Ciarán Nugent: Hidden numbers behind the cost-of-living crisis

The number of people struggling to cover their basic living expenses increased in 2022 by 150,000 to 860,000, or 17.2% of the population, and two thirds were working adults

Wed, 28 Dec, 2022 - 14:26

Ciarán Nugent

With inflation running at over 8%, real wages fell this year by almost 6%, and only in information technology, which accounts for about one in 12 jobs, did average wages grow ahead of rising prices.

That means real average weekly wages in Ireland are up by 1.6% from 2019 and, if the trends continue, will be lower by 2023 than they were before the pandemic. Remember too, that average wages had only recovered by around 2017 from the great financial crisis of a decade earlier.

The new minimum wage level next month at €11.30 is worth less in real terms than the minimum wage of €10.10 in January 2020. Average real wages have fallen in the low-wage parts of the economy this year: Hospitality, retail, and public sector workers have been disproportionately impacted by the cost-of-living crisis.

The drivers of inflation show no sign of abating and will likely continue well into 2023, and probably beyond. There is little evidence to suggest a wage inflation spiral is a potential issue at present, with plenty of room for wage increases, particularly for the lowest paid earners.

Employment growth stalled over the summer and after falling, unemployment for younger workers is now back up again to around its level of early 2019.

Job vacancy rate

An important measure is the job vacancy rate, which accounts for the share of vacant jobs in a given week. Ireland consistently has a rate at about half the EU average and this did not change at any time over the pandemic. By this measure, we still have a relatively sluggish labour market in European terms. 

The results of a special survey on enforced deprivation in Ireland were published recently that provided a picture of the effect of rising prices on living standards.

The number of people struggling to cover their basic living expenses increased in 2022 by 150,000 to 860,000, or 17.2% of the population, and two thirds were working adults. Despite a strong growth in jobs, this means the number of working poor has increased to 288,000. 

Such estimates do not take account for the number of 25-34 year-olds who are highly educated and living at home and who are deprived of an independent living.

Similar trends can be seen in the years before the pandemic, marked by a jump in deprivation numbers as people struggled with excessive housing costs.

In 2022, more than one in three renters could not afford to pay for basic items and one in five had gone without heating at some stage this year, up sharply from 2021. Workers receiving housing assistance payments now represent over half of recipients.

The Government recently announced an increase to the minimum eligibility requirements for social housing to €40,000 for a single adult. Median earnings here in 2020 were about €32,710, which means more than six in 10 single Irish workers would now be eligible for social housing based on their wages.

We also have the second highest wage inequality in the EU, one of the highest shares of low-wage workers, and we are also an outlier in market income inequality in EU terms.  There is a clear and growing mismatch between wages and living costs.

Falling living standards should be tackled by increasing the minimum wage to a living wage, and by the State tackling living costs, by making housing costs a priority.

The State should also implement a mass programme of retrofitting, starting with the social and public buildings and intervene to accelerate the rollout of solar and wind energy technologies.