Wednesday, July 3, 2024

CT receipts go gangbusters - again

Can we really keep saying that? We might have expected an increase in June but the outturn was exceptionally strong.  For a single month, the €5.9 billion collected in June is second only to the €6.3 billion collected last November.  

As shown below, June 2024 was by far the largest June on record.

Of course, as we discussed earlier, the June receipts are also a pointer to what might happen in November.  Here’s what happens if we extend the June/November relationship for the outturn we have just seen for June 2024: a fitted value for November 2024 of €8.2 billion – which alone would be equivalent to the entire amount of CT collected in 2017.

The strong June means that 2024 is now considerably higher than 2023.  In the first six months of 2024 €12.2 billion of CT has been collected.  On its own this would be the fourth-highest full year ever – and there are still six months to go.

It is pretty likely now that the sequence of calendar year CT receipts exceeding the previous year will be extended to 13 years (back to 2012).

The June outturn was enough to push the rolling 12-month sum up to a new high of €25.5 billion.

The next month of interest will be August when we will see how much the fruit harvest brings in.

The continuing elevated levels of Ireland's Corporate Tax receipts

Ireland’s Corporation Tax revenues have been at an elevated level for some time. For the past 18 months their 12-month rolling sum has hovered around €24 billion, with little more than volatility causing it to move slightly up and down.
There is no clear recent trend, but the chart of calendar year outturns could be set for another year with an annual increase. It is 2011 since the amount of Corporation Tax collected in a year was lower than the preceding year. Here are the outturns since 2014, with the line for each subsequent year being higher than the last.
2024 did slip slightly behind 2023 in March and April, but this was made up by a strong May. The month receipts in May 2024 of €3.6 billion were the highest May on record.
May is a significant month for CT receipts but it is not generally a useful pointer for receipts for the year as a whole. May is month 11 for companies with an end-June year-end so has greater links with December of the previous year (month 6 for such companies). June is both a significant month for CT and a pointer for receipts for the year as a whole. June is month 6 for companies with an December year end, with November being month 11 for them. Large companies pay the bulk of their Corporate Tax in two preliminary payments during the year. These payments are made in month 6 and month 11 of the companies’ financial years. Here are the monthly receipts for June and November (and a fitted line) since 2009. The relationship is clear.
What will June 2024 bring? It is hard to know. As set out at the beginning the fluctuations in CT have been due to the volatility that can be expected in such a concentrated series (the top 10 payers account for more than 50 per cent of total CT receipts). The year-on-year monthly comparisons are pretty wide. Obviously, most of them have been positive in recent years, but certainly not all. There have been months where the amount collected was significantly down on the same month in the previous year. But this has typically not been those months that are important for CT – such as May, June and November (though other months such as March and August are starting to join them).
And we can see above that the range of changes has been a bit lower over the past 18 months or so. All-in-all, it probably points to June 2024 being relatively close to June 2023, maybe +/- 10 percent, which in turn points to yet another high return in November. And if there is to be a surprise, it may be on the upside.

Friday, May 17, 2024

Annual Volume of Market Purchases by FTBs Tops Out at 17,500

Figures released with the CSO’s March update of the Residential Property Price Index point to the volume of market purchases by FTBs topping out at 17,500 on an annual basis.

In the 12 months to January 2024, stamp duty filings were made for 17,496 purchases by first-time buyers.  For March, the equivalent annual figure dipped to 17,275, a reduction of just over 200.

This reduction is due to a fall in the number of existing dwellings purchased by FTBs.  The number of new dwellings has remained in and around 5,400 on an annual basis for the last year or so.

A local peak for FTB purchases of existing dwellings was reached in October of last year with 12,242 stamp duty filings made in the year to that month.  The latest figures for March show this 12-month sum declining to 11,891, a fall of around 350.

Since Census Night 2022 (April 3rd) just over 34,000 stamp duty filings have been made for market purchases by FTBs, giving a run-rate of around 330 per week.  Non-market transactions, self builds and bequests will give further first-time owners.

Friday, May 3, 2024

Ireland’s largest taxpayer motors along

OK, we can’t be 100 per cent sure that Microsoft Ireland Research is Ireland’s largest taxpayer but it certainly is a likely candidate for being so.  The 2023 accounts are now available and like last year continue to paint a strong picture.  Let’s start with the income statement:

From 2019 to 2023, turnover pretty much doubled (after previously doubling from 2017 to 2019).  Operating costs haven’t increased as rapidly with operating profits increasing by around two and a half times since 2019, to reach $23.3 billion.

In recent years, the tax charged in the income statement has been around 12 per cent of operating profit plus net interest income. This continued to be case in 2023.

At $2.9 billion, Microsoft Ireland Research (MIR) is likely responsible for around ten per cent of Ireland’s Corporation Tax revenues and something a little north of two per cent of general government revenue.  MIR has also seen its non-financial footprint increase here in recent years.

In 2023, Microsoft Ireland Research had an average of 1,242 employees and incurred an aggregate of $157.7 million of expenses on wages and salaries.  This gives an implied average of $127,000 per person employed.  In total aggregate staff costs were $234.7 million once PRSI, pension costs and share-based remuneration are factored in.

