High Irish GDP is an illusion, Ireland is not that rich

techman1

https://www.youtube.com/watch?v=fKmem7Epk8E

A good international viewpoint on the discrepancy between very high irish GDP figures and the fact that a survey has shown that 7 out of 10 young people want to leave the country. They pose the question why would so many young people want to leave such a supposedly rich successful country?

They answer it by saying on paper Ireland is a very rich country we have twice the GDP per capita of countries like Germany and Sweden the industrial powerhouses of Europe, however this is not really the reality. Our GDP is grossly inflated by the global tech companies funneling all their global revenues through Ireland to take advantage of our very low corporation taxes. While we have very high GDP figures the average salaries in Ireland are lower than many of our european compatriots, and is less than half our GDP per capita but in Europe the average salaries are similar to their GDP per capita. Also when other statistics are looked at such as the "average household disposable income per capita" which is the income people have left over after taxes and expenses Ireland is 17th on that list and lower than the EU average. Also the average salaries are inflated by the very high incomes of the skilled tech workers many of them from other countries, however the average salary of people working outside these areas in the domestic economy is much lower

It says that Ireland is particularly bad at building infrastructure compared to our european colleagues, they blame this on government making it very difficult and expensive to build high density accomodation in the cities and too easy for people to object and block these developments. The same for energy and other critical infrastructure, Ireland is very bad at this. Therefore Ireland behind the scenes and flattering statistics is not really that rich.

They pose the question what happens when these global corporations are forced to pay their taxes in other countries and away from Ireland the irish GDP will fall dramatically. Ireland has a very high public debt load but because this is expressed as a percentage of GDP this looks ok because GDP is inflated by global profits of the tech companies. If this GDP were to fall then Irish public debt becomes a big problem

DublinWriter

Totally agree on all points. Our GDP is a 'smoke and mirrors' statistic at this point, caused by the likes of Apple doing the 'double-Irish' trick.

I get the gut feeling that we're in for a very rude awakening in the next ten years.

moon2

That's the reason why the CSO produce the "modified GNI" figures since 2018.

https://www.cso.ie/en/interactivezone/statisticsexplained/nationalaccountsexplained/modifiedgni/

More information here:

https://en.m.wikipedia.org/wiki/Modified_gross_national_income

So... Yes, GDP figures are distorted, and that distortion is mostly eliminated by modified GNI! It's pretty unlikely there'll be a "rude awakening" at any point. Were this money to no longer flow through Irish books then GDP would begin approximating the modified GNI figures again, and we'd probably just stop producing modified GNI stats in addition to GDP stats.

techman1

https://www.boards.ie/discussion/comment/120859440#Comment_120859440

well aware of that but the CSO only came up with that GNI* statistic after being ridiculed by international economists for "leprechaun economics", it hasn't gained any traction anyway as no one else uses this statistic so is no good for comparing the irish economy to international peers as they all use GDP or GNP. Also when the social partners are out with the begging bowl looking for more money, GDP is what they use and sure isn't ireland the richest country in Europe

Wolf359f

https://www.boards.ie/discussion/2058305291/high-irish-gdp-is-an-illusion-ireland-is-not-that-rich

So if Ireland isn't that rich, can you show us on a graph just how poor or non-rich we are?

Ireland, Singapore, Luxembourg, Qatar, UAR etc... all have massive differences between GDP per capita and GNI per capita. It's nothing unique to Ireland.

Modified GNI is just another way to more accurately measure the health of the economy.

Cpxxc

I'm sorry my friend. We are indeed rich, well not me, my bank account has -€5,49 at the moment and no I have no salary resolving that issue in the foreseeable future.

But the country is.

I absolutely don't believe that 7 out of 10 young people want to leave the country. That's obvious nonsense. BS in fact.

Of the young people in my family and extended wife's family only two moved abroad and both because they wanted to. We Irish love to go overseas and come back. 3 of my family. My wife and three of her family and that was when they're were few jobs.

Yes our infrastructure is messed up. But mysteriously we build more houses and apartments every year than the so called homeless figures. So who are moving into these new houses?

The high prices we pay for everything tells us we're a rich country. Because they wouldn't be high if people couldn't afford the prices.

Same with housing.

