Monday, January 8, 2018

Some trends from the Survey of Income and Living Conditions across the EU15

Before Christmas the CSO published the 2016 update of the Survey of Income and Living Conditions.  Some of the Irish trends are  explored here.  This time we will look at the Irish data relative to the rest of the EU15 as the full set of figures are now available.

First, median nominal equivalised disposable income.

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This is useful for trends but a measure that takes into account inflation within countries and relative price differences between countries would give a better indication of the living standard that are supported by those incomes. Eurostat produce real incomes in units of purchasing power standard (PPS), a unit that has the fixed purchasing power through time and across countries.

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By 2008 Ireland had risen to fourth in the EU15 on this measure, but 2016 Ireland had fallen to tenth.  For real household income Ireland is, at best, a mid-ranking member of the EU15.  This position could improve again over the coming years as Ireland has moved back towards the top of the growth rankings.

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Over the past decade Ireland has gone from the top, to near the bottom, back to near the top of the growth rankings of this income measure.

But how is this income distributed? How does Ireland’s gini coefficient compare to the rest of the EU15?

Even with the above volatility in income growth Ireland’s gini coefficient has been largely unchanged for almost a decade and in 2016 was ranked exactly in the middle (8th) of the EU15.

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Ireland was also eighth in 2016 for the income share ratio of the top 20 per cent to the share of the bottom 20 per cent. The gradual upward trend of those countries below Ireland could see this ranking improve.

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Another relative income measure is the at-risk-of-poverty rate which shows people with equivalised income less than 60 per cent of the median (as set for each country). Ireland had the fifth highest at-risk-of-poverty rate in the EU15 in 2016 with the top five made up of the PIIGS.

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To try and assess changes in absolute poverty we can use a threshold from a fixed point in time  and the adjusted it for inflation in future years. This allows us to compare incomes to a fixed threshold in real terms.

Here we use 2005 as that fixed point in time and look at the relative change in the proportion of people below that threshold in each country.

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Relative to the 2005 threshold for each country Ireland has the second largest reduction in absolute poverty by 2016 though it can also be seen that Ireland had performed even better than this by 2008 but those improvements were not maintained.  The proportion of people in Greece below the 2005 at-risk-of-poverty threshold has more than doubled.

The above changes in absolute poverty are reflected in the changes in the material deprivation rate. Eurostat uses a set of 9 items reflecting economic strain and deprivation linked to durables.  A household is deemed to be materially deprived if it suffers from an enforced absence of three of more of those items.  The nine items are:

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In 2016, Ireland had the fourth highest rate of material deprivation in the EU15, though this has declined rapidly in recent years.

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Here is the breakdown by item for 2016 (click to enlarge).

EU15 SILC Materical Deprivation by Item Table 2016 2

As we examined here the items that have the largest impact on Ireland’s material deprivation rate as measured by Eurostat are:

  • Arrears
  • Afford a holiday 
  • Dealing with unexpected expenses

These are the items that Ireland has levels greater than the arithmetic mean of the EU15.  For the other six items, Ireland is either roughly at or below the mean of the EU15 countries.

An issue for Ireland is the distribution of income before social transfers (with public and private pensions excluded from social transfers). Ireland has both the highest gini coefficient and at-risk-of-poverty rate in the EU15 before such social transfers.  As shown here this has been true for significant periods for both measures.

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A significant factor behind this is households with little or no earned or market income. In 2016, Ireland extended to ten years it’s run as European champions for “jobless households”.

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Even with a relatively low unemployment rate Ireland has more people aged under 60 where the level of earned income of the household is zero or near-zero. 

The following table gives the at-risk-of-poverty rates by household work-intensity in 2016,

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For all levels of work intensity other than “very low” Ireland has some of the lowest at-risk-of-poverty rates in the EU15.

For those working, the at-risk-of-poverty rate in Ireland in 2016 for employees was 3.5%, the third lowest in the EU15 bettered only by Belgium and Finland.

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Finally, here is a variation of the at-risk-of-poverty rate that takes into account housing costs.  If is the proportion of households who are below the standard at-risk-of-poverty threshold after “total housing costs” have been deducted from their income. For this measure Ireland has the 5th lowest rate in the EU15.

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The items included in “total housing costs” are outlined here.

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Unsurprisingly, comparisons of the 2016 figures across the EU15 reaffirm the improvements that were highlighted when the Irish results were looked at in isolation.  All measures are either improving or unchanged with almost none showing a deterioration. 

If the government have some cash available for strategic communications they could so far worse than to direct it to the CSO to accelerate the publication of the 2017 SILC. Denmark already have data for 2017 available from Eurostat!

Denmark SILC 2017 on Eurostat

2 comments:

  1. I'm open to correction, but I think Denmark's data is not obtained from a household survey but from administrative data.

    It would be interesting to see if the differences between the methods Eurostat and the CSO use to define income and equivalence scales make any meaningful difference.

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