We are primarily interested in Microsoft Ireland Research because of the size of its tax charge. It does not have the highest amount of Microsoft’s employees in Ireland.  That impact belongs to Microsoft Operations Ireland Limited which had an average of 2,779 persons employed in 2023 (2022: 2,386). 

In 2023, MIOL incurred wages and salaries costs of $340 million at an average of $122,400 per person employed.  On top of that MIOL had a tax charge of $652 million, up from $476 million in 2022.

Combined MIR and MIOL, had a tax charge of $3.5 billion in the twelve months to the year ended June 30th 2023.  Add in $700 million of total staff costs and we’re at $4.2 billion.

Thursday, April 25, 2024

Recent changes in the tenure status of households headed by an Irish or UK national

This is a companion to the previous post which looked at changes in the homeownership rates in the 1991 and 2022 censuses. Here we look at more recent changes in the tenure status for households headed by an Irish or UK national using figures kindly provided by the CSO.

From Census 2016 to Census 2022 the number of households enumerated headed by an Irish or UK national increased by 83,293, or 5.5 percent.  In 2022, these were 87 percent of the total households enumerated (and 89 percent of households where the citizenship of the reference person was provided, i.e. excluding “not stated”).

Here is the tenure status of households headed by an Irish or UK national in the last two censuses.

When looking at the changes, by far the largest absolute increase was for owner-occupiers, whose number increased by 48,522 over the period.  There was a rise in the number of outright owners without a loan or mortgage and a decline in the number of owner-occupiers with a loan or mortgage. 

In relative terms, the number of owner-occupiers rose by 4.4 per cent.  With the total increasing by 5.5 percent, this results in a decline in the home-ownership rate for this group from 75.3 percent in 2016 to 74.8 percent in 2022.  Households whose tenure status is “not stated” are excluded from the determination of the tenure rates shown in the table.

The next largest absolute increase was for social housing tenants. The number of households who are tenants of local authorities or approved housing bodies shows a rise of 20,741 over the period.  This is a 14.5 percent increase and resulted in the the share of households headed by an Irish or UK national who were local authority or AHB tenants increasing from 9.6 percent to 10.5 percent.

The next largest increase was for households who occupied a dwelling free of rent. There were a further 3,643 such households in 2022, though these remained less than two percent of all households headed by an Irish or UK national.  These are likely to arise due to intra-familial arrangements where the owner and occupier of the dwelling differ.

Of the possible occupancy statuses, the smallest absolute increase for households headed by an Irish or UK national was for those renting from a private landlord.  There were just an additional 360 such households in Census 2022, an increase of 0.2 per cent.  The share of these households declined from 13.4 percent in 2016 to 12.8 percent in 2022.

This does not tally with a property-owning democracy being replaced by a rent-paying one.

Indeed, related findings from the census indicate that we need more rental dwellings not fewer.  On Census night 2022, 33 percent of 25 to 29 year-olds were enumerated at their parents’ house.  The equivalent figure from 2011 was 24 percent. 

If the share of 18 to 35 year-olds living with their parents had stayed at the level it was in 2011, then almost 100,000 more young adults would have left the family home.  The number of households with a reference person aged under 35 declined from 367,000 in 2011 to 255,000 in 2022.

Part of this is demographics and aging, but a lot of it is due to the shortage of housing.  The share of the population aged 20 to 34 has declined from 23 percent to 18 percent.  However, the share of households with a reference person under 35 has declined from 22 percent to 14 percent.  If the share of households had just tracked population change there would be 70,000 more households with a reference person aged under 35.

If we were to crudely apply the actual tenure status rates from Census 2011 for the under 35s, then these additional 70,000 households would be split as 35,000 private rentals, 25,000 owner-occupiers and 10,000 social rentals or occupied free of rent.  However, the extra 100,000 still living at home are not the same as those living independently.

Most people when they leave the family home go initially to rental accommodation. Some of those still in the family home may be looking to buy, but most would choose to rent if reasonable options were available.  Ireland needs more of all types of housing but options for renters are far more restrictive then they are for buyers. 

The very large increase in the number of young adults still living at home can be addressed by providing more rental accommodation for these people to move out to.  At a point in time, private renting is a legitimate form of tenure status and is no less deserving of being provided for. However, almost all commentary and pretty much all policy is aimed at owner-occupiers. Units provided for renters are considered a "home lost".

As the opening table of the post shows, since 2016 there has been an 48,500 increase in the number of households headed by an Irish or UK national who are owner-occupiers.  Over the same period the number of such households who are renting privately increased by 360. 

For every one additional household headed by an Irish or UK national who became a private renter, 135 became owner-occupiers. 

In the inter-censal period, April 2016 to March 2022, separate CSO figures show that there were 79,500 market transactions by first-time buyers.  On an annual basis these are currently running at 17,500 per 12-month period.

If we look at the homeownership rates derived from the census we can see the decline in recent decades.  However, most of this decline took place in the first decade of this century. 

From Census 2002 to Census 2011 the homeownership rate declined from 80 percent to 71 percent.  From Census 2011 to Census 2022 the decline levelled out considerably with a further fall to 69 percent. 

Part of the reason the decline is moderating is because people are staying in owner-occupied houses for longer – their parents’ houses.  With more options, people could get out of the family home and set up their own one-person or two-person households – in suitable rental accommodation.  They could then look to join the buying brigade down the line.

