The Daniel O'Donnell Income Effect

Paul Sweeney: They say if Daniel O’Donnell left Donegal, the average income in the county would fall. It is still low even with Daniel living there. Average disposable income in Donegal is the lowest in Ireland in 2014 at €15,061, compared to the highest in the capital Dublin at €21,963. Donegal is 31% lower or almost €7,000 per head less per the CSO. As the map below shows there are nine of the 26 counties with relatively low incomes compared to some others.

There is a serious spatial distribution problem in Ireland which is not seriously on the political radar. It is the over-dominance of Dublin. All cities have higher incomes than rural areas, villages and towns. Capital cities do enjoy the highest incomes in most countries. People want to live in cities and the agglomeration engenders higher incomes. But we need to encourage people to live and prosper in rural Ireland.

Sure broadband will help and the privatisation of Eircom was a real setback on that front as its successive owners sucked capital out of the company and failed to invest. They would have taken the copper of the wires out if they could have gotten away with it. But the overdevelopment of Dublin and the Eastern region is hampering the development of other areas. It is also causing problems in Dublin. Dublin is a disproportionately large Capital city by international standards. The issue is bigger than broadband, than rural post offices or buses.

Ireland has attempted to have a regional or spatial strategy and it’s currently being reviewed. If regional income inequality and the social and economic problems which Dublin’s dominance is creating both for the city itself and for the country, then there has to be a very serious change in policy to build attractive and viable alternative centres to Dublin in the regions.

Disposable income is calculated by adding social transfers to primary income and subtracting off income taxes and social insurance contributions. 

Of the eight regional authority areas, the Dublin region had the highest average disposable income per person in 2014. At €21,963 it was 14.5%  higher than the State’s figure of €19,178.The CSO warns that while the county figures involve uncertainty they do provide a useful indication of the degree of variability at county level.  Dublin, Limerick,  Kildare and Cork  are the only counties where per capita disposable income exceeded that of the state average in 2014.

Dublin continues to remain the only region with higher per capita disposable income than the State average during the entire 2006-2014 period while the Midland, Border and West regions  continue  to earn less than the State average.

Viewed from this longer term perspective (i.e. from 2006 onwards) the CSO points out that the divergence in income between the regions and Dublin was at its lowest in 2010 but has continued to widen in  2011,  2012,  2013 and 2014. The CSO also takes out rents for each country in one table, as well as calculating estimates for average gross value added per person and GDP per person for the regions. 

Of course, averages within regions and counties do not inform us about the level of inequality within them.

If Dermot Desmond and Denis O’Brien lived in Dublin, would the disparity between the capital and the rest increase by much? And if JP McManus really lived in Limerick?

Paul Sweeney is the chair of TASC's Economists' Network.