Regional variations in income are remarkably less in the Republic than in comparable states, writes GARRET FITZGERALD
DURING THE first seven years of the Celtic Tiger period, the purchasing power of disposable income per head in our State rose by over half, with a further increase of only one-sixth in the subsequent seven-year period from 2000 to 2007. That change provides a clear indication of how sharply the growth of our prosperity slowed during the course of the present decade, even before the crisis broke.
Of course, since 2007, our national output has dropped by 14 per cent, or one-seventh.
Moreover, despite the return of 50,000 immigrants to their homelands during the course of the most recent 12-month period, our very high birth rate – the highest in Europe – and our low death rate have thus far caused our population to continue to rise. So our present reduced level of output and income now has to be shared among a somewhat larger number of people, reducing our average disposable income per head.
By and large it can be said that our average living standards are now back to where they were around the year 2000. All the post-2000 real growth in disposable incomes has been lost, which is deeply depressing – especially as almost none of this would have happened if the economics of our State had been run with even normal competence.
On the other hand, we should not overlook the fact that we still retain all of the gains of the earlier Celtic Tiger period. We are more than 50 per cent better off than back in the days before our rapid growth began. And, although the early stages of our impending recovery will be slow because unemployment is unlikely to start falling before 2012, there is a reasonable chance that we have now seen the end of our period of actual decline. We cannot be sure of this until and unless our immediate banking problems are overcome.
The dispersal of incomes within our State is remarkably even. In 2007, the latest year for which data is available, outside of Dublin, disposable income per head of population averaged €21,000 – with none of the seven regions outside the capital varying from that average by more than 4 per cent in that year.
Of course, like all capital cities, Dublin houses many high-value occupations. Consequently in Dublin, “primary incomes” (the incomes accruing to individuals before they pay taxes or receive social benefits) are on average more than one-sixth higher than elsewhere in the State.
However, because of having these higher incomes, Dubliners paid higher taxes. And almost one-third of the taxes paid by Dubliners – and also, I should add, of those paid by residents of Meath, Kildare and Wicklow – is in fact used to supplement in varying degrees the lower average incomes of the other seven regions.
I find it very interesting that, after adding to the primary incomes of the areas outside Dublin the net transfers to them from the Dublin region, there is a quite remarkable consistency about the resultant average levels of disposable income per head. The overall average disposable income for all the regions outside Dublin was just under €21,000, and in all regions average disposable income per head fell within 3 per cent of that figure. None fell outside the range of €20,000 to €22,009 per head.
This is quite extraordinary, for in all other states big enough to be divided into regions there are quite wide variations in regional income levels.
Without the transfers from the Dublin region to the rest, some of the differences in income levels would have been substantially greater. For example, in 2007 the region comprising the Border counties, (the three Ulster counties together with Leitrim, Sligo, and Louth), received well over one-quarter of the transfers from the Dublin region, which supplemented the primary income of this Border region by almost €750 million, or about 8 per cent.
This levelling out of our regional living standards preceded our crisis. Since then, in a very crude way, the crisis itself has reduced some of the appalling inequalities of individual incomes that were a feature of the Celtic Tiger, and above all of the building boom that followed it. Some, but not all.
For while the huge fortunes made in property have mostly been lost again, there remains the problem of excessive incomes secured, for example, by bankers and many professional people, some of whom have managed to create monopolistic situations through which they are paid sums far in excess of what their skills would earn them anywhere else in Europe.