Just how upside down things have got can be see by these two recent postings on

These two 2-bed apartments are a short distance from each other in the Douglas area of Cork city.  The property for sale is listed at €275,000. The property for rent is listed at €2,200 per month.

At an interest rate of five percent, over 20 years, the monthly repayment on a mortgage of €240,000 would be €1,600 per month.  That’s €600 a month to help cover the additional costs of being an owner-occupier, though obviously without the flexibility of being able to move easier.

If the sale and letting were to happen at the advertised prices it would give a price-to-rent ratio of just over ten.  By international and recent historical standards in Ireland this is low. Remember this?

Again, something does not feel right.  Then it was prices that were far too high; now it is rents.

There is lots of evidence that the squeeze is most acute in the private rental sector.  As shown in an earlier post here are the housing-cost overburden rates for renters and mortgagors across the OECD.

And this only reflects those who are actually in rented accommodation.

To repeat what we saw at the start.  Since Census 2016, there are an extra 83,300 households headed by an Irish or UK national. Of these, the increase can be split as:

  • 48,500 owner-occupiers
  • 20,700 social housing tenants
  • 3,600 occupied free of rent, and
  • 360 private renting

with a 10,000 increase in the number of “not stated”. If a ratio of 135:1 is the natural order of things, then fine, but it seems more than a little extreme and is just going to result in more young adults having to stay at home for longer.

The impact of “not stated” and migration on Ireland’s home ownership rate

The census is a key source of reliable information on population and households in Ireland.  One important indicator taken from the census is on households’ tenure status: split between different types of owners and renters.  Since the publication of the census results on housing there has been considerable focus on the decline of Ireland’s homeownership rate relative to its peak in 1991.

In the 1991 Census, there were 808,385 households enumerated as owner-occupiers from a total number of permanent households of 1,019,723.  That gives a homeownership rate of 79.3 per cent. 

By 2022, the number of owner-occupiers had increased by almost 50 percent to reach 1,210,925.  However, the total number of households had increased by 80 per cent and there were 1,836,728 permanent households enumerated in Census 2022.  Thus, the homeownership rate was reduced to 65.9 per cent.

Here we will consider the impact of two factors on the change in the homeownership rate from the 1991 to 2022 Census:

  1. Households whose tenure status is “not stated” on their census form, and
  2. The change in the resident population due to migration

A subsequent post looks at recent changes in the tenure status of households headed by an Irish or UK national and examines how the housing squeeze is much more acute in the private rental sector, yet it is owner-occupiers that capture all the attention.


In the 1991 Census, there were 9,396 households who were recorded with a tenure status of ‘not stated’.  This was equivalent to 0.9 per cent of the total number of permanent households. 

The table above is taken from the Census 1991 report on housing.  It is notable that this report was one of the last to be produced and was not published until February 1997, highlighting that this was not a priority area for results and publication.

In contrast, for Census 2022, the report on housing was the second to be published.  In this instance there were 80,235 permanent households whose tenure status was not stated on their census form.  This was equivalent to 4.4 percent of households.

One reason for the rise in “not stated” is the use in recent censuses of Reconciliation Forms for known households that did not return a census form.  Compliance with the census is high but not universal.  The CSO note that in 2016, just over 20,000 households were enumerated using Reconciliation Forms.

This makes the population count more accurate – which is, after all, the primary purpose of the census – but does impact other indicators taken from census data.  Part of the reason for the decline in the headline homeownership rate is due to the increase in the share of households whose tenure status is not stated. 

By definition, the census data cannot tell us anything about the  tenure status of such households.  Saying that homeownership has declined in favour of “not stated” is pretty meaningless.

Thus, it would be better to calculate such rates using only those households for whom a tenure status is known.  Using the numbers above this would give a base of 1,010,327 households in 1991 and of 1,756,493 households in 2022.  The amended homeownership rates become:

  • 1991:   ( 808,385  / 1,010,327 ) x 100 = 80.0%
  • 2022: ( 1,210,925 / 1,756,493 ) x 100 = 68.9%

Among households whose tenure status is known the homeownership rate declined from 80 per cent in 1991 to 69 percent in 2022.


The second factor to be considered is migration.  As noted in an earlier post, the Ireland of 2022 is very different to that of 1991.

In the 1991 Census, 98.4 per cent of the population of 3.5 million was born on the islands of Ireland and Great Britain.  The equivalent figures for the 2022 Census were 85.4 per cent of a population of 5.1 million.  The number of people living here who were not born in Ireland or Britain went from 55,000 in 1991 to 730,000 in 2022.

Beginning with Census 2006, the CSO published a breakdown of tenure status by the nationality of the reference person of the household.  They have now also kindly provided a similar breakdown for the 2022 Census by the citizenship of the reference person of the household.

For 1991, the overall homeownership rate of 80.0 per cent can be taken as that for households headed by an Irish or UK national.  Other households made up such a small proportion of the population that they could not significantly move the homeownership rate.

In 2022, there were 237,560 households with a reference person who was not enumerated as an Irish or UK citizen.  Of these, there were 48,221 households where the citizenship of the reference person was not stated, giving 189,339 households with a reference person with a citizenship other of Ireland and the UK.  Thus, households headed by a non-Irish or non-UK citizen were 10.6 percent of households enumerated in the census (excluding not stated). 

