When the CSO produced data on county incomes, attention was focused on the growing inequality between Dublin and the rest of the country. This overlooked another interesting finding – the falling incomes in a number of counties in 2018. Indeed, most counties have yet to return to 2008 levels of income – after a number of years of recovery.
The CSO tracks disposable income per resident by county. Let’s first look at the growth in income between 2008 and 2018.
First, we see that throughout the state disposable income per resident rose by only two percent. This is pretty grim, caused by the significant collapse in incomes following the financial crash. Between 2008 and 2011, disposable income fell by 16 percent. Since then, disposable income has been rising. And because we are dealing with ‘disposable’ income, we also see the effects of the tax increases that were part of the austerity programme.
However, not all counties have benefitted equally. Only six counties have seen their disposable incomes rise above the state average over the last 10 years. Limerick and Wicklow lead the pack with double-digit growth, following by Dublin and Kildare.
However, by 2018, most counties had not returned to pre-crash levels. Their disposable income per resident lags behind where it was 10 years previously. The worst-affected counties were Laois, Wexford and Cavan. They have seen disposable income fall by more than 10 percent over this 10-year period.
In total, nearly half the population lives in counties where disposable income per resident is still below the 2008 level.
Many of these counties in negative territory have experienced annual increases since 2012 or 2013, when disposable income troughed. However, such was the impact of the crash and so slow was the recovery that they struggled (and failed) to return to the 2008 high. Let’s look at the country’s worst performer: Laois.
Laois took a bit hit in the financial crash, with disposable incomes falling by nearly 20 percent between 2008 and 2011. It returned to growth in 2012 but it was sluggish. It was only 2016 when substantial disposable income started to grow. But this was reversed in 2018. A big negative hit, some growth and reversal: that’s the story of Laois, and to a lesser extent most other counties.
And that reversal in 2018 was shared by a number of other counties despite disposable income rising in the state by 3 percent.
While the graph looks a little better than the 10 year spread, there are counties that declined in 2018 – even though that was a year of growth in employment, wages and national income.
The Midlands region was particularly hard-hit with all the counties – Laois, Longford, Offaly and Westmeath – experiencing a yearly decline. Indeed, Laois has not only been the worst performer in the decade up to 2018; it was the worst performer in 2018 itself.
The natural flow of capital is towards metropolitan and urban areas. This results in capital moving out of many regions, especially those regions with more dispersed populations. But we shouldn’t treat this as an iron law. While accepting there will be inevitable disparities, we don’t have to accept that regional areas will, of necessity, experience falling income.
But we have to go beyond grant-aiding programmes if we are to counteract capital flows. And here are the problems. First, many of the still-depressed areas are unlikely to attract foreign direct investment. FDI will cluster in areas where they are already strong, where there are skilled workers and where there is easy access to domestic and foreign transport links.
Second, private capital is unlikely to be mobilised in areas where there is population flight of young people, falling incomes, greater reliance on social protection and loss of a potential skill base. While there will be investment in the larger towns and in activities that are not reliant on local purchasing power (goods and services intended for sale throughout the country), there is unlikely to be any significant investment in areas of perceived long-term falling demand.
So how do we address this? Clearly, if foreign and domestic private investment falls off, the only alternative is to mobilise public investment. When we talk about public investment we usually talk about investment in ‘public goods’, in infrastructure that benefits all of us: transport, telecommunications, transport, etc. However, while many areas won’t have the benefit of these assets, even where they do it doesn’t guarantee market activity.
So public capital needs to be mobilised towards productive activity; namely the establishment of new companies and the expansion of existing ones. This is not to replace private activity but to spur it. Public capital could be invested in local public enterprises as well as joint ventures with local private capital in the form of equity. There would also be a role for civil society enterprises (community enterprises, labour-managed firms etc.), along with third-level institutions.
However, to make this work we need to invest in the powers and resources at local levels. There is a limit to what a central government department in Dublin can do. Skills and ideas can best be mobilised at local or regional level; needs can be better assessed, strengths can be identified and deficits addressed. This requires a bottom-up approach identified by the National Economic and Social Council when it discussed Just Transition initiatives:
‘A key feature of the just transition perspective is the commitment it brings to ‘leaving nobody behind’. Critical to achieving this is a people-centred, bottom-up and place-based approach: just transition is not an imposed view but one that is worked out with citizens and stakeholders in the areas affected by specific pressures for change and decarbonisation.’
In short, we need a significant decentralisation of power and resources to local and regional levels to make this work. A first step would be to establish Regional Enterprise Boards with the powers and resources required to invest in market activity.
This isn’t the full answer. There are many moving parts in addressing the issue of falling incomes and economic activity throughout so many areas. But it is a critical part. And if we start with people – their ideas, skills and experience – we are starting off on the right foot.
Comments