What you’ll see below are Ireland focused extracts from a study on alternative contemporary economic measurements. It is designed to measure how effectively and equitably an economy distributes surplus value to its citizens. It measures whether or not excess economic growth is redistributed in the form of wages and mitigated cost of living across healthcare, childcare, education and accommodation.

The belief is that 1) socio-economic performance is a more effective indicator of overall economic performance, as it is experienced by citizens of the country, than macro-economic indicators alone and 2) that increasing cost of living without commensurate increases to median income is an effective predictor of future economic instability.

*\*The research that follows has been compiled over the last 18 months and is drawn primarily from OECD data. This has been extracted from privately commissioned research. Original data sources are public but final rankings are not.*

**Introduction**

A successful economy is one that can maintain or increase the level of opportunity and socio-economic mobility for its citizenry as it grows. It effectively distributes the surplus created through productivity equitably across a society to ensure that all citizens have an opportunity to prosper as the country does. An economy that grows, (i.e. increases GDP per capita) but sees proportionate increases in cost of living and consequential decrease in socio-economic mobility is not successful.

GDP (or some derivative of it) has been the principal measure of economic productivity in the post war period. We have used it to assess the relative success or failure of both systems and regimes. But the world has changed and so too must our economies and the way we assess them. GDP was designed to measure corporate productivity. A belief emerged that GDP could implicitly consider 1) the success of the economic regime, 2) the government who implemented it and 3) the contentment of the electorate that put them there. Implicitly, a strong economy would lead to more opportunity and mobility for the electorate and a higher level of satisfaction with government.

This was an elegant solution in a world where the salaries provided by corporations could be expected to ensure socioeconomic-mobility in the long term. That is no longer the case.

**Alternative Measures**

We have constructed an alternative system of economic assessment that has three constituent parts:

1. Economic performance as measured by a weighted combination of CPI, unemployment rate, general government fiscal balance as a % of GDP and GDP volume and annualised growth,
2. Cost of living as measured by childcare costs (net childcare costs for parents using childcare facilities), housing affordability (House price to rent ratio & household housing cost burden as share of disposable income), education cost (private expenditure on all educational institution per FTE student & annual avg tuition fees for bachelors degree) and health costs (private health expenditure % of annual wage) and
3. Financial Standing as measured by Household net worth, household financial assets, household savings % of total household disposable income & income of people over 65 as % of population)

By using these criteria we can quickly establish if a rising economy is also reducing relative cost of living and increasing household wealth. This would be the best case scenario. An economy that increased relative cost of living whilst also increasing household wealth might be acceptable to most people but would not be ideal. An economy that sees increasing cost of living and declining household wealth during a rising economy is catastrophic because people are becoming fundamentally poorer despite broader economic success. It indicates a major systemic fault with the economy itself. This is the case for Ireland.

**Ireland**

In 2012, using these criteria Ireland scored as follows. (out of 36 OECD assessed countries)

* Economic performance: 33/36
* Cost of Living Performance: 18/36
* Financial Standing performance: 20/36

In 2020,

* Economic performance: 1/36
* Cost of Living Performance: 28/36
* Financial Standing performance: 29/36

So Ireland’s Economic performance using more traditional measures has improved significantly over that 8 year period. Unemployment declined from 15.48% to 5.9%. General government fiscal balance as a percentage of GDP has improved significantly from -8.33% to -5.02% on GDP growth of 5.9% Traditionally, this would have inferred that Ireland was in pretty healthy shape but we can see that both cost of living results and financial standing have disimproved meaning that life in Ireland is more expensive in 2020 and people are poorer.

Specifically, Ireland ranks 32 out of 36 for childcare costs (up from 33). Private spending on education (primary to post-secondary non-tertiary, % of GDP) has jumped by a factor of almost 18 from 0.185% to 3.31%. The annual average (or most common) Bachelor’s tuition fees charged by tertiary public educational institutions to national students (2013/14) has jumped by 28.74%. Private health expenditure has remained constant but Ireland still ranks as 31/36 for private health costs in the OECD.