Across the world, the homeownership rate of immigrants is typically found to be lower than that of native populations.  In Census 2022, the homeownership rate of the near 190,000 households headed by a non-Irish or non-UK citizen was 24.3 per cent. This will impact the overall result.

The details provided by the CSO show that the homeownership rate in Census 2022 for households headed by an Irish or UK citizen was 74.8 per cent.

Thus, while the headline homeownership rate in the census declined from 79 percent in 1991 to 66 percent in 2022 we note that:

  1. If households whose tenure status was “not stated” on the census form are excluded the decline in homeownership is from 80 percent in 1991 to 69 percent in 2022, which better reflects the overall change in the homeownership rate in Ireland, and
  2. If looking at households headed by an Irish or UK national the decline is from 80 percent in 1991 to 75 percent in 2022, which better reflects the change in the homeownership rate for the native population.

Friday, April 5, 2024

On the Price and Quantity of Housing

Housing problems are complex but usually can be distilled back to a shortage of housing relative to demand. For those looking, it can be difficult to find somewhere to live, particularly for renters.  More housing makes it easier to find somewhere to live, though sometimes this is in dispute. 

Earlier in the week we had a opinion piece that focused on prospective homeowners with a broad focus on price and a limited view on supply.

On Price

The piece sets out findings of research undertaken by the Bank of England:

For every 1 per cent increase in lending rates, the researchers of Threadneedle Street found a commensurate 3 per cent decrease in house prices, and vice versa.


Another significant determiner of house prices is population growth. For every 1 per cent increase in the natural growth of households since 1990, the UK researchers found a 2 per cent increase in house prices. The same 1-to-2 per cent ratio also applies to immigration – people coming to work here.


And the third factor: wages. Each 1 per cent rise in incomes results in a 2 per cent rise in house prices.


Finally, housing supply itself. A 1 per cent increase in stock (some 20,000 houses) should theoretically reduce prices by 2 per cent.

The precise source isn’t provided but we will just taken them as given in the piece.  We will use the most recent intercensal period, 2016 to 2022, to do a crude approximation of the impact of these estimates if applied to Ireland.

Central Bank data shows that the interest rates on new business mortgages averaged 3.50 per cent in 2016. For 2022, this has declined to 2.68 per cent.  This gives a decline of 0.82 percentage points (which seems more relevant than the 30 per cent reduction)

The population data from the Census shows an 8.1 per cent increase over the same period.  The annual data from the Employment Costs Survey shows the yearly earnings of a full-time employee rising from €45,640 in 2016 to €54,189 in 2022, an increase of 18.7 per cent.

And again using the Census, the housing stock increased from 2,003,645 in 2016 to 2,112,121 in 2022, an increase of 5.4 per cent.

Applying the Bank of England’s estimates gives the following impacts on prices:

  • Mortgage Rates: –0.8 x 3 = +2.4
  • Population: +8.1 x 2 = +16.2
  • Annual Earnings: +18.7 x 2 = +37.4
  • Housing Stock: +5.4 x –2 = –10.8

It is all very crude but the sum of those impacts is +50.6 per cent.  The CSO’s residential property price index went from 107.5 in 2016 to 164.0 in 2022, a rise of 52.6 per cent.  I don’t know, it’s like this supply and demand stuff works, or something.

However, the negative impact on prices of the increase in the housing stock is dismissed in the piece because prices haven’t fallen as the housing stock has increased and “are at their highest level since the Celtic Tiger.” 

But the price effect of the increase in the housing stock is there! And, as done here, can be shown using the estimates provided in the piece.  Using those shows that house prices in 2022 would have been 10-11 per cent higher if there had been no increase in the housing stock since 2016.

The increase in the housing stock reduced house prices relative to what they would have been if that increase hadn’t occurred.  This is how supply and demand models work: relative prices, ceteris paribus etc.

The piece is right that interest rates have been a key driver of house prices in recent decades.  We examined that here which showed that even though price to income ratios have increased in Ireland, indicative initial mortgage payment to income ratios are actually lower than they were in the 1970s and 1980s.  This is the final chart from that post:

As was pointed out in the previous post it is with the deposit required that the most significant increases have been seen.  Higher nominal house prices (due to lower interest rates) have seen the amount required for a 10 per cent deposit rise from around a quarter of the average annual household income in the 1970s and 1980s to almost a half of household income now.

Ireland does not stand out as having unusually high mortgage payment burden. Here is OECD data on the median mortgage burden as a share of disposable income for owners with mortgages (with data for all bar five OECD member countries).

For newer and possibly larger mortgage burdens we can look at the housing cost overburden rate.  This is the share of households where housing costs consume more than 40 per cent of disposable income.  In this instance OECD data for both owners with mortgages and private tenants are provided.

Ireland is hard to locate in Panel A because Ireland has one of the lowest housing cost overburden rates for owners with mortgages in the OECD.  In Panel B it can be seen that Ireland has one of the highest housing cost overburden rates for private tenants in the OECD.  Whose plight is in need of easing?

On Quantity

The piece takes a very limited view of quantity: it’s new houses for first-time buyers or nothing, and is best represented by this paragraph.