We do need affordable housing for the ordinary people who quite frankly do all the work to make the money to make this country rich.

That's a big failing. Back in the early sixties. The council in Dublin built modern houses which they sold to people like my parents at a favourable mortgage rate. I'm not sure why that model can't be copied.

Geuze

There are various alternative measures of living standards:

GNI* = modified GNI

MDD, modified domestic demand

AIC actual individual consumption

Geuze

GDP vs AIC per person:

Geuze

This lad on Twitter produces great graphs:

https://twitter.com/jlpobrien/status/1680155971572596736

Geuze

Another good chart:

Cpxxc

Oh Jesus, someone put up some charts.

I suppose it proves we're rich. All I know is that there are two houses on my road on sale for half a million each and the people coming to see them are driving expensive cars.

That's rich.

I live in Galway BTW not southside Dublin. Where I grew up poor.

This country is rich. Get over it.

Padre_Pio

https://www.boards.ie/discussion/comment/120861083#Comment_120861083

The country is rich. I'm not saying the figures are accurate, but GDP, GNI, gross exports etc all put Ireland top of the charts. Aside from a massive housing problem, and ongoing healthcare issues, Ireland is a fantastic place to live.

I'm skeptical of the 7 in 10 figure, though I know plenty of people who have left Ireland to travel for 3 or 6 months and were 100% confident they could easily pick up a job on return.

If that's not a measure of success then I don't know what is.

Peregrinus

None of this is news; we've known for a decade or so that Irish GDP figures are distorted and can't be compared with the GDP figures of most other countries.

Ireland isn't unique; this is a common feature of economies that are overweight in financial services, that have high levels of external investment or that are tax-driven. The chart posted by Geuze in post #8 shows similar anomalies with Luxembourg, Norway and Switzerland and there would be other countries, not on that chart, similarly affected.

As long as you recognise what's happening and what GDP figures do and don't show, it isn't a problem.

Podge_irl

The amount of young people wanting to leave Ireland is as much a reflection of geography and demographics as anything else. Ireland is a small country and young people will often want to move somewhere larger and its particularly easy to move to other anglophone countries.

techman1

https://www.boards.ie/discussion/comment/120861063#Comment_120861063

On that basis "actual individual consumption " we are the same as poland, Hungary, Spain and Italy. That would seem to match the reality of people's lives because accomodation and living expenses and taxes are so high in Ireland. Therefore even with relatively high wages irish people don't have the purchasing power of our northern European neighbours

Fred Cryton

While GNI* better measures individual income, GDP cannot be ignored as the country benefits by taxing that additional GDP (for example, corporation tax on intellectual property).

Best way of looking at it is that we have similar disposable income to countries like Germany and Sweden, but we also have something they don't, which is a chunk of additional GDP we can tax and benefit from which over time could indeed make us properly wealthier than those countries. Provided we use it wisely of course.

listermint

https://www.boards.ie/discussion/comment/120861999#Comment_120861999

The shops, full restaurants, home renovations and multiple holidays disagree entirely with your sentiment. That and diminishing credit debt.

I don't know why People can't accept that people are actually quite well off. But we have inbuilt infrastructural problems I'm areas due to successive self interest bad government policies.

Padre_Pio

https://www.boards.ie/discussion/comment/120862249#Comment_120862249

70% of adults are homeowners. If you own your home, have a job and have relatively good health then you're likely very well off.

techman1

https://www.boards.ie/discussion/comment/120862249#Comment_120862249

We have less disposable income than our Northern European neighbours, that's been captured in the statistics shown above. While there maybe full restaurants and holidays abroad that's more a function of people wanting to socialize and travel following the covid lockdowns, that's a Europe wide phenomenon.

However our housing and infrastructure deficits are much worse than the rest of Europe and this results in increased costs for everyone. The Irish state, the government sector is the problem, look at the cost over runs in children's hospital construction. The state is obviously trying to put the blame on BAM the contractor. However BAM is an international developer with many successful international infrastructure developments under its belt, why is the Irish one in such a mess?

The government rather than building infrastructure prefers to throw money out to people through increased social welfare and child benefit payments. This acts as a disincentive to work and reduces the available workforce to work in those hospitality jobs and on the building sites building houses and infrastructure

beggars_bush

Irish households have huge levels of deposit savings and that has been growing since covid.

