It wasn’t per­fect, but 2018 was an ex­cep­tion­ally strong year for our econ­omy

At the depth of the cri­sis, few could have pre­dicted that in­comes would ex­ceed 2008 lev­els this year

The Irish Times - Weekend Review - - 2018 REVIEW - David McWil­liams

2018 was an ex­cep­tion­ally strong year for the Ir­ish econ­omy. In fact, 10 years af­ter a mon­u­men­tal crash which de­stroyed the bal­ance sheet of many hun­dreds of thou­sands of Ir­ish peo­ple, the po­si­tion a decade later is quite re­mark­able.

At the depth of the cri­sis, most of us wouldn’t have pre­dicted that in­comes would rise above their 2008 peak by 2018.

De­spite ob­vi­ous prob­lems in the hous- ing mar­ket, over­all per­for­mance has been pretty good and pretty good is well, pretty good.

We hu­mans have a ten­dency to un­der­value the sig­nif­i­cance of pretty good. It is al­ways eas­ier to point out what is wrong, rather than ap­pre­ci­at­ing what is right. We tend to al­low some no­tion of “the per­fect” to bully “the good”, as if good is the en­emy of per­fect; it is not.

Good is an es­sen­tial mile­stone on the road to bet­ter. Ev­ery­one can source anec­do­tal ev­i­dence that things are go­ing to hell, but only hard data of­fers us an ac­cu­rate pic­ture of what is re­ally go­ing on . And what is hap­pen­ing – eco­nom­i­cally, at least – is pretty good. Tak­ing the lat­est data pub­lished this week by the Cen­tral Sta­tis­tics Of­fice (CSO), 2018 has been a year of steady progress across a num­ber of eco­nomic in­di­ca­tors.

Slice and dice

First off let’s look at what econ­o­mists call “me­dian equiv­alised real dis­pos­able in­come”. In English, this re­veals what the per­son in the mid­dle is tak­ing home af­ter they’ve set­tled up their taxes and ben­e­fits with the State and ad­just­ing for in­fla­tion.

No mat­ter what way you slice and dice the num­bers, in­comes in Ire­land of those in the mid­dle are ris­ing. In 2018, in­comes rose for men (+ 2 per cent) and women (+ 3.8 per cent) alike. When we break it down be­tween those in work, on the dole or on dis­abil­ity, we see clear pos­i­tive trends. In­comes for those in work rose by +3.3 per cent, for the un­em­ployed and for those un­able to work due to dis­abil­ity, in­comes were up by +4.3 per cent.

Pos­i­tive story

For those who are study­ing, in­comes were up + 4.1 per cent and those tend­ing to the home saw their in­comes rise by + 2.5 per cent.

This pos­i­tive story is also true across the ed­u­ca­tional at­tain­ment spec­trum, with the me­dian in­come of all groups, rang­ing from those with only a pri­mary school ed­u­ca­tion to those with PhDs, go­ing up.

While the me­dian in­come of ur­ban­ites fell slightly last year (- 0.9 per cent), if we look over the past two years, there has been a sig­nif­i­cant in­crease for both ur­ban (+ 5.5 per cent) and ru­ral dwellers (+ 7.6 per cent) alike.

The two main groups that ex­pe­ri­enced a ma­te­rial drop in the me­dian in­come last year serve to il­lus­trate the loom­ing threats to the econ­omy, namely the el­derly and, of course, renters.

In­deed, re­tirees saw a 3.8 per cent de­cline in me­dian equiv­alised real dis­pos­able in­come, while those rent­ing at the mar­ket rate wit­nessed a siz­able 6.6 per cent drop. These are the ar­eas Ire­land needs to fix. In­ter­est­ingly, up to now there has been a ten­dency to ar­gue that the re­cov­ery is a lo­calised Dublin phe­nom­e­non.