In Dublin city last year, 94 per cent of all new housing was apartments, 98 per cent of which were for rent. First-time buyers there bought just 75 new houses. In Cork city just 3.5 per cent of all new housing was sold with first-time buyers buying 17 new houses. In 2017, over 80 per cent of all new scheme houses (what the CSO calls housing estates) was sold on the market, and last year that was 52 per cent. Individual buyers have been sidelined and forgotten by successive governments.

The figures for the Dublin City local authority area are correct but they are limited.  Per the CSO, there were stamp duty filings for 1,975 first-time buyer transactions in Dublin City Council’s (DCC) area in 2023. That’s a long way from 75.

The difference, of course, is explained by the most frequent type of property that is transacted: existing ones. Dublin City has a housing stock of around 250,000 units.  That most of the supply for first-time buyers comes from this should not be a surprise.

We can get insight into the composition of the housing stock in DCC’s jurisdiction from the Census.

The area has 150,000 houses – 60 per cent of the stock.  If 50,000 apartments are added, houses would still make up 50 per cent of the stock.  3,200 apartments were completed in the DCC area last year.

We can start to see if “individual buyers have been sidelined and forgotten” by looking at the national tenure status figures from the Census.

From Census 2016 to Census there was an increase of almost 140,000 in the number of households in Ireland.  Of this increase, 63,400 were owner-occupier households.

Somewhat unusually the next largest increase was for the “not stated” category.  Then comes the increase for tenants of local authorities and approved housing bodies which increased by just over 23,000.  The fourth largest increase was for households renting from a private household which made up 15 per cent of the total increase in households over the period.

The supplementary data to the CSO’s residential property price index gives details of the number of transactions. Between Census 2016 and Census 2022, stamp duty filings were made for 80,000 FTB transactions.  The figures show that there were 17,500 FTB transactions in 2023.

The breakdown shows that there were 5,000 FTB purchases of new properties and 12,500 FTB purchases of existing properties.  For the whole of Dublin, i.e. County Dublin, there were 5,000 FTB transactions last year.

On top of purchases, there will also be first-time owners due to single or one-off houses that are built for the occupier and will not have a stamp duty transaction to record.  5,500 single houses were completed in 2023.

On Homeownership Rates

Homeownership rates are used to highlight the plight of prospective buyers.

As the proportion of new housing for sale plummets, despite increasing overall supply, our home-ownership rates follow suit, and are now below the European average at just 66 per cent. Thirty years ago, 81 per cent of households owned their own home. That is a staggering drop in a short space of time, but the Government is remarkably silent on (or oblivious to) the issue.

Ireland’s homeownership rate has declined since 1991 but the Ireland of 2022 is very different to the Ireland of 1991.

In the 1991 Census, 98.4 per cent of the population of 3.5 million was born on the islands of Ireland and Great Britain.  The equivalent figures for the 2022 Census were 85.4 per cent of a population of 5.1 million.  The number of people living here who were not born in Ireland or Britain went from 55,000 in 1991 to 730,000 in 2022.

It is true that the overall homeownership rate declined from 80 per cent in 1991 to 69 per cent in 2022 (when households with a tenure status of ‘not stated’ are excluded).  However, what the various census results show is that this decline occurred from 20o2 to 2011, during which the rate declined from 80 per cent to 71 per cent.  The homeownership rate for All Households has been relatively stable since 2011.

The above chart also shows some outturns for homeownership by nationality – specifically the homeownership rate for all households and for those  headed by an Irish or UK national. 

As discussed, this was essentially the entire population in 1991, when the homeownership rate was 80 per cent.  The first time a breakdown of homeownership by nationality was provided was with the 2006 Census. 

Thus far, no results for homeownership by nationality have been published by CSO for Census 2022.  Going back to Census 2016, the homeownership rate for households headed by an Irish or UK national was 75 per cent.

Going from 80 per cent in 1991 to 75 per cent in 2016 is a decline, but not a staggering one.  The significant change in Ireland has been in the proportion of the population who were born somewhere else. 

In line with the experience elsewhere, immigrants have lower homeownership rates. Of the 150,000 households in Census 2016 not headed by an Irish or UK national, just 22,800 were owner-occupiers, giving a home-ownership rate for this cohort of 16 per cent.  Nearly three-quarters of such households are private tenants.

Finally, on homeownership rates, it should be noted that they are based on households that actually exist.  If there is not enough housing people may stay in owner-occupied households longer than they want to.  We previously noted that in the recent Census, Ireland was short around 70,000 households headed by under 35s.

Between 2011 and 2022 the number of people aged between 20 and 34 declined by 11 per cent.  However, the number of households headed by an under 35 declined by 30 per cent.  Many of these people are living in owner-occupier households but they are not the owners; they are living with their parents.

There has not been enough analysis of the impact of current policies. Some 68 per cent of Irish 25-29 year-olds live with their parents; in Finland this is 5.7 per cent.  We should be discussing that, or how a policy obsession with urban hyper-density housing and homes unsuitable for families has created unsustainable commuter sprawl under a Green Minister for Transport.

There is no doubt that there are more people living with their parents for longer, but a figure of 68 per cent is outlandish.  For a start, around a quarter of the population aged 25 to 29 are non-Irish citizens (69,000 out of 296,000 in the latest Census). It seems unlikely that a large share of those are living with their parents.

