Analysis:The weekly real disposable incomes of Irish households increased by almost one-third on average in the five years to 2004/05, according to data contained in the Household Budget Survey 2004/2005, published yesterday by the Central Statistics Office.
In cash terms, the weekly disposable income of the average Irish household advanced from €551.60 in 1999/2000 to €842.06 five years later, an income gain of 52.7 per cent. However, average consumer prices rose by 15.7 per cent over the period. Stripping out the effects of inflation, the real purchasing power commanded by the average Irish household increased by 31.9 per cent over the five-year span.
The principal contributors to this substantial rise in real household incomes were rising employment rates among household members, higher wages and salaries, much enhanced state benefits - particularly Child Benefit and State old age pensions - and reduced rates of direct taxation on incomes.
The gains in average real household incomes are even more impressive when the reduction in the average size of households is taken into account. As can be seen from Table 1, the size of the average household fell from 3.08 persons in 1999/2000 to 2.73 persons in 2004/2005, a decline of 11.4 per cent.
Factoring in the effects of smaller households, average per capita real disposable incomes increased by close on 50 per cent in the five years to 2004/2005.
Despite the substantial advances in average household incomes, the gap between rich and poor households widened in the first five years of the current decade. The bottom 10 per cent in the income distribution league survived on average weekly disposable incomes of €157.70 in 2004/2005. In contrast, the top 10 per cent of households amassed average weekly disposable incomes of €2,233 in the same year. Thus, the top 10 per cent of households enjoyed 14 times more disposable income each week than the bottom 10 per cent. In the 1999/2000 Household Budget Survey, the ratio was 13:1.
However, these data should not be interpreted too literally. For a start, the 10 per cent of households with the lowest incomes are much smaller in size than the richest households. The poorest households are comprised mostly of people living alone, with an average household size of 1.12 persons. In contrast, the richest 10 per cent of households contain 3.8 persons on average.
Additionally, just one in 10 of the poorest households can boast of an employed household member where 2.29 persons are at work on average in the richest 10 per cent of households. Finally, 21 per cent of pensioners are locked into the poorest 10 per cent of households while less than 1 per cent of pensioners have made it into the richest 10 per cent of households. Despite these caveats, the Household Budget Survey still finds 22 per cent of all households are at risk of poverty, defined as subsisting on less than 60 per cent of median disposable income.
While households on average raised their disposable incomes by more than one-half in the five years to 2004/2005, they have husbanded their resources quite carefully. As shown in Table 1, average weekly household spending rose by just 36.4 per cent in the five years to 2004/05, compared to an average gross disposable income gain of 52.7 per cent over the same period. Nonetheless, even allowing for the 15.7 per cent cumulative inflation rate over the period, the volume of weekly purchases of goods and services by the average household increased by one-fifth in the five years to 2004/2005.
The weekly food bill for the average household amounted to €142.74 in 2004/2005. Food remains the largest single component of household spending, accounting for 18.1 per cent of all weekly purchases in 2004/2005. However, as incomes rise, the share of the household budget allocated to food has declined. A decade earlier, spending on food had absorbed 22.7 per cent of the weekly household budget.
Unsurprisingly, housing has been the fastest-rising element in household expenditure. In 1999/2000, the average Irish household spent €55.41 or 9.6 per cent of its weekly budget on housing. By 2004/2005, housing was costing the average Irish household €94.01 a week, an increase of almost 70 per cent on five years earlier.