Professor Christopher Pissarides:

On the question of whether the move should be into the private sector in terms of social enterprises, I would give a similar answer to the one I just gave. If we look at the history of job creation and structural change taking place in the economy, something in which we have been more interested recently, the move has been increasingly to the health and education sectors, which are publicly funded. If we do not do anything with the private sector, taxation will inevitably increase to finance those jobs. We are moving in the direction of the Scandinavians in that respect. If that is acceptable to a country, there is nothing wrong with it provided a state is not corrupt. If higher taxes are not acceptable, as in the way we hear American politicians talking about that all the time, then we have to shift to the private sector because someone will have to provide the jobs. If it is done in the way the Americans have done it, an outcome of that is that health costs there have increased by a multiple of seven compared with all the other costs of services. The costs of all services there are increasing but health costs are shooting up. Compared with the mid-1980s, health costs there are seven times higher than the costs of other services. Britain is finding it cannot finance the National Health Service as efficiently as it was to able to do in the past and only last week it removed some restrictions on hospitals to go private. There was the usual opposition to that, others applauded it and the Minister said that they are hoping the extra money the hospitals will make from private medical care will be used to enhance the NHS. I cannot believe that if one makes money from one's private consultancy one will put it back into one's job if one is an employee of the government. That is a big problem.

There is no advice one can give about reviving the retail sector other than to revive the economy. That sector is the biggest measure of how the economy is doing. If people do not go into shops to buy products, jobs will not be created. One could try to introduce some job sharing schemes similar to the type Germany has tried to introduce and they have been successful. Another measure is to give incentives to employers not to lay off part of their workforce. It is not expensive for the government to do that. There is the impression that it is expensive because money is given to the employer but it avoids the subsidisation of the unemployment through unemployment benefits. If one has 100 employees and because of a fall in business one decides to let 20 of them go, instead of the government financing the employment of those 20 employees and providing initiatives for them, that money could be given to the employer and it could be asked to keep those 20 staff employed and to share out the jobs. It would reduce labour productivity for a short period but it is a much better way of doing it than increasing unemployment.

Regarding practical advice on investment, as I said, the budgets should be split because that will encourage investment. On the question of whether servicing the debt is sustainable, that is a can of worms we better keep sealed. Japan has a debt of 240% of GDP and no one thinks it is unsustainable, therefore, there are ways of financing big debts without defaults but I do not know how one could do that.

On the question of whether we are educating people in the wrong disciplines, I do not think so apart from the issues we discussed earlier in encouraging more interaction between local businesses and schools to make sure they get the right skills. In good times young people were not leaving the country. People are leaving now because of the recession and because Ireland has always had a very mobile population. It is an issue on which I disagree with the European Commission. The European Commission wants to encourage this kind of emigration. In fact, Ireland might discover during its Presidency of the EU that it is the champion of Europe in terms of migration. The Commission wants to encourage more migration from the high unemployment countries to the low unemployment ones. I do not believe that will be good for European countries. I do not believe it will be acceptable. I do not know what the outcome will be if Germany suddenly discovers it is being invaded by people from southern Europe the way it was in the 1950s with the guest workers. It is not something that works here. Even in the United States migration has decreased enormously. Giving people incentives to stay here would be a good idea. It is not something the European Commission would be happy to hear but it would be better in the medium to longer term.

In terms of what we do about the long history of unemployment, Ireland needs something to break that and education is the best way of doing it. It is very difficult to do it when there is no education mentality in the family or they believe it is useless. More positive incentives such as better grants could be offered, but education is the only thing that breaks that vicious cycle in the family.