As inflation steadies, pressure from the cost-of-living crisis persists

They also estimate that 1.7m in Ireland live in households that don’t have €1,200 in the bank in case of an emergency situations like car trouble or the need to replace a boiler.

In 2022, in a period of almost record employment growth and the strongest earnings growth in 15 years, the share of workers who couldn’t pay for basic goods and services increased by about 60%, now somewhere in the region of 300,000 or one in eight workers.

This increase applied across all household types too, including those aged 65 and over who are opting now to continue in employment in growing numbers and are among the most likely to be in employment in Europe.

The share of adult children living at home also increased again, as did the share of that group in full-time employment. 

We’re now more similar to Italy and Spain in that regard, and significantly above European norms.

Irish households with children are fourth most likely in Europe to be in arrears on mortgages, rent, and bills and much more likely than they were in 2007.

Eurozone inflation fell recently to 2.9% and 3.6% in Ireland. The European Central Bank’s (ECB) target is still 2%. Though this is the lowest inflation has been since October 2021, prices are still growing at a rate significantly faster than at any time in almost 15 years prior to that and well ahead of average earnings growth.

Annual Irish grocery price inflation has fallen below 10%, following trends seen in the UK, but remained nearly double the overall consumer price inflation, according to figures from Kantar.

Of course, inflation does not affect every group or household equally and in 2022, the top 10% saw their incomes grow well ahead of inflation while everyone else’s lagged behind.

Similarly, on an individual level, earnings over the past number of years for the top 1% of workers have grown about 50% faster than for those in the bottom half and average earnings are down in real terms in eight out of 16 economic sectors since 2019, including in health and in education. 

In general, we have very unequal distribution of market incomes. The gap between income going to the top fifth and the bottom fifth is by far the highest out of 27 EU members in Ireland. We’re an outright outlier.

Housing pressures

While average weekly earnings are up just 4.3% this year, thenew Daft.ie report shows that rents nationally have increased by 8% over the past year, eating further into the spending power of those who are not in a position to buy. 

Renting a double room in shared accommodation in Dublin ranges from €853 on average in the city centre to €777 in Dublin west. In Cork City, it’s €709. In Limerick, it’s €671. 

With a minimum wage at €11.30, it would take a worker 59 hours to cover this rent in Limerick and 77 hours in Dublin city centre. Around a third of renters cannot afford to cover basic expenses.

This has resulted in a steady increase in the share of workers among housing assistance applicants: Around two out of three new Hap recipients are in employment, almost double the share in a few years. About a quarter of recipients earn over €28,000, putting them squarely in the ‘squeezed middle’ group.

In Spring, over a quarter of Irish households felt worse off over the year, twice as many who felt they were in a better position. 

All available evidence suggests that this problem will continue to get worse before it gets better.

Ciarán Nugent, Economist with the Nevin Economic Research institute