The figure comes from the SILC, and the CSO have set out the differences in figures for young adults living at home in this useful note.  In the 2022 Census, 33 per cent of young adults aged 25 to 29 were enumerated at their parent’s house on Census night.  This is still a high figure.  It is much higher than it was in 2011 (24 per cent) and far, far higher than it is in Finland.

If the share of 18 to 35 year olds living with their parents had stayed at the level it was in 2011, then almost 100,000 more young adults would have left the family home.  We might ask how does Finland do it.

They are not doing it through homeownership. Recent figures from Statistics Finland show that “eighty-one per cent of household-dwelling units of persons aged under 30 lived in rented dwellings.”  A household-dwelling unit is formed by all persons living permanently at the same address.  Separate figures show that they also tend to live alone.

Here are the population distributions for Ireland and Finland by type of household.

Over 20 per cent of Ireland’s population lives in households of three or more adults. These are the households of young adults living with their parents or young renters sharing a semi-d. In Finland less than four per cent of the population live in households with three or more adults. 

On the other hand, in Finland, nearly 16 per cent of the population are people younger than 65 living alone.  In Ireland, this group is six per cent of the population. 

Ireland has lots of dwellings that are suitable for families.  Over 85 per cent of our housing stock are houses, with 1.8 million houses in a total stock of 2.1 million dwellings.  What we don’t have, if we are emulate Finland,  are sufficient dwellings for households of one or two people, especially renters.

Tuesday, March 26, 2024

The Recent Decline in the Inequality of Market Income in Ireland

One feature  of how the inequality of disposable income is determined in Ireland has been the recent decline the in the inequality of market income. Market income is typically defined as including wages, rents, dividends, interest and typically certain pension income such as from private and occupational pensions.

Here is the OECD’s estimate of the gini coefficient for market income in Ireland since 2012 (chart crime incoming):

In the OECD’s dataset, the figure for the latest year, 2021, corresponds to the household survey undertaken for SILC2022.  The reference year for income in the SILC is now the previous calendar year and this is the year the OECD use in their database.  The 2022 outturn for Ireland will be based on the survey done for SILC2023. It should also be noted that in SILC2023 the CSO revised their SILC results for 2020 to 2022 (due to the population findings of the Census) though the impact of the revision on the main measures of income inequality was modest.

The recent reduction in Ireland of the inequality of market means Ireland no longer has the highest gini coefficient for market income in the OECD.  The latest estimates show that France, Italy, Finland and the U.S. among others have higher gini coefficients for market income, with Ireland eighth highest.

It should also be noted that although the inequality of market income has been declining in Ireland for the past decade it has been lower previously – with lower gini coefficients estimated for the late 1990s/early 2000s.

The chart below has the recent outturns for Ireland and a selected set of OECD countries, showing Ireland losing its outlier status (and is also a chart having the vertical axis more appropriately start at zero).

We can start to get some insight into the nature of the fall in the inequality of market income in Ireland by looking at income shares.  These can be determined using the information in the ESRI’s PILSReP Database

Here are the quintile shares in the SILCs for selected years since 2013:

It can be seen that the market income share of the top 20 percent declined from 57 percent in 2013 to 50 percent in 2021.  The offsetting share increase can be seen for the bottom three quintiles. The share of market income going to the bottom 60 percent increased from 16.5 percent in 2013 to 23.4 percent in 2019.

We can get more granular detail on this change by looking at the Lorenz curves – a plot of cumulative shares by the cumulative population.  Here are the Lorenz curves for the distribution of market income in the 2013 and 2021 SILCs (again using figures from the ESRI’s PILSReP spreadsheet):

The most significant change happened at the bottom where there was a large reduction in the number of zeroes (i.e. non-recipients of market income).  In the 2013 distribution of market income, a cumulative share of one percent was not reached until the 33rd percentile.  By 2021, this was reached by the 24th percentile (with the 33rd percentile having a cumulative share of 4.1 percent).

The 2013 Lorenz curve remained at zero until the 22nd percentile; the 2021 distribution was zero until the 13th percentile.  The recovery and expansion of employment significantly reduced the number of zeroes in the distribution of market income.

The associated reduction in unemployment also means that the impact of transfers on income inequality has also fallen.  We can see this if we return to OECD data and look at their gini coefficients for market income, gross income (market income plus transfers) and disposable income (gross income minus taxes and social contributions).

For 2012, the OECD put the impact of transfers on Ireland’s gini coefficient at 0.20 points, reducing the gini coefficient from 0.58 for market income to 0.38 for gross income.  The impact of taxes further reduced the gini coefficient by 0.07 points, giving the gini coefficient of 0.31 for disposable income.

For 2021, the impact of transfers reduced to 0.15 points (due to there being fewer recipients of unemployment related transfers).  Transfers reduced the gini coefficient for market income from 0.51 to 0.36 for gross income.  The impact of taxes was largely unchanged again reducing the gini coefficient by 0.07 points, giving the gini coefficient for disposable income of 0.29.

Thus, while there was a reduction of .07 in the gini coefficient for market income, this translated into a reduction of “only” 0.02 in the gini coefficient for disposable income, due to the reduced impact of transfers. 