There's a lot of money in the economy waiting to be spent

NIMAN

Figures on both sides of this argument need to be taken with a pinch of salt.

Is our GDP inflated by a few companies? Yes it is, and it's something we need to prepare for in the medium to long term as they might not always be here.

Do the vast majority of young people want to leave here? No, they don't. The vast majority of Irish youngsters stay in Ireland.

WesternZulu

The ERSI recently published a report using modified GNI that put us at a similar standard of living as Germany and ahead of the UK.

We recently came second in the UN quality of life index.

By any objective measure Ireland is a rich modern country. However all countries have their issues; Ireland isn’t unique either in having a housing problem at the moment.

Sam Russell

I think that there is a difference between being RICH and being WEALTHY.

A rich person has access to money - plenty. A wealthy person is not measured by money but assets - most of which are not valued in money terms.

Think - 'nouveau riche' vs 'old money'.

coolshannagh28

High GDP nay be skewing the numbers on the levels of wealth in Ireland but the longer the tax take and huge surpluses from MNCs continues the wealthier we will become as is already becoming apparent in this particular cycle.

Strumms

We owe roughly 237 billion euros.

So, the State's national debt now stands at roughly €44,000 per person in the country, one of the highest per capita debt burdens in the world.

Podge_irl

https://www.boards.ie/discussion/comment/120864469#Comment_120864469

1. So what?
2. We're behind most of Western Europe regardless

I don't know what your obsession with this figure is, but its meaningless.

wotzgoingon

https://www.boards.ie/discussion/comment/120864469#Comment_120864469

Sure America who would nearly be one of the wealthiest countries in the world have massive debts also.

Stephen_Maturin

https://www.boards.ie/discussion/comment/120861055#Comment_120861055

I’m a (relatively) young person (27) and I’d say 7/10 figure is about right.

I’d reckon it’s about that proportion of my friends that have emigrated in the last couple of years or are actively preparing to leave in the next 6 months. And that’s across several different friend circles from school, college, cousins, ex colleagues etc

It’s an extremely common sentiment amongst young professionals in Ireland at the moment. A real feeling of frustration and no viable future.

Can have done everything “right”, worked your ass off etc and you’re still no closer to the realistic possibility of buying a house and starting a family likes generations before.

Unfortunately there also seems to be a real lack of empathy out there from older generations, which doesn’t help. A lot of those people that've left already, highly educated and motivated Irish young people, are never coming back to Ireland. Which is sad.

Podge_irl

https://www.boards.ie/discussion/comment/120864587#Comment_120864587

Can have done everything “right”, worked your ass off etc and you’re still no closer to the realistic possibility of buying a house and starting a family likes generations before.

How many of them are moving to England were this is just as true though?

combat14

there may be some money in the country but the infrastructure save a few motorways is an absolute disgrace .. head over to somewhere like bilbao for example in the north of spain and there is no comparison many dublin or cork street merely inches from the main streets are literally crumbling and with the latest childrens hospital 2 or 3 billion euro Blank cheque fiasco there doesnt seem to be any hope to improve our position going forward!

WesternZulu

https://www.boards.ie/discussion/comment/120864623#Comment_120864623

It’s like anything, it’s very easy admire something from afar when you don’t live there.

A sibling of mine lived in Spain. If you think Ireland is corrupt, Spain is in a different league.

Podge_irl

https://www.boards.ie/discussion/comment/120864667#Comment_120864667

"Outside of the southeast" is a pretty definitive restriction though. The vast majority of Irish nationals in the UK are in London. A highly paid professional in Dublin can afford to buy closer to Dublin than their equivalent in London - albeit the transport is not as good.

I understand the frustration, I think we need to build significantly more housing, but also a lot of Irish people who leave go to places that are basically just as bad on that front. But London is bigger and more fun, and Australia has a completely different climate and lifestyle and there is nothing we can do to compete with that.

Murph85

https://www.boards.ie/discussion/comment/120861083#Comment_120861083

These Cars are likely on pcp... a rich country with third world infrastructure.... David mcwilliams had a good article on it recently...

