Category Archives: Blog

Project Ireland 2040- can it be delivered and is it enough?

Cranes

On Wednesday, May 16th I spoke at the Infrastructure Ireland 2018 conference organised by Eolas. Presentation is here

Two questions hang over the new national development plan Project Ireland 2040; (i) can it be delivered and (ii) is it sufficient? While there is a lot of heat and light about the total spend, in reality the cumulative additional spend is modest and well within the fiscal rules. Of concern are the cyclical, political and operational risks-  almost 60% of the spend is backloaded 2023-2027- that is at least two governments away.

More importantly, is there is sufficient construction capacity to deliver? I talk about some of the structural issues within the industry that will significantly inhibit labour supply into the sector. All too often the focus is on State supports to apprenticeships and training. The industry also needs to reflect on the impact of sub contracting processes and the offer of little or no direct employment on the future supply of construction workers.

Lastly, we believe Project 2040 underestimates future housing demand. We explore the concept of of unmet housing demand- i.e. that household formation rates have remained stable between census 2011 and census 2016 not because people want to live in big households but because they can’t afford to live on their own.

Housing economics suggest that there will be no dramatic reduction in house prices anytime soon.  The concept of thousands of houses flooding onto the market to depress house prices is highly unlikely to happen because of who controls land supply. There is a significant generational issue here- younger workers on average wages face a major affordability issue. The most cost effective option is that the State develops the land it owns rather than parcels it off for sale. The State’s new Regeneration agency offers some ground for hope; coordination of zoned residential land for development and a focus on the necessary infrastructure to service it. The agency should adopt the lessons from our neighbours, the Dutch and the Scottish and take on a third function; development of the land itself.

Living income must also be a part of North East Inner City revival

Five lampsIn late February, the North East Inner City (NEIC) task force issued their first progress report. This excellent initiative was set up in 2017 with the ambition of supporting long term economic and social regeneration of Dublin’s north east inner city. At its heart are Sean McDermott street, Sheriff street, Portland Row, Summerhill, Ballybough and all their surrounding areas. To those of us who live or work there, it is very obvious that the scale of the challenge is huge. Resilient and proud, yes but with some of the rates of joblessness across the city.

The list of initiatives is long, the range is broad-encompassing security, the physical landscape, sport, community organisation, training and career guidance.  On top of existing state agency and Dublin City Council funding, extra has been provided to fund specific projects. So far so good, but I couldn’t help wondering about the immediate and longer-term impact of these initiatives on the area. Together, these actions are very important in striving to make the north east inner city, in the words of chair Michael Stone, a “safe attractive, vibrant, living and working environment for all.”  But will that impact persist when the extra funding is exhausted and the task force has to be stood down in a few years time?

Over the past decade, a lot of research has been undertaken about the impact of policies designed to boost areas of high disadvantage in the world’s major cities.  Most agree that a high level of employment is vital to regenerating an area. But its not just a job, it must be a good job with a fair income that can afford a worker and his/her family a decent standard of living. To be fair to the Chair of the NEIC task force, he recognises this, he talks about ensuring there are real job offers by local employers to local people.

How this is delivered is another matter. Measures to boost employment such as training, education and transport, business and telecommunications infrastructure have been shown to be necessary but not sufficient to deliver a persistent employment boost to the area. Issues such as skills mismatches, access to workplace experience, the quality of education and training and job quality have given rise to more disappointing outcomes than were expected.  The NEIC task force recognises some of these issues- they want to improve access to apprenticeships in 2018 and local businesses are encouraged to take on students for work experience.

However, the missing element in all these deliberations is income. The task force progress report rightly highlights the very high levels of unemployment in the area; 19% for women and almost a quarter of all working age men (24%) do not have a job. This is based on data from Census 2016 across 74 small areas in the north east inner city. However, the majority of the working age population in the north east inner city do have a job. And the issue then becomes about income and the adequacy of that income to provide for the worker themselves and their dependents.

The CSO’s census data from 2016 provides us with an insight into the types of jobs people in the north east inner city have. The rates of non reporting on certain census questions is above the national average, so we exclude them from our analysis, which may have the effect of creating a rosier picture than is actually the case.

Of the 5,148 households in our analysis located across the district electoral divisions (DED) of Mountjoy A and B, Rotunda A and B and North Dock C that encompass most of the areas names above, 21% of are headed by a person who is semi skilled or unskilled, compared with 14% for the whole of Dublin city.

In terms of occupations, there are fewer persons in managerial and professional roles living in the north east inner city which we might expect. The numbers in skilled trades is slightly above average for Dublin city, and again the numbers in what are termed “elementary occupations” is almost double (21%) the average for Dublin city (11%).

