Monday, January 15, 2018

Where do Ireland’s housing problems show up in the SILC?

The Survey of Income and Living Conditions gets a lot of attention for the income and inequality data that it provides.  But it is far more than that.  The SILC contains lots of information on housing and housing costs.  Some insight into what is collected can be found by looking the the section on the “household questionnaire” beginning in this fieldwork manual for the survey.  The previous post was a data dump of what the SILC can tell us about housing and some background to the measures used here can be found there.

The most recent data from the SILC is for 2016 and covers household surveys that took place between January 2016 and December 2016 with the reference period being the twelve months prior to the time the survey is taken.  So, for households surveyed early in 2016 the reference period can go back to January 2015 (which is now three years ago).

When looking for evidence of the impact of the ongoing housing problems it may be that they do not appear in a survey like this.  That is because a lot of the problems arise at the margin. That is, people looking for accommodation and/or people unable to find accommodation (to rent or buy).  Most households remain in their accommodation, are not looking for an alternative and do not experience any change.

However, it should be possible to identify some of the pressures that lead to people having difficulty finding accommodation.  Here we will look at:

  • Housing costs (particularly for tenants)
  • Housing overcrowding (including young adults living with their parents)

So let’s start with housing costs.  Eurostat provide a measure of “total housing costs” to disposable income.


In 2016, in Ireland the weighted average of housing costs to disposable income was 14.6 per cent and the median was 11.8 per cent of disposable income.  These are some of the lowest shares in the EU15 and show no increase in recent years.

Of course, tenure status may matter here and the impact of changes experienced by, say, tenants in the private sector, may be drowned out by a lack of change elsewhere.  Here is the distribution of households by tenure status in the 2016 SILC across the EU15.


In comparative terms we see that Ireland ranks high for people living as tenants with rent at reduced price or free and ranks low for people living as tenants with rent at market rate.

We will try to isolate changes for tenants.  Eurostat provide an average of the total housing costs incurred by tenants.  As discussed in the previous post this includes actual rent paid and any insurance, taxes or charges, utility bills or maintenance costs incurred by the tenant.  Thus, the measure of housing costs is fairly for complete for tenants.  For owners with a mortgage, the interest component of repayments is included but not the principal component.

Anyway, our focus here is on tenants.  Here are the housing costs of tenants in Purchasing Power Standard (PPS) units to allow a comparison across countries.


In 2016, tenants in Ireland had the fifth lowest housing costs in purchasing power units across the EU15.  What is surprising is the lack of increase in recent years with increases of averaging just two per cent showing since 2012.

One reason for this is composition.  The above includes all tenants.  Around 55 per cent of tenants in the 2016 Irish SILC pay less than the market price, e.g. rent from local authorities.  If, as we might expect most of the increase in housing costs for tenants arose for tenants paying the market price then this group were likely experiencing increases in housing costs of four to per cent per annum (and there would likely be variation within that again). 

A break of housing costs for tenants paying the market price and tenants paying less than the market price is not provided by Eurostat.  It would be useful if some breakdown along those lines was provided by the CSO but they do not tend to independently publish many (any?) findings from the SILC relating to housing costs.

Eurostat do provide rents paid as a share of disposable income for tenants.  Again though, it is for all tenants so those paying a reduced price and the market price will be included in the one category.  


As a share of the disposable income of households who rent Ireland has the lowest rents in the EU15 – and the share is falling!  It was 21.4 per cent in 2011 and had fallen to 19.6 per cent by 2016.

Of course this won’t be because rents have fallen; but because incomes have risen.  Here are the nominal mean incomes for both groups of tenants in Ireland.

SILC Disposable Income of Tenants CSO 2004 to 2016

From 2011, the mean disposable income of tenants paying the market price increased from €36,500 to €42,700.  Over the same period this increased from €25,200 to €32,200 for tenants paying less than the market price.

Eurostat measure the housing cost overburden rate as being the share of population living in households where total housing costs exceeds 40 per cent of household disposable income.  In 2016, Ireland had the second lowest housing cost overburden rate in the EU15.


Ireland might have the next-to-lowest level for all households but as with most of these measures there is plenty going on under the surface.  Here is the 2016 breakdown of the housing cost overburden rate by tenure status.


Ireland’s overall rate might be 4.6 per cent but for tenants with rent at the market price the housing cost overburden rate is 19.6 per cent.  Thus, just under one-fifth of tenants paying market rates had housing costs in excess of 40 per cent of their disposable income.  As shown here this has always being the tenure status with the highest rate in Ireland.