The cost of living here is insane, in general wages are low, any embarking over 40k you lose half your salary. What will you get fir this tax? Very little, appalling health service, services and Infrastructure. You're effectively paying fir a welfare wonderland and free housing etc fir others, that you will never benefit from... Unless your parents bail you out, you'll be effectively poor...

beachhead

With a national debt curently at 270.65 billion and rising.Ireland must be rich,alright

moon2

https://www.boards.ie/discussion/comment/120864885#Comment_120864885

https://www.ntma.ie/business-areas/funding-and-debt-management/statistics/debt-projections

the graph doesn't even go high enough to display 270 billion. At least use the correct figures when getting annoyed over debt!

Charles Babbage

Ireland is not fabulously rich, but is doing rightly. GDP per capita is twice other places and GNI* is about 54% of that, so we are broadly similar to other prosperous European countries. If the statistics that are used are bollix, that is not our fault. Debt of 270.65 billion means that it is €50K per head, it is not rising, it is falling as the government has a surplus. By comparison the USA has debt of almost $100K per head.

This stuff about everyone wanting to leave is not borne out by the stats, the last CSO figures show more Irish citizens came into the state than left it. Some people always want to see the world.

Everyone complains about health, yet life expectancy is one of the highest in Europe, so it is not the "third world" that it is often referred to on boards.ie.

There is an infrastructure deficit, but housing output is increasing, and possibly the government will actually build a metro and other public transport when they get up off their arse and stop fiddling with bicycle lanes.

Unfortunately, people like sound bites and giving out and the likes of McWilliams that do know better still put forward headlines that will get lots of likes on twitter, if that requires some misrepresentation of the data then thats what we get.

Padre_Pio

https://www.boards.ie/discussion/comment/120864821#Comment_120864821

Cost of living is insane? Based on what? Rent, maybe, if you're renting in a city?

Food has become more expensive, but nowhere near insane. Bills are expensive, but still a comparatively small amount of your salary.

Clothes, transports is all the same, petrol is back to where it was in 2019.

Lose half your income over 40k? If you are then you're doing something wrong. Start a pension, join your company's salary-forgone scheme, and invest in EIIS. Be tax efficient and claw back what you can from the government.

The vast majority are doing very well in Ireland. Statistics show this, even if some people's sentiment is the opposite.

The usual gripes get trotted out;

Oh the health service is bad... When was the last time you were in hospital and were refused treatment because it was too busy?

Oh infrastructure is bad... How exactly are you affected by this and how could it be better?

People on welfare have it so easy... if that was anyway true then EVERYONE would be on welfare.

And the usual "young people are emigrating" ehh... to where exactly? No matter where you go you're going to get taxed. There's no free ride.

I had a friend who was planning on going to Michigan because the tax is less. Yeah, federal tax is are 22%, but factor in city tax at 2%, state tax at 4%, and property tax at 2%, plus healthcare, and various insurances and you're no better off that in Ireland.

People say these things with no context. "Oh X in Ireland is bad" and it's usually easily avoidable, or there's no where that does it well.

NIMAN

https://www.boards.ie/discussion/comment/120864593#Comment_120864593

Or Australia, or Canada, or the US.

Ardillaun

https://www.boards.ie/discussion/comment/120861448#Comment_120861448

Do as many Scandinavians leave as Irish do?

Ardillaun

https://www.boards.ie/discussion/comment/120861083#Comment_120861083

I think that proves Ireland is expensive, especially for young people. There seems to be a marked generational difference on how people see things. Young voters are clearly not happy with the status quo.

Peregrinus

It should be pointed out that, while our high GDP doesn't feed directly into living standards in the way that it might in other economies, its not completely fictional and its not irrelevant. It does feed into the tax base. Despite having a very low rate of Corporation Tax, Ireland collects more Corporation Tax per capita than does the UK - more than three times as much, in fact. So that grossly inflated GDP does have benefits for us.

techman1

https://www.boards.ie/discussion/comment/120865115#Comment_120865115

It's obvious that the government is benefitting from collecting corporation tax from these companies global profits. However you would imagine that tax bonanza would be used to reduce the tax burden on the squeezed middle, those on 40 to 60 thousand euros like other rich countries. Instead the squeezed middle in Ireland is more heavily taxed than our European counterparts and that basket case economy the UK (joke obviously)

We also don't spend that tax bonanza on infrastructure but waste it away on highly inefficient public services and very high welfare payments .

