Patrick O'Sullivan, senior economist, Bank of Ireland Private Banking

The trillion Euro society

BY ROBBIE SMYTH

Which of these is your Ireland? Does your household have a weekly income of €2,223, or are you struggling to get by on just €158 a week? Are you saving and investing or borrowing week to week? These are the differences between the top 10% of income earners in the 26 Counties and those living on the lowest incomes. If you’re in the top 10%, then you could be one of 33,000 millionaires now living in the state. If you’re not in the top 10% then you are probably part of the 70% of Irish households who live in debt week to week, year to year.
These new figures on the gap between the wealthy and poor in Ireland come courtesy of the Central Statistics Office’s (CSO) 2004 to 2005 Household Budget Survey and the now annual Bank of Ireland’s (BoI) Wealth of the Nation survey.
Taken together the two reports catalogue in detail not just the growing wealth of the Irish economy but the vast inequalities between those who are cashing in on two decades of economic growth and wealth creation and those households enduring deprivation and poverty, in a society whose total wealth will reach €1.2 trillion by 2015, according to BoI estimates.

Stunning insights
The Bank of Ireland report by Associate Director Patrick O’Sullivan is stunning in the insights into who owns the wealth of Ireland today. In the 26 Counties, BOI estimates that the number of millionaires grew from 30,000 in 2005 to 33,000 in 2006, a 10% increase.
The BoI report estimates that, “the top 1% of the population holds 20% of the wealth, the top 2% holds 30% and the top 5% holds 40%”. Net wealth per head in the 26 Counties was in 2006 €196,000 per person. The net wealth of households increased by 19% last year to €804 billion, Gross Wealth was €965 billion, but household debt also grew to €161 billion. In international terms only Japan is a wealthier country than the 26 Counties.
The CSO Household Budget Survey (HBS) has a significantly different focus in that it is not just counting the assets of the wealthy. Their survey of 6,884 households is the seventh such study completed since 1951 and the previous survey covered the years 1999 to 2000, while the fieldwork for this significant study covers the years 2004 to 2005.
The HBS found that average weekly expenditure in the state was €788.25, a 36% increase over the 1999-00 period. Consumer prices rose during the same time period by 15.7%. The highest percentage increases in household spending was for housing, which rose 69.7% over the five years between surveys. The lowest was for drink and tobacco where household spending only increased by 7% between the two surveys.

Dublin more expensive
There was a marked difference in spending between urban and rural households where city and towns dwellers spent an average of €820.81 weekly compared to €735.35 a week for rural households.
These cost of living differentials have been highlighted recently in another CSO survey released in June comparing prices between Dublin and the rest of the 26 Counties. The June survey found that Dublin was more expensive for a range of goods and services, from simple things like cinema tickets where there was a 14.5% difference, or beer where there was a 14% difference. Of 78 everyday items surveyed, 58% were more expensive when bought in Dublin.
The HBS survey found other differences between urban and rural living. Rural households are more dependent on central heating oil and private transport, while 24.3% of urban dwellings are rented compared to 7% in rural areas.

Widening gap
The most stunning part of the HBS survey is the details on the widening gap between high and low income households, the ratio of the highest to lowest income earners has widened from 13 to 1 in 2000 to 14 to 1 in 2005.
The differences between life in the highest 10% of earners and those on the lowest incomes is shown by statistics such as that pensioners account for less than 1% of top earners and 21% of the lowest 10% income group.
Those in the lowest income groups spend 35% of their income on food, fuel and light compared to just 17% for the highest income households. There was also substantial differences in the size of households in the high and low income earning groups with the lowest income groups having just one person per household compared to just over 3 on average for the highest earning groups. In the highest earning groups nearly 83% of households had two people working compared to only 9% of households in the lowest income group having even one person at work.

Debt
One other significant difference between high and low income households in the 26 Counties is the level of debt families are dealing with. The top 10% of income earners had an average disposable weekly income of €2,233, but the HBS found that they only spend €1,659 weekly leaving them over €573 a week that can be saved or invested. Technically they can save over 34% of their weekly income without spending. Compare this to the lowest income group with an average weekly disposable income of €157.70 but average weekly spending of €217.19 meaning that every week they are living beyond their means with debts of over 27% of their weekly income, nearly the opposite of the top 10% of earners. In fact the survey found that 70% of households were in debt with only the top 30% of earners able to save from disposable income.
So the Ireland of today may be one of the wealthiest in Europe, with the greatest level of income inequality, it is also one of the most expensive to live in according to a Eurostat report published in mid July. The survey of 27 EU states found that the 26 Counties is the most expensive place to buy a basket of food.
Bread and cereals are 21% dearer than the EU average, meat is 29% dearer, fish 23%, dairy products and eggs are 26% dearer, fruit and vegetables are 30% dearer while other foods are 21% dearer.
We already know from  the findings of the CSO Household Budget Survey  that the lowest income groups spend 35% of their income on food, fuel and light. The double digit increase in electricity and gas prices of recent years has been well documented but the more expensive food is a new dimension. All of this  discriminates against those on low incomes.
It is now more than a year since the groceries order was abolished and Irish households are still clearly paying high prices for their food without any real explanation as to why the prices are higher. When you add in the disproportional costs of housing in Ireland you can see the growing poverty trap that many low income families are in. Their already low incomes are eaten up by higher food and housing prices leading a life of debt.
Last April the 26-County Financial Regulator published a report on money lending that showed not just interests rates of up to 188% being paid by some households but that money lenders in Ireland had approximately 300,000 customers. The CSO and BoI reports reaffirms that there really are two Irelands today.

Rich and poor in Ireland