It may also be surprising how little this is changed over the past few years. Though there has been some increases for tenants paying the market price since 2013, the increases are unlikely to be statistically significant and the 2016 rate is pretty much bang on the average since 2004.

The picture is much the same if we reduce the threshold.  The next chart looks at the share of the population by tenure status where “total housing costs” exceed 25 per cent of disposable income.  Again tenants paying the market rate fare worst but lack of deterioration over recent years is again notable.


Here is a chart of the housing cost overburden rate for tenants renting at the market price across the EU15.  Ireland, has generally had one of the lower housing costs overburden rates for this group since 2004. 


Given increases in asking rents one might have expected the housing cost overburden rate for tenants paying market prices to have increased in recent years but that is not what the SILC is showing – up to 2016 at any rate. 

As “total housing costs” used to calculate the above shares and rates excludes capital repayments on mortgages a broader measure is used to give a full insight into housing costs, particularly if we want to look at all households not just those who are renting.  To this end, participants in the SILC are asked to assess the “financial burden” of their housing costs (including capital repayments on mortgages) on the scale of:

  • is a heavy financial burden,
  • is a financial burden, and
  • is not a financial burden.

Here is the share of people living in households who consider the impact of their housing costs  to be a heavy financial burden.


This is likely closer to what we expect for Ireland. The share of people living in households experiencing a heavy financial burden due to housing costs increased after 2007 and reached 43.3 per cent by 2013. It has since fallen back and was down to 32.4 per cent in 2016, though still the fifth highest in the EU15. 

The above pattern for Ireland is reflected in the pattern of arrears.  It should be noted that in the SILC arrears is measured as missed payments in the previous 12 months rather than a measure of the build-up of cumulative arrears in the past.


Of course, these measures of financial burden and arrears are probably more a function of the general performance of the economy as a whole rather than specific problems relating to housing.

Another indicator that may reflect some of these problems is overcrowding.   The Eurostat definition of overcrowding is here and in 2016 Ireland had the lowest housing overcrowding rate in the EU15 with no notable increase evident.


Again, it may be informative to look at this by tenure status which is shown.  Although there has been little or no change in the overcrowding rates for owner-occupiers in the past few years, an upward since 2012 or 2013 can be identified for both groups of tenants.


A final measure from the SILC which could reflect some of the ongoing problems is the share of young adults living with their parents.  Ireland’s doesn’t have a particularly high rate but the increase since 2013 is notable.

EU15 SILC Adults Living at Home  2004-2016

In 2013, 19.4 per cent of young adults in the SILC aged between 25 and 34 were living with their parents.  In the 2016 SILC this share had increased to 27.2 per cent.  Through all the measures of costs and overcrowding that is probably as a clear an impact that can be identified in the SILC of the ongoing housing problems.

Households, Housing and Housing Costs in the SILC

There is lots of data on housing in the Survey of Income and Living Conditions.  Almost all of it is published by Eurostat rather than directly by the CSO itself.  That alone means much of it can be hard to find and even harder to pull together.

The initial intention was to look at the data for the impact of the current housing problems in Ireland but this post has ended up being a bit of a data dump – a hodge-podge of what the SILC has to say about housing and housing costs without any real end-point in mind.  It may be better to move to the next post which will try to isolate those bits that reflect the Ireland’s current housing problems rather than plough through the 11 tables and 22 charts that follow.

So, what can the SILC tell us about households, housing and housing costs? Quite a lot actually.  We will look at:

  • household type and tenure status
  • housing size and under-occupied housing
  • housing and environmental deprivation
  • housing costs and the burden of housing costs

Monday, January 8, 2018

Some trends from the Survey of Income and Living Conditions across the EU15

Before Christmas the CSO published the 2016 update of the Survey of Income and Living Conditions.  Some of the Irish trends are  explored here.  This time we will look at the Irish data relative to the rest of the EU15 as the full set of figures are now available.

First, median nominal equivalised disposable income.


This is useful for trends but a measure that takes into account inflation within countries and relative price differences between countries would give a better indication of the living standard that are supported by those incomes. Eurostat produce real incomes in units of purchasing power standard (PPS), a unit that has the fixed purchasing power through time and across countries.


