Four-fifths of households in Northern Ireland receive more in benefits than they pay in taxes, compared with slightly more than half in the Republic, according to a new Economic and Social Research Institute (ESRI) report.
Wages in the Republic are higher, but so too are taxes, while means-tested benefits are paid to a far greater percentage of people in Northern Ireland, according to the report Drivers of Income Inequality in Ireland and Northern Ireland.
The figures are contained in research carried out for the ESRI by Karina Doorley, Michele Gubello and Dora Tuda, funded by the Irish Government’s Shared Island programme.
The list includes benefits such as the Working Families Payment, housing benefit, jobseekers allowance and supplementary welfare allowance/income support among others.
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The 20 per cent poorest sections of society in both parts of the island receive similar welfare benefits, but further up the income scale “the level of means-tested benefits is higher in Northern Ireland”.
Almost 80 per cent of Northern Ireland households receive more in means-tested benefits than they pay in taxes. Eligibility for such benefits falls away earlier in the Republic, leaving just over 50 per cent of households as net tax contributors.
The average household in the Republic has an average income of €2,473 per month, compared to €1,646 in Northern Ireland. Workers in the Republic work slightly more hours per week on average but are paid 50 per cent more per hour than their Northern Irish counterparts, according to the ESRI report.
Even adjusting for purchasing power workers in the Republic are better paid, with the average hourly rate for workers in Northern Ireland – at £16 per hour – standing at three-quarters of that enjoyed by workers in the Republic. However, the average tax burden is substantially higher in the Republic of Ireland, even accounting for the difference in incomes, with the average household paying “nearly three times as much tax as households in Northern Ireland”.
“Once taxes and social security have been deducted and benefits added, average household disposable income is around one-third higher in nominal terms in Ireland than in Northern Ireland,” says the ESRI report.
Younger people in the Republic enjoy higher earnings than their Northern counterparts, but workers in the Republic live in a society where earnings are more unequal. The tax benefit system in the Republic is more progressive than its Northern counterpart, but the number and level of means-tested benefits is lower, thus increasing income inequality compared with the North.
The researchers warned that population ageing and the need for upskilling will affect incomes in coming years, but “is likely to be particularly important in Northern Ireland, where baseline levels of education are lower”.
Future welfare co-operation in coming years between Dublin and Stormont, if any, may have “a limited impact on income inequality due to opposing forces in the tax and benefit system”, it said.
Income levels are higher in the Republic, while Northern Ireland has historically had a higher at-risk-of-poverty rate than its southern counterpart, but there is little existing evidence on what drives income inequality differences on the island.
Northern Ireland’s population is “slightly older and less educated than the population of Ireland”, but “perhaps most strikingly, just 23 per cent of adults” there have third-level education, compared with 47 per cent in the Republic.
