The OECD said today that 90,000 persons in Ireland have been without a job for 3 years and it said Ireland’s high inequality of market incomes largely reflects its uneven distribution of labour earnings. Only 50% of the individuals in the 20-30 age group are employed or are seeking work, 20 percentage points lower than in other advanced economies in the European Union.

 

The think-tank for 34 mainly developed country governments said in its biennial survey that "Ireland’s high inequality of market incomes largely reflects its uneven distribution of labour earnings. The ratio of the top income decile to the bottom income decile is high by OECD standards and the distribution has fatter tails than the OECD average. Higher shares of income are concentrated at the top and bottom of the income scale, while smaller shares are in the middle of the income distribution than the OECD average (Table 1.1). This is associated with the returns to tertiary education and the penalty for poor education both being higher in Ireland than the OECD average. A high share of the workforce with tertiary education earn more than twice the median income (Figure 1.7, panel A). A possible contributor to this high earnings premium for tertiary education is the strong presence of multinationals, which offer highly-paid jobs to those with high skills.

By contrast, those with below upper secondary education are concentrated at the bottom of the income distribution (Figure 1.7, panel B). These skill-based wage differentials have important effects on the overall distribution of earnings because Ireland has a higher percentage of 25-64 year olds than the OECD average with a tertiary degree (40% versus 33%) and about the same share of those with below upper secondary education as the OECD average of 24%."

Low pay in Ireland; Lowest social security & corporate taxes in Europe

Irish standard of living in 2014 below Euro Area average, Italian level; Prices 5th highest in EU28

Indicators of income concentration directly calculated from taxpayers’ income statements to the Revenue Commissioners confirms that market income inequality is high in Ireland, driven by both ends of the income distribution. Around 37% of market income goes to the top 10% of tax units in 2012 (of which 10.5% and 3.3% to the top 1% and the top 0.1%, respectively, according to Kennedy et al., 2015). This concentration was somewhat lessened following the property bubble burst, but remains high. "Nonetheless, by international comparison the concentration is not excessively high (Figure 1.4). High market income inequality is mostly driven by the lower end of the distribution: the income share of the bottom 20% households is the lowest in the OECD countries (Figure 1.5). A consequence of this is that at market incomes poverty is also very high. According to EU-SILC data, some 50% of individuals would live at or below the poverty line of 60% of the median disposable income, if they did not receive social transfers (Figure 1.6)."

Irish GDP 2015, 2016The OECD says that "data compiled for this Economic Survey shows that about 43% of tax units remained in the same quintile income groups between 2004 and 2012 (Kennedy et al., 2015). Less mobility occurs at the low and high ends of income distribution (47% and 58% of tax units remained in the lowest and highest quintile groups), while mobility is more frequent in middle income classes (on average 37% of tax units remained in the same quintile group). This is similar to the United States. The mobility at the lowest end of income distribution increased during the crisis as more people crowded into that group after losing their job and main source of income (which resulted in comparative and incremental upward mobility of the rest of the population)."

The survey says about 90,000 persons, i.e. 26% of the registered unemployed, have been without a job for more than 3 years, and only 51% of single parents were in employment in 2014, compared to an EU15 average of 69%; the latter gap was apparent before the crisis, indicating that it is largely structural. "In addition, many workers who lost their jobs, especially men and older workers, have stopped seeking a job and withdrawn altogether from the labour market (Kelly et al., 2015). The activity rates of the low-skilled are particularly low in Ireland. Only 50% of the individuals in the 20-30 age group are employed or are seeking work, 20 percentage points lower than in other advanced economies in the European Union. Ireland has a markedly higher percentage of younger cohorts (25-34 years old) with tertiary qualifications than both OECD and EU averages. However, there remains a large cohort of unemployed with insufficient skills. Raising skill levels is especially important for reducing inequality at market incomes given the mentioned evidence that the reward for education and the penalty for a lack of skills are very high. These high skill premiums and penalties result from the wide gap between the skills of the workforce and the needs of employers (Figure 1.8): employers are willing to pay a premium for hard-to-find talents, but are unwilling to do so for the many with low skills."

OECD Ireland debt GDP 2015The OECD says Irish economy is strongly rebounding from the crisis, with GDP growth of 5.2% in 2014, the fastest in the OECD. In part, this reflected temporary factors such as the fading of the patent cliff (the expiry of a number of drug patents), which weighed on exports in 2013. The initial stages of the recovery was largely driven by multi-national companies (MNCs) that account for a large share of production in sectors that are less sensitive to cyclical fluctuations, such as pharmaceuticals and medical devices.

The economy is projected to grow by around 5% in 2015 and 4% in 2016.

Private-sector (households and non-financial corporations) debt is still high at 290% of GDP, well above the euro area average of about 165%. "In addition, non-performing loans still account for just under a fifth of the value of outstanding loans (Figure 4), although this includes some restructured loans. The value of non-performing loans (NPL) peaked at just under €100bn in mid-2013 but the NPL ratio continued to rise through to 2013Q4 due to the declining loan stock, peaking at 25.7%. The share of very long-term mortgage arrears (720 days and over) in total arrears is still increasing albeit at a much slower rate."