WesternZulu

https://www.boards.ie/discussion/comment/120864821#Comment_120864821

I think you're being massively hyperbolic. Wages are not low, wages are very high in Ireland and our progressive tax system lessens inequality. PCP is used extensively in other countries, it's surprising it took so long to take hold in Ireland.

Our health service isn't as bad as it is often made out to be. Not perfect! But comparable internationally to the NHS.

If you think our infrastructure is third world I suggest you go to an actual third world country and compare. We have more roads and more rail per head of population than the UK. It's absolutely not perfect and it's a disgrace that Dublin hasn't a metro and that Cork and Limerick haven't a motorway connecting them but a sense of perspective is badly needed.

Podge_irl

https://www.boards.ie/discussion/comment/120865467#Comment_120865467

those on 40 to 60 thousand euros like other rich countries. Instead the squeezed middle in Ireland is more heavily taxed than our European counterparts and that basket case economy the UK (joke obviously)

Their marginal tax rate is higher than many other countries, but their total tax burden is not.

Podge_irl

https://www.boards.ie/discussion/comment/120865112#Comment_120865112

More Norwegians leave than Irish. Not as many Finns though Sweden is a standard destination for young Finns to move to. The disparity between Finland and Sweden is not really comparable to that between Ireland and the UK though.

Podge_irl

https://www.boards.ie/discussion/comment/120864751#Comment_120864751

I feel the same way about low income housing as I do about extremely high level "executive" housing or whatever you want to call it. I'll be living in neither, but more housing is more housing and anything that increase supply will help in the current situation.

Yes, people can more easily afford to live in Birmingham or Manchester or Glasgow. But for the most part that's not where they are going - they are going to London.

None of this is to undermine the reality of the issues. They exist and need a lot of work. But young people have been leaving Ireland and will continue to leave Ireland no matter the economic situation at home due to massive pull factors.

Sam Russell

I know someone who worked in London and was on a very good salary. For family reasons they moved to Northern England in a large city, and although the rent was lower, no job was available at even 50% of their salary. Consequently, moved back to Ireland and is now on the equivalent London salary.

If you are a home owner, then life is better in most places, particularly if you have owned the home for some time, and particularly, have little or no mortgage.

The problem with housing in Ireland (and Britain) is that local authority house building largely stopped in the 80s. The need for it did not stop - it had to be provided by the private sector - without the legal protection afforded to the tenants. It is commonly estimated that 30% or so of people require such housing. So some of those cannot afford the rents and become homeless, or require substantial subsidy from the state and this costs much more than social housing provided by the state.

The shortage of homes had led to continuous rise in the price of houses, and the cost of building those houses.

So we are rich but not wealthy.

blanch152

https://www.boards.ie/discussion/comment/120865505#Comment_120865505

That is because in other countries, there is income tax and social insurance on low wages.

Podge_irl

Housing in Ireland is a disaster. But there are similar problems everywhere Irish people are going to also! I just don't think the percentage of young people voicing an interest in leaving (which is not remotely matched by the amount actually leaving anyway) is a particularly good barometer of the country's health.

https://www.boards.ie/discussion/comment/120865710#Comment_120865710

Yes, Ireland's tax system is bad. More people should be brought into the tax net and the top rate entry point raised, though ultimately for someone on 50k+ I don't think their overall tax burden should change.

Podge_irl

https://www.boards.ie/discussion/comment/120865656#Comment_120865656

Or, to be more precise, younger people <40 are not wealthy. The rate of home ownership in Ireland is actually quite high and one problem the UK is having in particular now is that interest rate rises aren't having the inflation curbing impact they might because a huge percentage of homes are owned outright (so again younger people who have managed to buy property on big mortgages are being hit again to appease older people).

Peregrinus

https://www.boards.ie/discussion/comment/120865467#Comment_120865467

While the squeezed middle, as you put it, pays high marginal rates of income tax in Ireland, by comparison with other developed economies they pay relatively little in the way of property tax and other capital taxes. That, perhaps, is what the Corporation Tax bonus finances.

If we look at overall tax burdens, Ireland is probably about mid-range for OECD economies. But we are overweight in income taxes and underweight in property taxes, capital taxes and social security taxes.