By 2008 Ireland had risen to fourth in the EU15 on this measure, but 2016 Ireland had fallen to tenth.  For real household income Ireland is, at best, a mid-ranking member of the EU15.  This position could improve again over the coming years as Ireland has moved back towards the top of the growth rankings.


Over the past decade Ireland has gone from the top, to near the bottom, back to near the top of the growth rankings of this income measure.

But how is this income distributed? How does Ireland’s gini coefficient compare to the rest of the EU15?

Even with the above volatility in income growth Ireland’s gini coefficient has been largely unchanged for almost a decade and in 2016 was ranked exactly in the middle (8th) of the EU15.


Ireland was also eighth in 2016 for the income share ratio of the top 20 per cent to the share of the bottom 20 per cent. The gradual upward trend of those countries below Ireland could see this ranking improve.


Another relative income measure is the at-risk-of-poverty rate which shows people with equivalised income less than 60 per cent of the median (as set for each country). Ireland had the fifth highest at-risk-of-poverty rate in the EU15 in 2016 with the top five made up of the PIIGS.


To try and assess changes in absolute poverty we can use a threshold from a fixed point in time  and the adjusted it for inflation in future years. This allows us to compare incomes to a fixed threshold in real terms.

Here we use 2005 as that fixed point in time and look at the relative change in the proportion of people below that threshold in each country.


Relative to the 2005 threshold for each country Ireland has the second largest reduction in absolute poverty by 2016 though it can also be seen that Ireland had performed even better than this by 2008 but those improvements were not maintained.  The proportion of people in Greece below the 2005 at-risk-of-poverty threshold has more than doubled.

The above changes in absolute poverty are reflected in the changes in the material deprivation rate. Eurostat uses a set of 9 items reflecting economic strain and deprivation linked to durables.  A household is deemed to be materially deprived if it suffers from an enforced absence of three of more of those items.  The nine items are:


In 2016, Ireland had the fourth highest rate of material deprivation in the EU15, though this has declined rapidly in recent years.


Here is the breakdown by item for 2016 (click to enlarge).

EU15 SILC Materical Deprivation by Item Table 2016 2

As we examined here the items that have the largest impact on Ireland’s material deprivation rate as measured by Eurostat are:

  • Arrears
  • Afford a holiday 
  • Dealing with unexpected expenses

These are the items that Ireland has levels greater than the arithmetic mean of the EU15.  For the other six items, Ireland is either roughly at or below the mean of the EU15 countries.

An issue for Ireland is the distribution of income before social transfers (with public and private pensions excluded from social transfers). Ireland has both the highest gini coefficient and at-risk-of-poverty rate in the EU15 before such social transfers.  As shown here this has been true for significant periods for both measures.



A significant factor behind this is households with little or no earned or market income. In 2016, Ireland extended to ten years it’s run as European champions for “jobless households”.


Even with a relatively low unemployment rate Ireland has more people aged under 60 where the level of earned income of the household is zero or near-zero. 

The following table gives the at-risk-of-poverty rates by household work-intensity in 2016,


For all levels of work intensity other than “very low” Ireland has some of the lowest at-risk-of-poverty rates in the EU15.

For those working, the at-risk-of-poverty rate in Ireland in 2016 for employees was 3.5%, the third lowest in the EU15 bettered only by Belgium and Finland.


Finally, here is a variation of the at-risk-of-poverty rate that takes into account housing costs.  If is the proportion of households who are below the standard at-risk-of-poverty threshold after “total housing costs” have been deducted from their income. For this measure Ireland has the 5th lowest rate in the EU15.


The items included in “total housing costs” are outlined here.


Unsurprisingly, comparisons of the 2016 figures across the EU15 reaffirm the improvements that were highlighted when the Irish results were looked at in isolation.  All measures are either improving or unchanged with almost none showing a deterioration. 

If the government have some cash available for strategic communications they could so far worse than to direct it to the CSO to accelerate the publication of the 2017 SILC. Denmark already have data for 2017 available from Eurostat!

Denmark SILC 2017 on Eurostat

Tuesday, January 2, 2018

Dairy bubbles

Before Christmas the CSO published an advance estimate of output, input and income for the agriculture sector.  If we look at the bottom line things are estimated to have been a whole lot better for the sector in 2017.

Agriculture Entrepreneurial Income 2000-2017

The figures are nominal which warrants some caution when making comparisons to some of the early years shown but the growth in 2017 is undoubtable.  In aggregate, farms incomes grew rapidly in 2017. The €1 billion increase in 2017 is equal to the total for 2009.

