Youth labour market still in recession

Posted on August 30, 2014 by Tom Healy

Tom Healy, Director NERI

The week gone by brought some mixed news in regards to wages and employment trends in the Republic of Ireland.  The recovery in total estimated employment from about the end of 2012 has continued into 2014 but at a much reduced pace. At the same time, wages are dropping slightly on average (before account is taken of taxes and social transfers). And the estimated numbers emigrating are significantly down. The bottom line is that there are more people at work, wages are stagnating if not declining while fewer people are leaving to look for work abroad. These are the key points. In next week’s blog I will look at some recent wage trends while, this week, the focus is on the some aspects of employment trends that have received relatively little public attention so far.

Employment is up but only just ….

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Posted in: Jobs

How much tax do people really pay

Posted on August 28, 2014 by Micheál Collins

Micheal Collins profile

How much Tax do people really pay?

Too often considerations of the taxation system are focused on income taxes, or income related taxes like social insurance; a narrow perspective given the composition of taxation revenue received by the exchequer. Indeed, the oft-cited phrase ‘taxpayers’ is generally taken to mean income taxpayers rather than its more appropriate meaning of all those paying taxes – whether from income, expenditure or other contributions.

 A new research paper by Dr Micheál Collins of the NERI examines how much tax people ‘really’ pay. It uses data from the most recent Household Budget Survey to bring together information on the total amount of direct (income tax and social insurance payments) and indirect (VAT, excise and levies) tax paid by people in the Republic of Ireland.

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Posted in: InequalityTaxation

Ireland’s Low Pay Problem: time for a Living Wage

Posted on August 25, 2014 by Micheál Collins

Ireland joined a growing international living wage movement in July when the Living Wage Technical Group launched the 2014 Living Wage. In principle, a living wage is intended to establish an hourly wage rate that should provide employees with sufficient income to achieve an agreed acceptable minimum standard of living. In that sense it is an income floor; representing a figure that allows employees working full-time to afford the essentials of life. The figure for 2014 is €11.45 per hour, equivalent to €446 per week.

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Posted in: IncomeInequalityJobsLabour costsLiving wageWages

Wages stagnation in Northern Ireland a brake on recovery

Posted on August 22, 2014 by Tom Healy

Tom Healy, Director NERI

The speed of economic recovery in the UK has taken many by surprise. First the good news. Employment is up. Retail sales are up and business investment is expanding. This is good news for exporters in the Republic of Ireland especially those in sectors such as agri-food where, traditionally, the UK market has been an important destination. It is also good news for Northern Ireland where, even if timely data are lacking, it appears that output and employment are on the rise. See Section 2.3 of the latest NERI Quarterly Economic Observer . It also appears that many households are drawing on savings to spend a bit more in shops and local economies.

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Posted in: Northern Ireland Wages

The Energy Debate: touch choices

Posted on August 15, 2014 by Tom Healy

Tom Healy, Director NERI

Fracking – or Induced hydraulic fracturing to give it its full technical term – is rapidly developing as an issue of public debate. In the United States where fracking has been in operation for many years the output of oil and gas is making a significant contribution to opening up alternative sources of fossil fuel energy (gas or oil) to those coming from the Middle East. US production of gas is also impacting on global prices (as well as a much lower price of gas, there, compared to Europe). Europe is in a different albeit changing space where fracking is increasingly talked about but is treated with misgivings and caution by governments and their electors. Across England-Wales up to two thirds of the territory has been identified by the UK Government as potentially useful for fracking. At the same time the potential for disruption and volatility (upwards) in energy prices is heightened as a result of a possible cold war mark two with huge implications for Western Europe and especially central European countries which have depended, up to now, for most of their fossil fuel imports from the east.

For a technical introduction to the process of fracking see here. In simple terms the process involves blasting deep down through drill holes into the earth and through porous rocks with water, chemicals and sand in order to extract natural gas from a distance under the earth’s surface. The exact make-up and type of chemicals used will vary. Some may be highly toxic or carcinogenic and dangerous to human health.  Unlike conventional methods of natural gas extraction, fracking is likely to exhaust wells quickly and thus require more frequent drilling into new wells. The biggest concern and risk is to drinking water where the use of water and chemicals in the extraction process involves the creation of highly toxic waste water which is so toxic that treatment will not normally clean it.  In addition there are risks to both soil and air arising from leakages or contamination.

