Quarterly Economic Observer - Spring 2015 - "The Earnings Distribution and Low Pay"

This edition of the NERI’s Quarterly Economic Observer (QEO) outlines our latest expectations for the economic outlook in the Republic of Ireland and Northern Ireland (Section 3) and provides a profile of the earnings distribution and low pay in the Republic of Ireland (Section 4). In particular, we focus on establishing a more detailed evidence base for understanding those who are low paid.

Economic Outlook

The economic outlook differs for both part of the island of Ireland. In the Republic, an overdue recovery is gaining strength with ongoing improvements in the labour market, exports, domestic demand and earnings. However, concerns persist that the recovery has yet to spread across the country – a phenomenon typified by weak or limited employed growth in regions outside Dublin and its hinterland.

In the North uncertainty remains, deriving from the impact of Sterling’s appreciation against the Euro alongside unclear prospects for the forthcoming General Election and a possible European Union membership referendum in 2017. However, the expectation is for continued economic growth and falling unemployment. In both economies challenges remain given high, if declining, long-term unemployment and lower than ideal levels of investment.

Based on the assumptions and expectations outlined Section 3, our current projections for the Republic of Ireland include:

  • Strong GDP growth of 3.4% in 2015, declining marginally to 3.1% in 2016
  • Consumption will continue its recovery driven by rising real disposable incomes
  • The improvements in the economy will impact positively on the exchequers finances with the General Government Deficit falling to 2.7% in 2015 and 1.9% in 2016
  • A steady decreased in unemployment out to 2016, with the 2015 figure reaching 10%. By 2016 we expect unemployment to reach 9.1%.However, the pattern of employment growth in 2014 is a concern and points to divides in the nature of economic recovery across the Republic. The overall picture has been one of steady employment growth along the eastern half of the country centred on the Greater Dublin Area and stagnation or decline in the western and northern counties.

The Earnings Distribution and Low Pay

Section 4 presents our analysis of the earnings distribution using the latest data (from 2013). Our examination has also allowed us to gain a greater understanding of those who are low paid and the risk of low pay faced by employees with certain characteristics. Among these findings are:

  • On average employees earns €20.63 per hour although 50% of employees earn less than €16.62 per hour
  • 25% of employees earn an hourly wage of less than the Living Wage threshold of €11.45 per hour (approximately 345,000 employees)
  • 30% of employees earn below the Eurostat low pay threshold of €12.20 per hour (approximately 400,000 employees)
  • 60% of the low paid are women, with female workers facing a 34% risk of being low paid (one in three)
  • 69% of employees in the accommodation and food sector are low paid, while 60% of workers in administration and support services are also classified as low paid
  • The risk of low pay is much greater for employees on low hours (less than 20hrs) where more than one in two are low paid. The risk is similar (52%) for employees with a temporary contract
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