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News : Irish Economy Last Updated: Jun 25, 2015 - 11:53 AM


Irish standard of living in 2014 below Euro Area average, Italian level; Prices 5th highest in EU28
By Michael Hennigan, Finfacts founder and editor
Jun 23, 2015 - 5:30 AM

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The Irish standard of living per inhabitant in 2014 was both below the Euro Area  average and below the Italian level but similar to per capita living standards in Spain and Cyprus while price levels in Ireland were the fifth highest among the EU28 countries.

These data come from Eurostat the EU's statistics office and the measure of standard of living is Actual Individual Consumption (AIC) which consists of goods and services actually consumed by individuals, irrespective of whether these goods and services are purchased and paid for by households, by government, or by non-profit organisations. In international volume comparisons of consumption, Eurostat says AIC is often seen as the preferable measure, since it is not influenced by the fact that the organisation of certain important services consumed by households, like health and education services, differs a lot across countries.

The Purchasing Power Standard (PPS), an artificial currency unit that eliminates price level differences between countries, is used in the calculation and Eurostat says that while GDP (gross domestic product) per capita is an important and widely used indicator of countries’ level of economic welfare, "consumption per capita may be more useful for comparing the relative welfare of consumers across various countries."

AIC per capita, in effect a measure of material welfare of households, is usually highly correlated with GDP per capita, because AIC is, in practice, by far the biggest expenditure component of GDP. However, Ireland is an exception.

Eurostat says AIC per capita expressed in Purchasing Power Standards (PPS) varied from 49% to 140% of the European Union (EU) average across the member states.

Ten member states recorded AIC per capita above the EU average in 2014. The highest level in the EU was recorded in Luxembourg, 40% above the EU average (this data is distorted as many workers in the Grand Duchy live outside its borders). Germany and Austria were more than 20% above.

They were followed by Denmark, Belgium, Sweden, the United Kingdom, Finland, France and the Netherlands which all recorded levels between 10% and 15% above the EU average.

AIC per capita for twelve member states lay between the EU average and 30% below. In Italy, Ireland, Cyprus and Spain, the levels were 10% or less below the EU average, while Greece, Portugal and Lithuania were between 10% and 20% below. Malta, the Czech Republic, Poland, Slovenia and Slovakia were between 20% and 30% below the average. Six member states recorded AIC per capita more than 30% below the EU average. Estonia, Latvia and Hungary were between 30% and 40% below, while Croatia and Romania had AIC per capita between 40% and 45% below the EU average and Bulgaria was around 50% below.

The table below, which is included in a detail here, shows that excluding Luxembourg that Germany has the highest standard of living at 123 compared with the EU28 average of 100 and the EA19 (Euro Area) of 106.

Italy is at 98, Ireland at 93, Cyprus at 91 and Spain at 90 while Greece and Portugal are at 83 — the Greeks are not the poorest in the Euro Area as Slovakia has a level of 74 and the Baltic republics are also below the Greek level.

The gross household savings rate in the Euro Area in Q4 2014 was 13%. Between Q1 2008 and Q1 2014 the Irish rate has averaged 12.4% according to the Department of Finance.

A country that is overreliant on foreign firms that do not engage in significant research in Ireland coupled with a small indigenous exporting sector, cannot expect to be among the world's richest.

Eurostat says Ireland comes out second among the EU member states, at 32% above the EU-28 average — this includes the tax-avoidance inflated profits of the significant foreign-owned sector — followed by the Netherlands at 30 % above that average.

The EFTA (European Free Trade Association) member states Norway and Switzerland have a higher level of GDP per capita, more than 60% above the EU-28 average. Bulgaria records the lowest level of this indicator among the EU member states.

Other EU member states with a GDP per capita of more than 20 % above the EU-28 average are Austria, Denmark, Germany and Sweden together with the EFTA member state Iceland. Belgium is less than 20 % above the average. Finland, the United Kingdom and France show GDP per capita levels of up to 10 % above the average.

Prices in Europe

In 2014, price levels for consumer goods and services differed widely in the European Union (EU)

In Ireland prices in 2014 were 21% above the EU average while the price of Food and non-alcoholic beverages was 15% above the average. Alcoholic beverages were 70% above but clothing was below the average. Restaurant and hotels prices in Ireland were 27% above the average; Communication costs e.g. broadband 28% above; Transport services 13% above.

In Norway, which is not a member of the EU, Alcohol and tobacco prices are 239% above the EU average.

Poland was cheapest both for food and consumer electronics, while alcohol & tobacco as well as restaurants & hotels were the least expensive in Bulgaria. Prices for clothing were lowest in Hungary, while the Czech Republic was least expensive for both consumer electronics and personal transport equipment such as cars. Overall, price levels ranged from 48% of the EU average in Bulgaria to 138% in Denmark.

These data on consumer price levels in 2014 come from an analysis published by Eurostat, the statistics office of the European Union.

The Irish Times reports that the Support Your Local campaign, which represents pubs, off-licences, restaurants and hotels, says Irish whiskey is more expensive in Ireland than it is in the United States.

A one litre bottle of Jameson is €41.70 in The Loop in Dublin Airport of which the total tax is €24.83.
By comparison it is $29.99 (€26.61) in Total Wine and More in California, €30.99 (€27.50) in Crown Liquors Indianapolis and $31.99 ( €28.39) in Reno , Nevada.

Food price levels highest in Denmark, lowest in Poland

Price levels for food & non-alcoholic beverages in 2014 ranged from 61% of the EU average in Poland to 139% of the average in Denmark. Differences in price levels between member states were less pronounced for this product group than for the total of goods and services. Price levels for alcoholic beverages & tobacco varied by one to three, the lowest prices being registered in Bulgaria (58% of the average) and Hungary (65%), and the highest in Ireland (170%) and the United Kingdom (165%). It should be noted that this large price variation is mainly due to differences in taxation of these products among member states.

Clothes most expensive in Sweden, cheapest in Hungary

Clothing is one of the groups of products showing a smaller price variation among member states, with Hungary (70% of the average) cheapest and Sweden (121%) most expensive. Consumer electronics is another group of products where prices differed less among member states, ranging from 85% of the average in both the Czech Republic and Poland to 116% in Malta. With the noticeable exception of Denmark (151% of the average), price differences among member states were also limited for personal transport equipment, from 75% in the Czech Republic to 114% in Portugal and 117% in the Netherlands. In contrast, prices for restaurants & hotels showed more significant variations, with price levels ranging from 46% of the average in Bulgaria to 147% of the average in Denmark.

The data here are based on the results of price surveys covering more than 2,400 consumer goods and services across Europe, which are part of the Eurostat-OECD Purchasing Power Parity program. Price level indices (PLIs) provide a comparison of countries' price levels relative to the European Union average: if the price level index is higher than 100, the country concerned is relatively more expensive than the EU average, while if the price level index is lower than 100, then the country is relatively cheaper than the EU average.

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