Four years of commentary
Posted on July 10, 2016
Since the first Quarterly Economic Observer (QEO) published by the newly established Nevin Economic Research Institute (NERI) in March 2012 we have published 18 editions including the latest released last week (Summer 2016). Our initial Quarterly, in March 2012, focussed on the theme of investment. As the both parts of Ireland remained mired in an investment crisis in 2011/12 the first QEO contained a proposal for a ‘targeted, frontloaded, strategic and temporary investment of €20 billion over five years – €15 billion in the Republic and €5 billion (=£4.2 billion) in Northern Ireland – ‘to begin to reverse the negative impacts of fiscal austerity’. The emerging crisis in housing and accommodation in Ireland, and especially in the Republic of Ireland, is the result of private and public decisions to under-invest just at the time when a counter-cyclical measure was required.
The notion that a counter-cyclical investment stimulus was not possible within existing EU, domestic political and other constraints was challenged in our Summer 2012 edition of the QEO. In it, we argued for ‘no further cuts in the overall level of discretionary voted capital and current expenditure’ together with ‘a closing of existing tax breaks and reliefs and a graduated and incremental increase in the average target tax‐take for high‐income households with the aim of reducing the government deficit to below 3% of GDP by 2017’.
The Autumn 2012 QEO continued our alternative budgetary analysis for the Republic of Ireland and made the case for “a continuous review of all areas of public expenditure ‘line by line’ with a view to ‘reducing waste and re‐directing savings to additional public spending in priority areas to include for example…early childhood education and care; mental health services for young people; and a youth guarantee to extend training and work opportunities for school leavers’.
From 2012 onwards the QEO followed a set pattern with:
section 2 providing an overview of recent economic trends in both parts of Ireland;
section 3 providing projections into the future and an overview of different projections from different organisations including our own; and
section 4 which addressed a public policy theme in each edition.
The Winter 2012 QEO (published in January 2013 due to the death of Dónal Nevin) contained, for the first time, NERI projections of output and employment. These were unduly pessimistic with regards to the medium-term prospects of recovery as we underestimated the capacity of export firms to fill some of the gap in domestic demand prior to a significant recovery in more years. The Winter 2012 QEO contained an analysis of the distribution of household income challenging some widely held and preconceived views of where ‘middle Ireland’ was on the income distribution curve.
As an all-island research body we have ensured that every edition of the QEO contained analysis of recent developments in both the Republic of Ireland Northern Ireland economies. The Spring 2013 QEO focussed on the challenge of youth unemployment in Northern Ireland and made proposals for how a timely and generous youth job guarantee with EU support could be implemented. Youth unemployment has remained a huge problem in Northern Ireland even though employment has increased in the aggregate.
The Summer 2013 and Autumn 2013 QEO editions followed the now familiar pattern of focussing, respectively, on the broad fiscal framework and more detailed spending/tax proposals and options in the annual Budget for the Republic of Ireland. This seasonal pattern was repeated in 2014 and in 2015. During the period of fiscal austerity (or consolidation) we consistently made the case for defending and improving the effectiveness of public services while gradually moving Ireland towards European norms of taxation. We argued for smaller fiscal adjustments on the grounds that too much fiscal austerity would hurt recovery and damage the longer-term investment and social infrastructure prospects of the Republic of Ireland as well as undermine social equality. While we underestimated the extent and timing of recovery in GDP, employment and public finances our ‘counter-cultural’ commentary and analysis has been proven correct given the emerging crisis in homelessness, increased child poverty and long-term costs to the exchequer of under-investment during the years of austerity.
In our Winter 2013 QEO we provided a focus on the labour market in the Republic of Ireland with analysis of new emerging trends as well as a migration to the top and bottom of the market and a hollowing out of the middle.
The Spring 2014 QEO followed this up by examining the extent of low pay in Northern Ireland. The analysis highlighted particular sectors and groups that were highly vulnerable and urged an uplift in wages towards a ‘living wage’.
The Winter 2014 QEO retuned to a principal focus on Northern Ireland by looking at enterprise performance. It urged public authorities to prioritise support for innovation and applied research to provide a more supportive environment for enterprise.
The Spring 2015 QEO focus was on low pay in the Republic of Ireland where detailed statistics were reported on the extent and distribution of low pay.
Using UK micro data the Winter 2015 QEO showed that, in Northern Ireland, ‘nearly 77 per cent of working families who would have been affected by changes to Tax Credits would not have seen an increase in income due to the National Living Wage’.
Almost all editions of the QEO have been accompanied by a supporting NERI Working Paper authored by the main author of Section 4 of the QEO in each case. As the work of the NERI has developed and extended into new areas the QEO provides an overview of a moving research agenda where we seek to respond to public interest and demand for information as well as build on the individual and team research expertise of the NERI staff.