According to the latest studies conducted by the Economic and Social Research Institute, the average disposable income of individuals belonging to the baby boomer generation – most over 65 years old – has surpassed that of younger demographics. This discrepancy can be traced back to recent years when their incomes experienced a rise while others were grappling with income erosion due to inflation. This situation is a stark contrast to 2007 when the over-65s had disposable incomes that were 25% less than those aged 18 to 64, after factoring in housing costs. This development prompts pressing inquiries about the reasons behind the older age group’s economic victories.
Several underlying elements contribute to this situation. An increased number of over-65s are either gainfully employed or have working partners and are thus reaping the benefits of protected State pensions and elevated earnings. Statistical data reveals a gradual upward trajectory, with the count of working individuals over 65 augmenting from 50,000 in 2012 to 113,000 in 2023. Certain members of this age group have also profited from being landlords by garnering increased rent. Interestingly, while the younger demographics witnessed a decline in their real incomes of roughly 3% from 2022 to 2023, the over-65s benefitted from a similar ascent.
The conclusion that they exhibit superior economic conditions than their younger counterparts is determined by their disposable income after factoring in housing costs. While people aged 30 to 55 at the apex of their earnings capacity may technically earn more before deductions, these older individuals have more to spend. Given the current housing market characterized by limited housing availability, astronomically high rents, and exorbitant property prices, owning a mortgage-free home is a significant advantage.
Additionally, the robust political sway of this older demographic has ensured the preservation of pension values following economic declines, at times when other welfare rates were slashed. The age prerequisite for acquiring State pension remains constant at 66 years, owing to their influence. Although State pensions fell behind in the 1990s, this trend reversed in later years, with pension increases outperforming earning growth rates.
In essence, the over-65s are not only faring economically better but also steering political decisions, leaving younger generations in a challenging position.
“Are you and your significant other bringing in a combined income over €100,000? This is becoming increasingly common in Ireland. Arguments against inheritance tax being deemed ‘draconian’ or ‘theft’ lack substance; there is no solid reasoning behind diminishing it. The average income-earner cannot afford the ever-inflating housing prices – a trend that raises questions as to why this progression persists.
It’s crucial to grasp the magnitude of financial disparities across different age brackets. We’ve noticed an upward trend in higher earners amongst the younger and middle-aged populations. However, while individuals aged 65 and above generally fare well, those living solo frequently battle against poverty and deprivation. The key conclusions of the report highlight the immense financial burden experienced by households with an infant or child up to five years old. The report also estimates that 230,000 children live in material deprivation – a lack of affordability for life’s basic needs – marking a rise of almost 30,000 since 2022.
The Economic and Social Research Institute (ESRI) has recommended a second-tier child benefit, specifically targeting lower-income earners and welfare dependents. This is part of an array of key policies that could bring about substantial change.
The recent jump in this figure can be attributed to the inflationary spike following the Covid-19 pandemic and Russia’s invasion of Ukraine. Viewing from a wider perspective, the Irish economic model has led to elevated living standards and reduced inequality. When adjusted for inflation, disposable income has over doubled since 1987, with the poorer segments of society reaping the most gains. As inflation subsides, true income growth is making a comeback. However, widespread and long-standing poverty and deprivation indicate many have been left behind.
This calls for a more deliberate approach towards the provision of welfare support, such as strategies targeting poverty amongst younger families. The ESRI has once again suggested a secondary child benefit intended for low-income earners and those reliant on welfare. This is one of many high-priority policies that could greatly affect change. As the budget looms closer, it sparks clashes within the coalition.”
The recent ESRI report highlights a predicament for the Government due to its restricted ability to increase long-term welfare payments. Households that have been availing of temporary aids, such as energy credits, double child benefit and welfare weeks, for several years may suffer if these supports are not offered in the coming year. Hence, it appears the Government may opt for additional temporary supports to alleviate this. However, this is merely a temporary solution. There is a significant risk the government might predominantly focus its financial resources on universal credits, applicable to all households, instead of those in dire need. This is a potential misuse of available funds.
The Irish government’s coffers are currently experiencing a propitious phase, fueled by the job market surge and the growth of corporate taxes. Concurrently, State expenditure is on the rise. Already, the effects of this policy on different generations are starting to become clear, particularly in areas like housing policy. The urgency to rectify several years of underbuilding is evident, but navigating through the Irish planning system’s stifling legality proves to be an ongoing challenge. It seems those aged over 65 are frequently successful in broader debates, such as freezing the State pension age, likely reductions in inheritance tax and the continuation of favourable tax treatment.
With the exchequer flourishing, the State has so far managed to meet varying needs owing to the ever-increasing corporation tax. However, overspending on universal payments could impede future investments. An unavoidable repercussion is the imminent tightening of the annual budget. As the financial boom draws to a close, the question of who foots the bill will be a contentious issue. Ultimately, it’s highly likely that income tax, especially those in employment, will once again bear the brunt when the State urgently needs financial resources.