We can look at the individual items that lead to entrepreneurial income to see what drove the increase in 2017.

Agriculture Output Input and Income

Entrepreneurial income is the value of output produced plus subsidies less intermediate consumption, compensation of employees, depreciation, rent and interest.  In the main most items were relatively unchanged in 2017.  The one thing that did increase was the value of livestock products and this is almost wholly made up of milk.

Until recently the value of milk production was influenced by the impact of price intervention and output quotas.  As these have been removed (the quotas were lifted in April 2015) the value of milk production is not influenced by the world price of milk and the amount of output produced.  This has led to the volatility seen in recent years.

Agriculture Milk Output 2000-2017

The €1 billion increase in agriculture income is strongly linked to the €700 million increase in the value of milk produced.  Some of this was due to the continued expansion of the sector with volume expected to be up almost 9 per cent but most of the near 40 increase in the value of milk output is due to a 30 per increase in the average price received for milk in 2017.

And most of this increase is working through into an increase in national income.  When we look at our balance of external trade in dairy products it seems likely that the 2017 outcome will be €500-600 million higher than it was in 2016.

External Trade Dairy Balance

When they published their Outlook 2018 a few weeks ago Teagasc said:

Average dairy farm income in Ireland in 2017 set to exceed €90,000 – the highest ever figure - representing an increase of about €40,000 on the 2016 level.

Not too shabby.  Three-quarters of the increase was driven by price effects so it won’t directly feed into increases into real GDP/GNP/GNI/GNI*/NNI or whatever you’re having yourself.  But the money is an injection into the circular flow and if it is spent will contribute to an increase in real activity. The recipients may choose to save it (or equivalently use it to pay off some debt that funded some of the recent expansion) but there is no doubt that having this surge in income is way better than not having it.  But if prices can go up by 30 per cent…

Thursday, December 21, 2017

Growth of real wages in the EU15 since the start of 2014

Eurostat published Q3 2017 nominal hourly labour costs data earlier in the week.  Adjusting for inflation, using the Harmonised Index of Consumer Prices, we see the following picture emerge for the wages and salaries component of real labour costs since the start of 2014:

Real Wages and Salaries in the EU15

Using this approach it can be seen that Ireland has had the second-highest increase in real hourly wages since the start of 2014.  This might look good in relative terms but in absolute terms the increases remain modest.

Here is what emerges if we look at annual growth rates (smoothed over four quarters).

Annual Growth in Real Wages and Salaries in the EU15

There are maybe two ways to interpret this.  The first, is that Ireland has the highest growth in real hourly wages in the EU15.  This growth has accelerated slightly in recent times but not massively so.  The second is that the growth of real wages has slowed in almost all EU15 countries with 11 of the 15 having a slower growth rate of real wages compared to a year ago.

The reason for this has not been a slowdown in nominal wage growth, if anything this has slightly picked up with 11 countries showing a higher nominal wage growth in Q3 2017 compared to a year earlier.  The arithmetic mean for the EU15 has gone from 1.1 per cent to 1.5 per cent.  Ireland too has seen an increase in nominal wage growth but not unusually so.  The smoothed average growth has gone from 1.2 per cent in Q3 2016 to 2.1 per cent in Q3 2017.

Annual Growth in Nominal Wages and Salaries in the EU15

The reason for the slowdown in real wage growth across the EU15 has been the uptick in inflation.  The annual inflation rates from the HICP applied to the above nominal wages changes went from a mean of 0.3 per cent in Q3 2016 to a mean of 1.4 per cent in Q3 2016 with the UK, particularly showing a rapid rise in inflation. 

Annual HICP Inflation in the EU15

It’s all to with the second derivatives.  Inflation is rising faster than the increases in the growth of nominal wages hence real wage growth is slowing down – for most countries.

Ireland is one of the exceptions.  The increase in nominal wage growth over the past year in Ireland (0.9pp) is slightly above the simple average increase seen across the EU15 (0.4pp).  Inflation, though, has been non-existent in Ireland for an extended period now and remained close to zero throughout the period shown above.  Over the past year Ireland has had the smallest increase in inflation in EU15 and now has the lowest rate of inflation across the group – and this is including the large contribution made by the rapid increases in private rents. 

So put together our modest, though increasing, growth rates in nominal wages with our low rates of inflation and we get the result that Ireland has the fastest growth of real hourly wages in the EU15. For now anyway.