NERI Blog
If Governments were really only like households
Posted on May 20, 2013 by Tom Healy
A visitor from outer space might be forgiven for concluding that the only or main economic problem confronting European States was deficit and debts - Government deficits and debts. The corollary of this problem is - of course - austerity to cure the ailment. Or is it? Lets compare the Government deficit to a household with a combined income of €40,000 a year and with a total mortgage and other debt amounts totalling close to €50,000 and an annual interest bill on all of its debts of around €2,000 without any mention of paying back the total debt of €50,000. The household spends around €43,000 a year leaving a gap between total spending and total income of around €3,000 a year. The household borrows an additional €3,000 a year to cover this gap.
A household in such a situation might have a number of options:
- Cut back on its planned spending by €3,000;
- Increase its income by finding additional income;
- Continuing to borrow an additional €3,000 a year.
- Enter an agreement with its bank or credit union to temporarily reduce its interest payments (and possibly also reduce some of its outstanding debt by mutual agreement).
Fiscal Stimulus, Unemployment and House Prices
Posted on May 16, 2013 by Micheál Collins
The latest NERI seminar, from Kieran McQuinn and Robert Kelly of the Central Bank, examined the relationship between unemployment and house prices and used this relationship to examine the impact on banking defaults / mortgage defaults of economic growth. Modelling a fiscal stimulus of €2b, they estimated that bank defaults would decrease by about €660m; a saving to the state in either reduced future bank capital injections or refunds from current capital provisions. Combined with the ESRI estimated multiplier effect, where the cost to the economy of €2b stimulus is just under €1.3b, the research points towards the real cost of an investment stimulus in Ireland today. Ignoring that this investment would be in beneficial projects which would in any event pay for themselves over time (generally these are examined over a 20 year time period), the short term cost would be about €350m for every €1bn of stimulus.
Ireland has the lowest Tax Wedge in Europe
Posted on May 15, 2013 by Micheál Collins
The tax wedge measures the difference between the total labour costs to the employer (wages + employers PRSI) and the corresponding net take-home pay for an employee (gross wages - all income taxes and PRSI). It is generally reported as a percentage of total labour costs.
Tax Revenue Stability and Corporation Tax
Posted on May 13, 2013 by Micheál Collins
One of the lessons of the recent economic collapse (I hope!) has been the importance of a stable tax base. Total stability is impossible for a small open economy like Ireland; we will always have swings in economic performance which will alter the volume of economic transactions and tax revenues. However, policy should aim to limit exposure to tax revenue instability as well as closely monitor those areas where revenues are unstable.
Despite these lessons, we pay limited attention to the stability of the corporate tax system - one of the four main areas of exchequer revenue. Based on the recent Department of Finance Stability Programme Update (April 2013) corporation tax revenues account for 11% of total taxation income.
Public sector clerical workers paid below the OECD average
Posted on May 13, 2013 by Rory O'Farrell
Comparing wages of public sector workers across countries poses many difficulties. Nevertheless the OECD publishes some useful information.
In 2009 public sector clerical workers were paid below the OECD average. This is the latest available data (more timely data should be available in June). The OECD make adjustments for differences in working time and for the cost of living.
Since 2009, due to pay cuts, it is likely that clerical workers have fallen further down the international pay league.
More information on international pay comparisons can be found in the latest edition (Indicator 3.2a) of the NERI's Quarterly Economic Facts.
Households and Governments: how they differ
Posted on May 13, 2013 by Tom Healy
The gap between what the Government in Ireland takes in and what it spends is running at a rate of €1 billion every month. Clearly this is not sustainable in the long-run because it adds to the total amount of debt owed by citizens year after year. The total amount of debt owed by the Government on behalf of taxpayers is now well more than the size of the entire amount of goods and services produced in a year. It costs the taxpayer over €8 billion each year to 'service' this debt by way of interest payments. It is estimated that, in 2013, the cost of paying interest on this debt will account for two thirds of entire government deficit of over €12 billion.
Working and living below the poverty line: ‘The Working Poor’
Posted on May 08, 2013 by Micheál Collins
16% of the Irish population lives on an income which is less than the official poverty line - about €210 per adult per week. Given a population of approximately 4.58 million people this implies that almost 730,000 live at risk of poverty.
In the latest edition of the NERI's Quarterly Economic Facts document, indicator 5.3 examines the composition of those living below the poverty line in Ireland. Of all the workers in the Republic of Ireland, 6.5% are 'working poor'. When poverty among those aged 16 years and above is decomposed by principle economic status (the main thing that people do), those at work (the working poor) represent 14.2% of all those adults at risk of poverty.
Labour Market Conference 2013
Posted on May 02, 2013 by Micheál Collins
On May 1st, the NERI hosted its inaugural Labour Market Confernece. Across the day, 15 papers were presented by researchers across the island on various labour market issues and policy topics. We have made most of the slides from the conference available on the NERI website here.
Reforming Community Employment
Posted on April 29, 2013 by Micheál Collins
Five years into Ireland's unemployment crisis the nature of our policy response has been slow. In general attention has been focused on employment creation, a worthy and necessary goal, but with limited attention on the nature of the unemployment crisis and the likely long-term impediments to resolving it.
Issued this week is a new NERI Research inBrief which focuses on the role of active labour market policies (ALMPs) and in particular the role of the largest ALMP Community Employment (CE).
Where do we go from here?
Posted on April 29, 2013 by Tom Healy
Public debate about matters of public concern in Ireland has been characterised in a number of ways. I suggest that the following traits may be stronger than elsewhere in the world and could reflect deep and enduring historical factors:
- There is a disproportionate emphasis on 'survival' with the consequence of a great focus on the short-term over the long-term;
- Intellectual discourse about values, evidence and philosophy is not given the space and priority it deserves (in short there is a certain anti-intellectualism); and
- Fatalism dominates the perceived choices and options.