Ireland ranked number 1 in the OECD for housing affordability in 2012. Incomes were reasonably high and mortgages reasonably cheap. Ireland had fallen to 12th by 2020. House price to rent ratio (Index 2015=100) has swung from 75.4 in 2012 to 114.9 in 2020. Real house price indices, s.a. (Index 2015=100) has swung from 78.3 to 126.9 meaning You might think that this still seems too high and you would be correct because 1) these numbers don’t consider further real estate inflation through the covid period and 2) it’s based on national averages. Ireland’s significant economic dependency on Dublin means that the relatively low rental and property prices across rural Ireland (compared to Dublin salaries) make housing look more affordable than it actually is. (this is evinced by data showing that the median of the mortgage burden (principal repayment and interest payments) or rent burden (private market and subsidised rent) as a share of disposable income, in percent nationwide had actually reduced from 18.49% to 16% in 2020)

Increases in property value have improved financial standing generally. Household net worth and household financial standing, et pension wealth and income of older people have all remained reasonably consistent in the period 2012-2020 but other countries in the OECD have outperformed Ireland on all these measures resulting in Ireland’s ranking slipping from 20th in 2012 to 29 in 2020

Things have clearly worsened since 2020 but it’s clear to see that despite Ireland’s macro-economic success the economy is not working efficiently for the citizens of the country. The economy that we have created is one that generates more jobs and more growth but ultimately makes us poorer and makes day to day life more expensive. It is evidently unsustainable. An economy that provides jobs but takes away wealth for the majority is one that is highly likely to experience considerable instability.

​

\*This data is extracted from an OECD wide analysis on alternative economic measures. All data is publicly accessible through the OECD [https://data.oecd.org/](https://data.oecd.org/)

31 comments

  2. Interesting post and in particular an interesting way to compare the different performance indicators against each other. Thanks for posting.

  3. >We have constructed an alternative system of economic assessment that has three constituent parts:

    Who’s the “we” here?

  6. Interesting post.

    A few questions/comments/
    – why is house price to rent ration included as a cost of living measure? That feels like one added in to make Ireland do bad. If the average house price was €500 and average rent was €50 a month, you’d still do terrible, even though obviously the cost of housing would be very low. It’s an important metric for other reasons, but I don’t see how it really measures cost of living? A very large proportion of the population own homes, so for them, the metric has no bearing whatsoever (in fact, it may be positive). Housing costs as proportion of earnings seems more reasonable.

    – some metrics such as education cost do not appear to be adjusted for earnings, while others are.

    – any metrics that are based off GDP will give meaningless results for Ireland.

    – the housing affordability one is interesting. People sometimes don’t realise how cheap rent and houses were in Ireland in the early-to-mid 2010s. The fact we’re still 12/36 on housing affordability will surprise a lot of people (ne included tbh).

  8. Thanks. Great analysis.

    Something else which I think people often mis is “household hours worked”. Especially for comparisons over longer periods.

    You’ll often see data on how real disposable household income has increased (using the CSO definition for disposable income here, that is gross income minus pension contributions). But it doesn’t cover that now basically every household has two incomes, when it used to be just one. And obviously two income households have higher expenses than one income ones (more transport expenses, childcare …). Arguably a lower quality of life too, though I realize that part isn’t so easy to quantify.

  9. When I said all these new tech jobs being created are no use to anyone but the tech workers who get bigger wage increases, I got downvoted.

    More jobs = more pressure on housing, transport, health, education.

    Our obsession with jobs and GDP is blinding our view on how it impacts on the 5m or so people living here already.

    Our whole psyche is wrong. People only want wage increases. I want cost of living to go down.

  10. The problem with this sort of analysis is that it’s clearly designed to arrive at a particular result.

    Consider the following:-

    >Specifically, Ireland ranks 32 out of 36 for childcare costs (up from 33). Private spending on education (primary to post-secondary non-tertiary, % of GDP) has jumped by a factor of almost 18 from 0.185% to 3.31%. The annual average (or most common) Bachelor’s tuition fees charged by tertiary public educational institutions to national students (2013/14) has jumped by 28.74%. Private health expenditure has remained constant but Ireland still ranks as 31/36 for private health costs in the OECD.

    In terms of increased spending on private education, all this actually proves is that more people had enough money to spend on private education.

    Increased spend on tertiary education is in lieu of tax increases.

