North and South: A Tale of Two Economies on One Island
The Economic and Social Research Institute (ESRI), in collaboration with the Shared Island Unit of the Department of the Taoiseach, has recently released a comprehensive report comparing the economies of Ireland and Northern Ireland. This research provides a valuable, high-level overview, using a range of economic and social metrics to explore the similarities, differences, and evolving trends between the two jurisdictions.
It's crucial to remember the distinct contexts: Northern Ireland operates as a regional part of the UK economy, while Ireland is an independent EU Member State. Furthermore, recent years have seen strong growth in Ireland alongside the impacts of Brexit across the UK and periods without a functioning Executive in Northern Ireland. These factors shape the comparisons drawn in the report.
Demographics and the Labour Market: Diverging Paths?
Population: Ireland's population (5.1 million in 2022) grew significantly faster than Northern Ireland's (1.9 million) between 2010 and 2022, largely fueled by strong net migration into Ireland. Ireland also maintains a younger population structure, resulting in a lower old-age dependency ratio compared to Northern Ireland.
Participation & Employment: Labour market participation rates (ages 16-64) are higher in Ireland, and the gap has widened over time (4.4 percentage points higher in Ireland by 2022). While Northern Ireland had higher employment rates in 2010 following the financial crisis, Ireland's strong recovery means its employment rate (73.3% for 16-64s in 2022) now surpasses Northern Ireland's (by 3 percentage points).
Volatility: Ireland's economy shows more pronounced business cycle effects, with indicators like unemployment, migration, and NEET rates exhibiting greater volatility than in Northern Ireland. Recently, unemployment has been lower in NI, while the rate of young people Not in Employment, Education or Training (NEET) has been lower in Ireland.
Living Standards: A Widening Gap
The report highlights a significant and growing divergence in living standards:
Household Income: Using a reliable measure adjusted for household size and purchasing power, household disposable income was found to be 18.3% higher in Ireland than in Northern Ireland in 2018, with this gap widening over the 2011-2018 period.
National Income: Comparing modified GNI* per capita (a measure adjusting for globalisation effects in Ireland) with GDP per capita in NI shows a 57% gap in favour of Ireland in 2022. GNI* per capita also grew significantly faster in Ireland between 2015 and 2022, indicating increasing divergence.
Wages: Hourly earnings (PPP-adjusted) were 36% higher in Ireland than in Northern Ireland in 2022.
Economic Structures: Tax, Spend, and Trade Shifts
Taxation: Per capita, personal income tax payments in NI are less than half those in Ireland, likely due to higher average incomes and a more progressive tax system in Ireland. Corporation tax receipts per capita are over five times higher in Ireland, forming a much larger share of total tax revenue (21% vs 6% in NI).
Spending: Government spending priorities differ. Ireland allocates a higher share of its expenditure to health (26.3% vs 17.3% in NI) and capital investment (13.4% vs 8.7% in NI). Northern Ireland allocates a higher share to social protection (30.1% vs 27.9% in Ireland).
Trade: While Great Britain remains NI's largest trading partner, trade between NI and GB declined between 2015 and 2022, particularly services imports from GB. Conversely, trade between NI and Ireland increased, especially NI's goods exports to Ireland and services imports from Ireland. Brexit is cited as a likely important driver of this shift.
Sectoral Performance and the Productivity Divide
Employment Structure: Public sector employment remains higher in NI (29.2% vs 25.3% in Ireland in 2019), though the gap has narrowed. Ireland shows higher employment concentration in high-productivity sectors like 'information and communication' and 'financial insurance'.
Productivity: A significant productivity gap exists, favouring Ireland. Labour productivity in Ireland was higher in 8 out of 10 sectors in 2021. This is particularly stark in manufacturing and ICT, heavily influenced by Ireland's strong foreign direct investment (FDI) sector. Productivity in foreign-owned firms in Ireland was almost four times higher than in NI in 2021, pointing to a sharp divergence. Employment in foreign-owned firms also grew much faster in Ireland between 2015 and 2021.
Well-being Indicators: Education and Health Concerns
The report flags concerns regarding key well-being indicators, particularly in Northern Ireland:
Education: NI lags significantly in educational enrolment rates compared to Ireland, the UK, and the EU27, especially in early years (3-5) and among 15-19 year olds. Alarmingly, the 15-19 enrolment rate in NI fell between 2018 and 2022, and early school leaving rates increased over the same period, contrasting with falling rates in Ireland.
Healthcare: While waiting lists for 0-6 months are similar, NI has much higher rates of people waiting longer (over 18 months) for inpatient and outpatient procedures. Infant mortality rates, previously similar, diverged significantly by 2021, falling in Ireland and the UK but rising in NI.
Life Expectancy: Life expectancy from birth in Ireland (82.4 years in 2021) surpassed NI (80.4 years) and the UK average (80.7 years), having converged around 2006 and diverged since. This divergence likely reflects the widening gaps in living standards, education, and healthcare access.
The ESRI's report paints a picture of increasing economic divergence on the island of Ireland. While Northern Ireland has recently experienced lower unemployment rates, Ireland shows significantly higher and faster-growing living standards, higher productivity levels (particularly driven by FDI), and concerningly, widening advantages in key education and health outcomes. Factors like Brexit, differing economic structures, investment priorities, and policy choices appear to be contributing to these distinct trajectories. This research provides crucial evidence for policymakers North and South as they address the challenges and opportunities for the shared island.
Sources
The Economic and Social Research Institute (ESRI): Comparative Analysis of Economies of Ireland and Northern Ireland
Disclaimer: This analysis is for informational purposes only and should not be considered financial or legal advice. Readers should conduct their own research and consult with qualified professionals before making any financial decisions.