When you’ve had the flu for several days, and the raging fever begins to abate, you may tell people that you’re feeling ‘better’, but you won’t be recovered until your temperature returns to normal and you’ve got your strength back. Likewise with the economy. But what’s normal for the economy?
Ireland declined so much in the crash that, even after the four straight quarters of growth it’s just had, total incomes are still more than 5 per cent down on the peak in 2007, and after-tax incomes are down around 15 per cent. The country has regained about 75,000 jobs since , but it’s still 270,000 down on its best year. So Ireland is recovering, but not recovered.
So why aren’t the Irish on the streets like the Greeks or the Spanish? At least part of the answer is that it hasn’t been so bad for us: our austerity followed an extraordinary spurt of short-term growth. Reduced as they are this year, household incomes per person after tax are still higher than they were in 2002 – a pretty good year for many people, a year when the Fianna Fáil\PD coalition was the first Irish government in 33 years to be re-elected.
Of course, averages conceal variation, and the property bubble made winners as well as losers. Any property owner with the sense to sell before 2008, and to avoid putting the proceeds into bank shares, has done well. For every deal at silly prices there was a happy seller. One thinks of the new owners of the Bord Gáis Energy Theatre, who shared in profits of more than €900 million from the sale of a few Dublin hotels in 2005.
Long-term unemployment
At the other extreme, the biggest losers were those who lost their jobs. The number of people in long-term unemployment has more than tripled to 178,000, and others have been forced from professional jobs in construction to security at derelict sites. While the Government can legitimately boast of protecting basic welfare payments, families are being forced out of their homes because their benefits are outstripped by rising rents.
Even the “squeezed middle” has winners and losers – often distinguished mainly by their age. If you are a mortgage-holder aged between 35 and 45, there’s a good chance you bought at the full stretch of the bubble. Double whammy: you have a big monthly mortgage payment and a greater chance that your home is worth less than you owe – the negative equity trap that makes it difficult to move.
As these tend to be the most expensive child-rearing years, many in this group are suffering significant financial stress from lower incomes and higher taxes. One consolation is they probably have a tracker mortgage, paying about 1 per cent a year instead of the 4 per cent or so paid by everyone else.
So while official poverty levels based on income were unchanged from 2007 to 2012 – the proportion of people earning below 60 per cent of median income was more or less stable at under 17 per cent – the proportion experiencing actual deprivation more than doubled.
Arrears
That is partly explained by long-term unemployment and partly by the number of households in trouble with their mortgage or rents. The proportion of families in arrears tripled in four years to 17 per cent, and most of them were above the poverty line in income terms.
“Normal” health for the economy is low unemployment, with a reasonable rate of economic expansion, reflecting population growth and investment in technology that raises productivity.
On current trends, we’ll regain the overall national income lost since 2007 some time next year, but disposable incomes will remain depressed until more people are at work to pay their share of taxes.