    >Ireland ranked number 1 in the OECD for housing affordability in 2012. Incomes were reasonably high and mortgages reasonably cheap. Ireland had fallen to 12th by 2020. House price to rent ratio (Index 2015=100) has swung from 75.4 in 2012 to 114.9 in 2020. Real house price indices, s.a. (Index 2015=100) has swung from 78.3 to 126.9 meaning You might think that this still seems too high and you would be correct because 1) these numbers don’t consider further real estate inflation through the covid period and 2) it’s based on national averages. Ireland’s significant economic dependency on Dublin means that the relatively low rental and property prices across rural Ireland (compared to Dublin salaries) make housing look more affordable than it actually is. (this is evinced by data showing that the median of the mortgage burden (principal repayment and interest payments) or rent burden (private market and subsidised rent) as a share of disposable income, in percent nationwide had actually reduced from 18.49% to 16% in 2020)

    Can you think of any reasons housing in Ireland was cheap in 2012?

    I’ll give you a clue, the unemployment rate was 15%.

    >Things have clearly worsened since 2020 but it’s clear to see that despite Ireland’s macro-economic success the economy is not working efficiently for the citizens of the country. The economy that we have created is one that generates more jobs and more growth but ultimately makes us poorer and makes day to day life more expensive. It is evidently unsustainable. An economy that provides jobs but takes away wealth for the majority is one that is highly likely to experience considerable instability.

    To claim the economy was “more efficiently working” in 2012 is actually pretty offensive. To suggest we’re poorer and worse off, likewise.

    I can only hope you aren’t old enough to remember 2012.

  12. Why pick 2012? Why not 2010 or 2006?
    It seems very specific?

    >Ireland ranked number 1 in the OECD for housing affordability in 2012. Incomes were reasonably high and mortgages reasonably cheap.

    For people who had incomes and accessibility to mortgages.

  13. Great to see people put considerable thought into our current woes. Here’s my few pence:
    – while the stats might show that in 2012 we were doing much better, absolutely no one who lived through it would want to go back to that. My memories of the time were pay cuts, tax increases and emigration.

    – emigration was our safety valve for the last crash. It helped nearly every stat. As our economy recovered the young people returned and others also started to move here. The cso stats from last week have confirmed that our services (and housing) are under pressure due to huge population growth. How do you separate the problems caused by population growth from the economic growth? Is the population growth a short term issue that will ease and allow us to enjoy the benefits of economic growth?

    – our progressive taxation system is also partially responsible for our poor services. High earners pay taxes compatible with other European countries, whereas low earners pay way way less. We use the corporation tax receipts to compensate for their low levels of taxation. If we taxed them properly we would have money to pay for better services. Right now the people who do pay lots of taxes have very little interest in paying more for better services as they have to pay for some of those services directly themselves. (What are the chances we as a nation would vote for a government that reversed the above? Zero! You get what you ask for)

  14. Interesting and informative post, shame its gonna get downvoted because this sub is currently circle jerking about how great Ireland is and anyone saying otherwise is just moaning.

  20. I’d be curious to see a chart showing holidays abroad per capita across time. Do people take more foreign holidays now or in 2012?

  26. I don’t feel the standard of living in the west has increased, on average, in 20 years. Some technological growth yes, but that’s it.

  27. Thanks for putting this together, very interesting. Most of the world is feeling the effects of the current stresses on the economy so it’s useful to have data that backs up that Ireland is disproportionately worse.

    Are there any resources out there to help understand why Ireland’s cost of living is so high outside of our housing market?

  29. The Govt is from the school of Mick Bull politics.

    “I’LL RIODE THE COUNTRY PROPER LIKE! WHAT!”

    Funny how they become multi millionaires once they leave office.

    And there is nothing wrong with TD owning dozens of properties in the middle of a housing crisis. Right?

  31. As an academic, you aught to know it’s unethical to put out anonymous ‘research’ with no disclosing of your business ties, nor of your methodology/scoring, nor your funding.

    That’s the kind of thing corrupt think-tanks do to pretend that their writing is on the side of the public, when it’s actually promoting views which undermine the public (e.g. you pay lip service to Public Debt vs GDP based budget balancing narratives – which are right-wing conservative – and is the no.1 economic policy that is the enemy of the public).

    You run a business – a think tank most likely – you should not be free to anonymously push your businesses views here. I’m fairly suspicious of your framing of this (don’t quote-mine any of my sentences out of context btw), and don’t trust it one bit.

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