It’s easy to dis­miss the up­swing as a multi­na­tional-driven, Grand Canal Dock, avo­cado-and-sour­dough thing, but there has been an im­pres­sive catch- up be­tween ur­ban and ru­ral in­comes in re­cent years. In 10 years, the gap be­tween ru­ral and ur­ban in­comes has been re­duced from 20 per cent to just 4 per cent.

This progress has been achieved with­out any dra­matic in­crease in in­come in­equal­ity. That said, as ar­gued here and in doc­u­men­taries like Ire­land’s Great Wealth Di­vide, wealth in­equal­ity not so much in­come in­equal­ity is where the prob­lem lies in Ire­land.

Let’s see what is hap­pen­ing at the other end of the scale.

There is also cause for optimism as the lat­est fig­ures on de­pri­va­tion pub­lished by the CSO sug­gest that things are im­prov­ing slowly for those at the bot­tom – and not just in the mid­dle.

The CSO’s de­pri­va­tion in­dex con­sid­ers house­holds that can’t af­ford cer­tain sta­ples – such as a warm wa­ter­proof over­coat, heat­ing for their home or presents for fam­ily or friends at least once a year. The lat­est Sur­vey on In­come and Liv­ing Con­di­tions data re­vealed a sta­tis­ti­cally sig­nif­i­cant de­cline in the share of the pop­u­la­tion ex­pe­ri­enc­ing en­forced de­pri­va­tion, from 21 per cent to 18.8 per cent.

The con­sis­tent poverty rate has fallen from 8.2 per cent to 6.7 per cent. The Chil­dren’s Rights Al­liance was keen to note that the lat­est data from the CSO re­vealed the big­gest de­cline in child poverty in re­cent years, with the share of 0-17-year-olds liv­ing in con­sis­tent poverty fall­ing from 10.9 per cent in 2016 to 8.8 per cent last year. This means that an es­ti­mated 24,000 chil­dren were lifted from poverty last year.

Per­sonal wealth

Now let’s ex­am­ine per­sonal wealth. Last week Daft. ie is­sued a re­port on hous­ing wealth and be­cause hous­ing ac­counts for the lion’s share of per­sonal wealth – and is a good yard­stick for Ir­ish bal­ance sheets.

The av­er­age prop­erty na­tion­wide was worth al­most ¤257,000 in the third quar- ter of 2018, up from a low of ¤ 165,000 in early 2013. There is now al­most ¤450 bil­lion of hous­ing wealth in Ire­land.

To give you a sense of how sig­nif­i­cant hous­ing is in Ire­land as a form of wealth, this ¤ 450 bil­lion fig­ure is over twice the combined mar­ket cap­i­tal­i­sa­tion of the 50 or so firms listed on the Ir­ish stock ex­change and big­ger than Ir­ish GDP, es­ti­mated to be just un­der ¤300 bil­lion in 2017.

Over 5,000 Ir­ish peo­ple are in pos­ses­sion of a house worth ¤1 mil­lion or more.

And in this Ir­ish hous­ing wealth game, the big gain­ers over the past five years are not the well- heeled burghers of the tra­di­tional res­i­den­tial hot-spots, but res­i­dents of pre­vi­ously un­fash­ion­able ar­eas in the greater Dublin area: Dublin 1, Dublin 8 and Dublin 10 now rank nine, eight and 17 places higher in the list of 54 mar­kets around the coun­try, com­pared with five years ago.

West­meath and Louth – both in Dublin’s commuter belt – rank nine and seven places higher.

So as we look back on 2018, the eco­nomic per­for­mance across a range of in­di­ca­tors has been pretty good. It’s not per­fect by any stretch of the imag­i­na­tion – and the hous­ing cri­sis re­mains a ma­jor worry – but when com­pared with the prob­lems in many of our neigh­bour­ing coun­tries, pretty good is well, pretty good.

Happy New Year!

We un­der­value the sig­nif­i­cance of ‘pretty good’. It is al­ways eas­ier to point out what is wrong, rather than ap­pre­ci­at­ing what is right

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