In their 2017 paper, “Job creation for inclusive growth for cities”, veteran researchers on the livable, inclusive cities question, Andy Pike, Danny McKinnion and their co-authors look at the probabilities of being low paid, underemployed or insecure amongst different occupations. When controlling for individual characteristics they find that there is over a 40% chance of being in a low paid, insecure or underemployed job if in an “elementary” occupation. These elementary occupations are found in the retail, hospitality, caring and leisure sectors.

These sectors were never highly paid, but many hotels and retail outlets would have traditionally afforded a decent income to their workers living in the north east inner city many year ago. Now most of this employment is on the national minimum wage or just above it and has very low levels of trade union membership.

So the answers to reviving the north east inner city are not solely about getting people into work, nor improving the area’s security and making available more amenities. Nor are the answers solely to be found in an area based strategy such as the North East Inner City task force- albeit this is very important. The answers also lie in national policy and in particular, we need to think about how to improve low wage workers’ income. A large share of the population of the north east inner city are in “elementary”, semi skilled or low formal skilled occupations with a high probability of being low paid, insecure and/or underemployed.

A living income isn’t strictly about a worker’s wage but about their hours of work and their terms and conditions in terms of sick pay and other benefits. Government can offer better support for a living income in low paid sectors through a number of mechanisms; encouragement for negotiated wage agreements in low paid sectors. To date, some sectors are refusing to engage in the Government established Joint Labour Committees designed to negotiate terms and conditions and secondly, Government can support workers’ right to be recognised by employers for collective bargaining purposes.

Getting this right along with the area based initiatives will be crucial to overcoming inter-generational disadvantage in the north east inner city.

 

Brexit Breakthrough- a glimpse at the future shape of EU UK relations ?

It almost feels too good to be true. A deal to conclude phase 1 of the Brexit negotiations fell apart at the start of the week because north/south assurances were not matched by clarity on the east/west relationship. At one stage during the week, it looked like no deal would be possible, such were the questions and concerns about the workings of “regulatory alignment” with the EU.

Four days later, a different approach to negotiations was taken. Instead of working out how to avoid the return to a hard border, the British government crucially focused on the what. In effect, they signed up to a guarantee that committed to no hard border between Northern Ireland and Republic of Ireland and no hard border between the island of Ireland and Great Britain. Critically, these guarantees apply whether there is a deal on Brexit or not.

The detail of how all this can be delivered remains to be worked out but this set of guarantees now binds Theresa May to a specific set of outcomes. In effect, she leaves herself with little wriggle room in phase 2 of the negotiations. In order to ensure no hard border north/south and east/west, it seems that the British government will have to sign up to a free trade agreement with no customs tariffs and a common set of regulatory standards with the European Union. Anything less will mean a return to a hard border.

The significance of this deal in the context of the Brexit negotiations is enormous. Over the past nine months, there has been a simple incompatibility in British and Unionist thinking about the implications of Brexit. It is not possible to “make our own rules”, “control migration and our borders” and exit the Single European Market and EU Customs Union while retaining a frictionless border. Shared membership of the European Union meant that the Republic of Ireland and the Great Britain and Northern Ireland had to enforce the same EU rules. The beauty of that joint membership was that it allowed the physical border to disappear through the dismantlement of tariffs and different product regulatory regimes, while at the same time giving political cover to Northern Unionists.

To a certain extent, the guarantees of December 8th deal resolves the incompatible issues despite British Government spin that they can still leave the customs union and the single market. The text of the agreement goes beyond a guarantee to uphold the Good Friday agreement and by extension the sectors singled out for north/south cooperation and expresses a commitment to the all-island economy. Honouring this commitment will depend on the free movement of labour and capital, not just goods and services. However, the caveat for this phase of the negotiations to exit the EU is that nothing is agreed until everything is agreed.

What now remains to be addressed is the how and there are plenty of questions. The opposite of a hard border is not necessarily a frictionless border. There is plenty of negotiating to be done yet.

 

Real concerns about future of post office services in Phibsborough

Statement by Marie Sherlock, Local Area Representative, Labour Party, Dublin Central

Last Wednesday, November 1st, staff at Phibsborough post office were notified that the post office would be closed down.

This is a really worrying development as the post office serves a large population and is a critical resource for pensioners, social welfare recipients, those who need to purchase bin tags and the many residents who depend on the services within the post office.

It is essential that the post office offering a comprehensive range of An Post services remains in the heart of Phibsborough.

I understand there is a commitment to contract out the post office service to a private provider but there is no guarantee as to the range of services that will be offered in future and no clarity as to where this will be located.