We can use the OECD to examine the impact of transfers and taxes on income inequality in all OECD member states in 2021 (or the latest available year in the dataset).

For 2021, the combined impact in Ireland of transfers and taxes on income inequality was the fourth highest among OECD countries.  For transfers, Ireland was eighth highest, with transfers in Finland, France, Greece, Belgium, Austria, Poland, Italy and Czechia all having a bigger impact on inequality. 

For taxes and social contributions, Ireland continues to stand out, with the 0.07 point reduction in Ireland having the largest impact on income inequality in the OECD.

Eurostat also provide measures of market income inequality.  One of these is an S80/S20 quintile share ratio for gross market income.  The outturns of this quintile share ratio for Ireland have shown a remarkable reduction in recent years; falling from almost 100 in 2013 to around 15 now.

The huge swings in this measure, at least for Ireland, indicate that it is sensitive to small changes at the bottom of the distribution.  It was the relatively high number of zeroes in the distribution of market income in Ireland that gave rise to the exceptionally high outturns up to 2013 for this measure.

One can imagine the top 20 per cent/bottom 20 percent ratio being something like 50/0.5 in 2013 (giving an answer of c.100) and this moving to something like 50/3.5 in recent years (giving an answer of c.15).

This is a relatively small change in the share of the bottom 20 percent (from 0.5 percent to 3.5 percent) but it has a marked impact on the outturn for the quintile share ratio.  And even with this reduction, Ireland remains the highest in the EU for this measure.

We could calculate a similar quintile share ratio using the shares of market income from the ESRI estimates in the table provided earlier.  But the answer would be very very different, i.e. over 100 for recent years (50.3/0.4 = 127, for 2022), rather than the 15 shown in the Eurostat results for 2022.

The reason for the difference is due to the income definitions used.  The CSO (and the OECD) only include private and occupational pensions in their measure of market income.  For their measure of gross market income, Eurostat include all old-age transfer payments.  This includes state pension benefits such as means-tested and non-contributory pension benefits and all survivors pension benefits.  This is based on the concept of pension income being a part of lifetime earnings.  Outside of private and occupation pensions, the CSO (and the OECD) count pension income as a social transfer, i.e., not part of market income.

Ireland’s gross market income quintile share ratio is high because of the relatively high number of non-recipients of market income and the relatively low number of pensioners.  It has been found that excluding zeroes, Ireland “lies around mid-table in terms of market income inequality” in the EU. 

It is also the case the estimates of market income inequality have tracked the estimates of quasi-jobless households (households with very-low work intensity where less than one-fifth of the available time is worked).  For a considerable period, Ireland had the highest share in the EU for population aged under 60 living in households with very-low work intensity. This has not been the case since 2018.  The lower level of quasi-jobless households is linked to the lower level of market income inequality – both are estimated using the SILC.

Eurostat also provide a number of gini coefficients.  All of these are after income taxes and social contributions have been deducted but then vary in the amount of social transfers that are included.  Eurostat provide three gini-coefficients:

  • Disposable income before all social transfers
  • Disposable income including pension transfers
  • Disposable income including all transfers

The final one is just the standard disposable income while the first is akin to market income after taxes.  Here are the estimated gini coefficients across the EU15 for disposable income before all social transfers: 

By this measure of market income inequality, Ireland has had, in recent years, one of the lowest levels in the EU15.  This is after taxes and social contributions have been deducted and again we note that in Ireland these have the biggest impact on the gini coefficient across both the OECD and EU.

Taxes alone are unlikely to account for Ireland’s relative position here, which is at odds to what we have seen for other measures of market income inequality, such as the quintile share ratio.  The difference in results suggests the definitions used are important. The quintile share ratio is determined using gross market income

As discussed above this includes all pension income.  The previous chart excludes all pension income.  This would suggest that pension income has a significant impact on Ireland’s relative position using the quintile share ratio for gross market income. 

We can see this if we look at the gini coefficient after adding in pension income.

So, after taxes and before all transfers, Ireland has a relatively low gini coefficient across the EU15.  Once pensions are added in, Ireland has one of the highest gini coefficients in the EU15 (with the higher UK estimate in the above chart going back to 2018 when the UK last provided data to Eurostat).  Eurostat quintile share ratio for gross market income includes all pension income which may go some way to explaining Ireland’s relatively high outturn for that measure (due to Ireland having a lower old-age dependency ratio).

This highlights that the impact of pensions is key to the transition from the distribution of market income across the population to that of disposable income.  We don’t get much insight into this from the OECD’s income inequality estimates. 

However, we can examine it if we look at the three gini coefficients provided by Eurostat at the same time.  Here they are for Ireland since 2012:

In line with earlier results we see a decline in the gini coefficients from Eurostat for those income measures most closer aligned with market income.  The gini coefficient for disposable income before all transfers declined from 53.5 in 2012 (Eurostat uses the 0-100 scale) to 47.0 in 2022.  The gini coefficient for disposable income including pension transfers declined from 46.1 in 2012 to 38.6 in 2022. 

The difference between those gini coefficients reflects the impact of pension transfers on income inequality.  We can see that this has increased over the past decade, from an impact of 7.4 in 2012 t0 one of 8.5 in 2022.  This is likely explained by the increasing share of pensioners in the Irish population.

