Book/Report Chapter

Middle Incomes in Boom and Bust: The Irish Experience

October 28, 2016

Europe's Disappearing Middle Class? Evidence from the World of Work, chapter 8

In investigating the extent and nature of a ‘squeezed middle’, Ireland’s remarkable macroeconomic fluctuations over the past two decades make it a particularly interesting case study. Ireland had some of the fastest rates of economic growth in the Organisation for Economic Co-operation and Development (OECD) from the mid-1990s, followed by the most precipitous decline in national output of any OECD country at the onset of the Great Recession. The scale and nature of the economic boom and subsequent ‘bust’, accompanied by sharp swings in taxation and public spending, make Ireland a clear outlier in terms of macroeconomic fluctuations, providing a remarkable context in which to explore what happened to the middle-income groups that are the focus of this book. The chapter begins by describing key trends and developments in the macro-economy and in the labour market over the period from 1995 onwards, with particular attention to both the institutional context and key changes in the world of work. We then turn to how middle-income groups have fared in terms of the evolution of average disposable household incomes. To help understand the patterns observed, we then look at the profile of the different income groups in terms of age, education and employment status, and how this changed over the period. The role of redistribution via cash social transfers and direct taxes, particularly over the period of recession and ‘austerity’, is then examined. We next go beyond income to investigate what other indicators of living standards – namely, measures of deprivation and financial stress – reveal. That analysis points to the importance of debt and the housing market in boom and bust, which constitutes the first of our case studies. Changes in the occupational structure and the relative fortunes of different occupational groups are at the core of trends in the world of work and how the middle has fared, and this is the focus of our second case study. Finally, the conclusions are brought together and their implications explored.