I have written to An Post and the Minister for Communications to relay my concerns and to object to any diminution of post office services for Phibsborough.

I have also sought clarification on a number of key issues; the timing of the closure, the intended use of the current post office building, the intended location of the new post office service, the volume of services to be provided in the new post office and how that will compare with existing services and the staffing of the new service.

No change must take place until we have guarantees that there will no diminution of existing services in the future.

Strong unions and gender neutral parental policies critical to closing the gender pay gap

November 3rd marked EU Equal Pay Day. Women in Ireland are, on average, paid 13.9% less per hour than men. The gap is even more stark when comparing annual average earnings- 36.8%.

Part time work and a high share of females in low paid occupations and sectors is part of the cause, but there are other factors at play. I wrote an article in the Irish Examiner today discussing these issues and setting out specific recommendations for closing the gap. Link here.

Budget 2018- Exposing the shallowness of the current Government

This article appeared in the October, 2017 edition of Liberty.

For all the talk about providing for future generations and prudence in the face of Brexit and other risks, Budget 2018 was about “keeping the recovery going”- a crude stimulus that saw small amounts given to most people at the expense of bringing about real change in those areas that need it the most. Budget Day is the main opportunity in the legislative calendar for Government to signal how it intends to tackle the major problems of the day. Faced with a housing emergency and an interminable funding crisis in health, by and large, the FG, FF and Independent coalition opted to do more of the same.

With a budget of just over €1.2bn, Budget 2018 brought the prospect of real progress in health, housing and childcare no closer- in the main, it was a case of more sticking tape to temporarily alleviate ongoing problems. Despite all the hype, housing received less than 10% of new expenditure funding available in the Budget. Almost all of the €610m increase in Housing expenditure had already been provided for and pre-announced. In Health, there was no mention of the cross party Slaintecare 10 year plan and funding to outsource the waiting list backlog to the National Treatment purchase fund was more than doubled. The Childcare sector is in the midst of a recruitment and retention crisis due to unsustainably low pay and yet capitation barely increased by 7%.

At best, Budget 2018 reflected a big failure to understand the needs of the Irish economy and society at this point in time.  At worst, it showed up the hands off, non interventionist instincts of Fine Gael and their acolytes. Minor concerns about the economy overheating and the level of national debt were trumped up to justify smaller than necessarily investment into infrastructure and housing. There was window dressing with regard to fiscal prudence by shifting €1.5bn out of the potentially productive Irish Strategic Infrastructure Fund into the Rainy Day Fund. Claims that Ireland’s public investment will reach international norms by 2019 rang hollow when put in the context of the catch up that is required.

In effect, the role of the capital expenditure budget is entirely different to the current expenditure budget. It must meet pent up demand; significant in 2018 given that capital funding was filleted to about less than half of boomtime spending by 2012. It must be sufficient to maintain existing stock; the Fiscal Advisory Council (June, 2017) estimate that about half of what is planned between now and 2021 will go to covering depreciation and thirdly, it must meet future demands. The Irish population is expected to grow by 1.1m people over the next two decades. Despite all this, the capital budget is expected to grow by less than half that of the current budget in 2018.

This Budget was supposed to be about improving people’s living standards. Yet Government committed over a fifth of its additional resources to ensuring that a single person on €20,000 would get an extra €1 per week. Those who are self employed and on double average earnings will get 10 times that per week.

Ireland’s income tax system does have a problem in terms of fairness and simplicity. Amongst OECD and EU countries, higher income tax rates are typically paid by higher income earners. Wage growth has meant that those on average earnings in Ireland have experienced a fiscal drag- tax thresholds have not moved in line with wages. What gets lost in the debate is that Ireland currently has the lowest tax wedge for a worker on average earnings amongst the 21 EU countries in the OECD- it is the gap between what the employer pays out (pay & PRSI) and what employees receive in terms of take home pay. This matters in the context of “giving something” back to workers.  Living standards cannot be solely defined in terms of what is in people’s pockets- if the Government are really interested in prudent management of the public finances, then allocative efficiency must be a priority and that means targeting resources at public services, not people’s pockets.

 

Budget 2018- “Keep the recovery going”

Most of you will recall the FG pre election slogan in 2016- “Keep the recovery going”. Budget 2018 was precisely about just that- a crude stimulus measure where most people got less than 1% extra per year in take home pay. Using the pretext of “prudent economic management” and misleading concern about the level of national debt, the Government have opted to devote much less resources to overcome the housing crisis and tackling the interminable funding and management issue in health, than it can actually afford. On Budget Day, I debated the key issues on Today with Sean O’ Rourke. You can listen here

More Budget analysis to follow next week.