According to a report from the Economic and Social Research Institute (ESRI), 80% of Northern Ireland’s homes receive higher benefits than the taxes they contribute, in direct contrast with just over half in the Republic. The Republic witnesses higher salaries, matched by heftier taxes, while a greater portion of Northern Ireland’s population reaps the advantages of means-tested benefits, with more detailed information in the paper, “Drivers of Income Inequality in Ireland and Northern Ireland”.
Researchers Karina Doorley, Michele Gubello and Dora Tuda conducted the study under the Irish Government’s Shared Island scheme. The benefits examined incorporate working family payments, housing benefits, job seekers allowance and supplementary welfare allowance, along with others.
Interestingly, the bottom 20% of the population in both regions enjoy comparable welfare perks. However, as income climbs, Northern Ireland’s citizens receive a higher ratio of means-tested benefits. Almost 80% of their households receive larger means-tested incentives compared to their tax payments. In contrast, in the Republic, less than 60% of households emerge as net tax contributors, with the eligibility for benefits tapering off sooner.
The report also reveals a dichotomy in average incomes in the two areas: In the Republic, it stands at €2,473 per month whereas in Northern Ireland, it is €1,646 per month. The Republic’s labour force works marginally longer weekly hours but enjoys 50% more hourly compensation than their Northern Irish peers.
Furthermore, even with allowances for purchasing power, the Republic’s employees earn more. northern Ireland’s average hourly wage of £16 is just three-quarters of what Republic’s employees earn. But the Republic also experiences a considerably greater average tax pressure, three times that of Northern Ireland’s average, even after considering the income disparity between the two regions.
The ESRI report noted that when considering deductions for taxes and social security, as well as benefit additions, the mean disposable income for households in Ireland is nominally about one-third larger than that in Northern Ireland.
In Ireland, younger individuals earn greater salaries than their peers in the North, however, there is heightened income disparity due to the unequal distribution of earnings. While the tax benefit system in Ireland is more advanced, fewer benefits are subjected to means-testing and the values are lower. This significantly increases the income inequality compared with Northern Ireland.
The researchers cautioned that population ageing and the need for upskilling could impact income in future years, with Northern Ireland being particularly susceptible due to its lower baseline education levels. They also observed that ongoing discussions about welfare cooperation between Dublin and Stormont may only marginally address income inequality due to diametrically opposing forces in their respective tax and benefit system.
Despite income levels being higher in Ireland, Northern Ireland has historically documented an elevated poverty-risk rate. The driving factors behind such income inequality differences across the region are largely unknown.
Northern Ireland’s population is slightly older and has lower education levels than the population of Ireland. A notable difference is that only 23 per cent of Northern Ireland adults have a tertiary level education, significantly lower than the 47 per cent in Ireland.