The spread of earnings is quite uneven in Ireland, but the distribution of disposable income after tax and welfare is much less skewed. Tax and welfare changes implemented over the last half century have brought Ireland closer to the more egalitarian societies of Scandinavia. In 2021, we were only marginally behind Sweden, and slightly ahead of Denmark in how evenly people’s spending power was distributed.
But while nationally we are doing well, there has been less study of the regional distribution of income. A recent book by Prof Jim Walsh of Maynooth University documents the difference in regional incomes in Ireland. He uses a new Central Statistics Office (CSO) data set that matches anonymised earnings data from the Revenue Commissioners to anonymised Census data for 2016. This allows Walsh to map differences in income per head at considerable geographical detail.
In 2016, before tax and welfare, median or midpoint household income was highest in Dún Laoghaire-Rathdown at around €66,000 and lowest in Donegal at under half that figure. However, the gap between Dublin and Donegal was halved when we look at disposable income, once the effects of tax and welfare were taken into account.
The underlying difference in gross incomes between the richest and poorest parts of the State reflects the importance of cities. That is where high value-added production, employing large numbers of people with third-level qualifications, is generally located. For the Dublin metropolitan area, median gross income in 2016 was around €52,000. Cork and Galway were between €45,000 and €50,000, but median gross incomes in counties like Donegal and Leitrim, with no large urban areas, were under €35,000.
While the welfare system is significant in reducing differences in disposable income across the regions, the tax system plays an even more important role. On average, someone in the Border area pays only 60 per cent of the tax paid by someone living in Dublin, reflecting the much lower earnings than for Dubliners. It is this higher tax take from Dublin which funds a major transfer of resources to the rest of the State.
Public sector employment is another factor that helps to smooth earnings and living standards across Ireland. Jobs in teaching, health, and social care are spread across the State and paid at standard rates, irrespective of geographic location. Public sector jobs account for a much higher share of earned income in the Border and Western region than in Dublin with its high-paying tech jobs and thriving private sector, despite the fact that Dublin is the State’s administrative capital.
This gap in earnings between cities (and their hinterlands) and the rest of the State reflects the fact that high value-added production thrives in urban environments. One of the reasons for this is that only in cities can you find the scale of economic activity that provides employment for a wide range of different skills.
Historically, IDA Ireland had a major challenge in encouraging incoming high-value-added businesses to locate in dispersed areas across the State because of difficulties for the partners of skilled employees and managers to find suitable job opportunities outside the major urban centres. The husbands or wives of the highly educated scientists employed by pharmaceutical companies may also be high fliers looking for work as lawyers or accountants or in niche areas. Couples with varied qualifications seek locations where they can both have successful careers, generally possible only in larger centres.
The National Planning Framework set out to move Ireland away from the unsustainable model of widely-dispersed settlement to one where people live closer to their jobs. The Walsh study shows how long-distance commuting, especially around Dublin, sees many people living in surrounding counties but working in the city. The 2022 Census will show whether the National Planning Framework has had any impact to date, or whether Covid, hybrid working, and Dublin rents have resulted in more people living far from their place of work.
People whose journey to work takes longer than 30 minutes, earn between 40 per cent and 50 per cent more than people who work nearer home. With their above-average incomes, such commuters can afford higher fuel costs to get to work. Those high earners can also afford to pay more for housing in the Dublin commuter belt than those who work locally.
Fuel taxes and congestion charges may be tools to discourage long-distance commuting that leads to high emissions or traffic problems. A more sustainable pattern of development will require new housing to be concentrated in major urban centres where most jobs are.