Professor Christopher Pissarides:

As stated, the policy has been very successful in Germany and it is good that Ireland also has such a policy. I recommend policies of this nature because the relevant government can recoup most of its costs, if not through tax then by means of social security or national insurance contributions that self-employed make. Essentially, studies from Germany indicate that these programmes become self-financing. Due to problems with collecting data, these studies do not relate to the recession but are from 2006 and 2007. I do not believe, however, that the position would be very different in the recession.

I would like to comment now on how to train people in order that they will obtain suitable skills. As stated earlier, we must involve local businesses much more in the design of the curriculum. They are actually prepared to do this. I have spoken to CEOs who have indicated that they become frustrated when they want to hire young people and then discover that these individuals do not possess the skills they need and must be given a great deal of training. These CEOs also stated that it would be easy for schools to provide the proper training, particularly if they were invited in once a year to discuss the curriculum and the relevant syllabuses and then make recommendations about the type of jobs they see being created. Those to whom I refer are best placed to interpret future trends. They become aware of those trends first and then we discover them by observing what these individuals do in respect of them. They know what is required before they do it and, as such, this is not a random process. If that to which I refer were to happen, it would allow for better matching of skills to job creation opportunities.

I am sure Senators will be aware, in the context of Ireland's forthcoming Presidency, that the Directorate-General for Employment, Social Affairs and Inclusion of the European Union is carrying out many studies in respect of ICT, green jobs and health. These sectors were the subject of much discussion when I was in Brussels almost a year ago. During its Presidency, Ireland could encourage debate on the type of jobs that could be created in these sectors. Some of the biggest and most important sectors in which jobs were created in the 20th century were those in which the great technologies discovered in the 19th century were used. I refer, for example, to the internal combustion engine, domestic technologies and appliances, new types of housing, air conditioning and heating. When I first went to England in the late 1960s, I could not believe that houses still did not have central heating. Now all houses have central heating. A great many people had to be employed to ensure that the latter became the case.

We have not, however, taken action in the context of greening our buildings. This will be the next major area of construction in which employment is going to be created. For better or worse, Ireland has an advantage in this regard because it has so many unemployed construction workers. They will ensure that there will be a silver lining to the cloud currently hanging over the country. They are going to be of assistance in making a virtue out of the vice that gave rise to the huge expansion of the construction sector in the past. I will be able to expand more on these points when I address the College Historical Society in Trinity this evening. Construction is the biggest contributor to unemployment in this country among both young and old. In fact, Ireland is No. 1 in Europe in this regard and even beat Spain by a tiny amount in the context of the contribution the sector has made to unemployment. Everyone thinks of Spain as being the major problem in this regard but Ireland is just as much of a problem.

As stated, the German scheme relating to the self-employed has been very successful. This is because it has become self-financing. There are governments, particularly that in Britain, which have doubts with regard to whether such schemes would succeed in their jurisdictions. When I discuss matters of this nature with the economic policy unit at No. 10 Downing Street in Britain, those who work there have doubts as to whether a subsidy scheme relating to the hiring of unemployed people - particularly those who are long-term unemployed - would succeed. I am not persuaded by the arguments they put forward in this regard, particularly as the subsidisation scheme in Germany has worked well. Again, I intend to give more details on this matter when I address the College Historical Society this evening. However, I will state that the subsidy in Germany is for nine months and this is renewable if the worker stays on and is successful. The gross cost of the scheme is the same as that which relates to the payment of unemployment benefit. The latter might be paid for six months or a year but it can last even longer if it is given to an employer who subsequently pays the worker an amount above the rate of the benefit in order to incentivise him or her to take the job. When the employer then makes national insurance contributions, the net cost to the Government is less than that which would obtain in respect of the payment of unemployment benefit.

The scheme to which I refer has been especially successful in times of recession because if employers are not intending to create many of the type of jobs to which I refer, then there is no loss in respect of their collecting subsidies in respect of jobs they would have created in any event. I would certainly recommend this scheme.

On whether a fiscal stimulus should be put in place, this takes care of the splitting of the budgets to which I referred earlier. I am of the view that it should be given on the investment side. The youth guarantee is a good policy but it is going to be very expensive. Four months is not a long period, particularly in view of the extended durations that exist now. I have only just become aware that Ireland has the longest duration for youth unemployment. I had thought that Spain had the longest duration. The guarantee in this regard is very good. We must ensure, however, that if it is voted in, it will be followed up on. If we fail to follow up on it, then the reputation of policy makers will go down in the estimation of those who are young and unemployed. A guarantee of obtaining a job or training within four months is good but we must wait to see whether it will work in practical terms.

I will now say something slightly tongue in cheek. Language is a great skill and I tried to learn French and Italian. However, I ended up only learning English as a foreign language. Senator Barrett inquired about the advantages and disadvantages of those who live in English-speaking countries. The new technologies are entirely dominated by English as a result of the involvement of the Americans. As a result, there are advantages to being able to train people in ICT skills through English. However, as we discovered on Tuesday, American politicians are going to be obliged to learn Spanish if they want to be elected to office from now on. It might become a disadvantage to be in a country in which people speak English in the future, particularly if one is a politician.