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Employment up, but wages ominous

Posted on August 13, 2014 by Paul Mac Flynn

UK Labour Market data released this morning show that the trend of rising employment and falling real wages is set to continue. At a UK-wide level, the decreases in unemployment are quite impressive, particularly for youth unemployment but figures for earnings at GB level paint a more sober picture. Regular pay in Great Britain was only up 0.6% from this time last year and with inflation running at about 2% this indicates a significant drop in real wages. We do not have reliable monthly earnings figures for Northern Ireland, only the Annual Survey of Hours and Earnings can report the extent of wage growth here. Interestingly there are indications that wages growth is stronger for those who have been in consistent employment for the last number of years. A lot of the weakness in wage growth may be due to compositional changes in the workforce i.e. people who have come back to work are in lower paying jobs than before. This has interesting implications for the recovery in the labour market in Northern Ireland as highlighted in a recent NERI working paper here.

For Northern Ireland, the unemployment rate has dropped to 6.7% in the three months ending in June from 7.2% in the three months till the end of March. This was also accompanied by a fall in the number of people economically inactive. However the rate of 6.7% is unchanged from the rate recorded in the three month ending in May, indicating less robust employment growth of late. Overall claimant count figures (a more accurate but imperfect measure of unemployment) broadly chime with figures from the Labour Force Survey (LFS). In the LFS, the number of young people unemployed remained unchanged at 20,000 from the previous quarter, but the rate of youth unemployment increased by 0.8% to 19.4% indicating a reduced population of young people in Northern Ireland. The youth claimant count also increased in July, but neither of these figures is seasonally adjusted, and unemployment figures could easily be inflated in the summer by those leaving full-time education.

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Posted in: JobsNorthern Ireland Wages

The Revenue Gap

Posted on August 12, 2014 by Tom McDonnell

QEF chart 6.2

The NERI’s Quarterly Economic Facts contains a range of indicators on the public finances. One of these indicators compares government revenue as a percentage of GDP in the EU and the Republic of Ireland. Total general government revenue is largely obtained from taxes and social security contributions but also includes other receipts of public authorities.

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Posted in: MacroeconomicsTaxation

It's party time again?

Posted on August 08, 2014 by Tom Healy

Tom Healy, Director NERI

News of rising house prices, fewer households in negative equity, falling dole queues, rising spending in the shops and the long farewell to the Troika together with a relatively benign Irish summer, so far, have lifted the economic mood a little in the Republic of Ireland. In the North the spillover from improvements in the UK wide economy are being felt. A sign that conditions are improving is when economic forecasters (among whom NERI is now counted) are ‘upgrading’ their projections of employment, output or public finances from Quarter to Quarter.

Happy days?

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The economics of aye or nay

Posted on August 01, 2014 by Tom Healy

Tom Healy, Director NERI

Adam Smith, a Scottish political economist and philosopher of the 18th century is famous for having written The Wealth of Nations. He is less well known for having written an important work entitled The Theory of Moral Sentiment. The latter work is a very important contribution to moral and political economy.  The outcome of the referendum on the proposed political independence of Scotland on 18th September will be decided on a range of inter-linked concerns and drivers including political, cultural, moral and economic. This blog focuses on the questions raised under the latter – economic – even though ‘economic’ can never be viewed as entirely self-contained and separate from the moral, political and cultural.

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Examining Unemployment Traps in the Republic of Ireland

Posted on July 29, 2014 by Micheál Collins

As individuals transition from unemployment to employment they experience losses of welfare payments and entitlements, gains in earned gross income and they begin to pay income taxes and social insurance contributions on their earned income.

To assess this impact it is possible to calculate a ‘participation tax rate’. It attempts to measure the collective impact of these experiences by estimating by how much changes to taxes and benefits reduce the financial gain of moving into work. A participation tax rate of 50% implies that half of the gains in earnings from commencing work are lost through changes to taxes and benefits.

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Posted in: IncomeJobsLiving wageTaxationWages

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