The final gini coefficient is that for disposable income.  This has also declined, albeit more modestly, from 30.4 in 2012 to 27.9 in 2022.  The different to this gini gives the impact on income inequality of all transfers other than pensions.  We can see that this has declined from 15.7 in 2012 to 10.6 in 2022.  Again, this is likely driven by the reduction in unemployment and the reduced need for unemployment-related income supports.

We can compare the impact of pensions and other transfers across the EU in 2022.

In line with the OECD estimates, the estimates from Eurostat show that Ireland does not stand out for the impact of transfers on income inequality.  In 2022, the impact of transfers on income inequality in Ireland was the ninth highest in the EU27.

However, what the Eurostat estimates allow us to see is the composition of that impact which can be broken down into that due to pensions and that due to transfers other than pensions. 

And using this we can see that the impact of pensions on income inequality in Ireland is the lowest in the EU27, due likely to the low share of pensioners in Ireland’s population and also possibly the flat-rated benefits under the State pension schemes.  And, on the other the impact on income inequality of transfers other than pensions in Ireland is the highest in the EU27.  This will mainly reflect the impact of working-age transfer payments.

And, all of this is just how we get to the bottom line: disposable income.  This is the income people have available to spend.  The rest are somewhat notional figures.  So, to conclude here are the gini coefficients for disposable income across the EU15.

In terms of the EU15, Ireland has moved from upper-middle to lower-middle for the inequality of disposable income.

Tuesday, January 9, 2024

Ireland’s growing population of young adults

Using the results of Census 2022, the CSO estimated that Ireland’s population in April 2023 of young adults aged 25 to 34 was 645,000.  If we go back five years to 2018, using Census 2016 as the benchmark, the CSO estimate that the population then of young adults aged 20 to 29 (the same cohort) was 575,000.

Between 2018 and 2023 the population of this cohort grew by 60,000, or a little over 10 per cent.

Using the CSO’s estimates of the population by single year of age we can get the population of this group back to 1998 (when the youngest, now 25, would have been born).  After 1998, migration is the main driver of changes in the population of this cohort.

Population of Cohort Aged 25 to 34 in 2023 1998-2023

We can see that from 1998, the population of the cohort increased, likely as the parents of children moved to Ireland with them.  There was then a fall after the 2008 crash.  For the last ten years the size of the group has been increasing but this time, because the group is older, it is likely due to the autonomous decisions of young adults in their twenties.

We can see this pattern if we look at the estimated annual change in the population of this cohort.

Population of Cohort Aged 25 to 34 in 2023 Annual Change 1998-2023

In the years immediately preceding the pandemic, the size of this group was growing by an average of 10,000 per year.  Since then there has been volatility in the series due to COVID and, more recently, the war in Ukraine.

Of course, these changes are the net outcome of inward and outward migration.  We don’t have published estimates of migration by single year of age but the CSO do provide migration flows by age group.  Here is what they show for people aged 15 to 24 and for those aged 25 to 44.

Migration Flows of Population Aged 15-24 1987-2023

Migration Flows of Population Aged 25-44 1987-2023

In both cases, we that the estimated net flows in the past ten years have generally been positive.  Over the period since 1987 there is, though, a noticeable change in the age profile of migration.

In the late 80s and early 90s, migration, which was mainly emigration, was larger in the younger age category.  In 1989, negative net migration of 15 to 24 year olds was more than twice as large as that of 25 to 44 year olds.  By the turn of the millennium there was very little emigration of 25 to 44 years olds, while immigration of this group had become much stronger.

In the last 15 years, migration flows – both directions –  in the 25 to 44 age group have been larger than those in the 15 to 24 age group.  In the five years, pre-Covid, net migration of 25 to 44 year olds averaged +20,000 a year.  The impact of Covid and the war in Ukraine make identifying the underlying trends for the last couple of years difficult.

To conclude here are two additional snapshots of Irish migration flows:

  1. Migration flows of Irish citizens (available from 2006)
  2. Migration flows with Australia (available from 2008)

Migration Flows of Irish Citizens 2006-2023

Migration Flows with Australia 2008-2023

The estimated net migration of Irish citizens was positive from 2017 to 2021 and was negative in each of the last two years: –2.200 in 2022 and –900 in 2023.  And of the past eight years, Ireland has had one year (2022, -800) of negative net migration with Australia.

Finally, we use the Census results to assess how Ireland’s population of young adults has changed in recent years.  From Census 2016 we have the population by nationality for the 20 to 29 age group.  We roll that forward six years for Census 2022 and get the population by citizenship for the 26 to 35 age group.

Population of Young Adults by Citizenship 2016 and 2022

There was a 76,500 increase in this cohort in the inter-censal period.  Census 2016 recorded 554,000 people aged 20 to 29, and six years later, in Census 2022, there was 630,500 people aged 26 to 35

By country, the most significant change is for India, which shows an increase of 19,000 over the period.  No other country had a five-figure increase. The next largest increases were Brazil, Romania and Italy.  There were modest declines for Lithuania and the UK, with Poland showing the largest decline.

Over the period we can see that the number for Ireland increased slightly over the period – unsurprising as these are the benchmark for the estimated migration flows shown above.