Graduates now earn more in Ireland than in UK, but Germany tops both

John FitzGerald: Premium for graduates working in Ireland, relative to Britain, varies by sector

Over the last 20 years, national income per head has grown faster here than in the UK, and is now about 10 per cent higher than across the water. Photograph: iStock

Over the last 20 years, national income per head has grown faster here than in the UK, and is now about 10 per cent higher than across the water. Photograph: iStock

 

With the exception of the second World War, there has always been free movement for people between Ireland and Great Britain. This has also included the right for Irish and British people to work in either jurisdiction. Despite Brexit, this situation remains unchanged.

For much of the 19th and the 20th centuries, huge numbers of Irish people benefitted from the freedom to emigrate and work in Britain so that these islands formed a common labour market. This meant that the growth in wage rates in Ireland was related to trends in Britain.

From the foundation of the State up to about 1960, large numbers of people who had difficulty getting a job in Ireland crossed the Irish Sea where they were paid about two-thirds more than they might have earned at home.

While the cost of living was higher in Manchester or Birmingham than in Galway or Cork, people were still substantially better off financially by moving. However, from the stories emigrants told in literature, poetry and song, we know that moving to Britain was still a wrench. This explains why more people did not go – the higher potential earnings were not sufficiently attractive to offset the loss of access to family and friends at home.

However, over the course of the 1960s and the early 1970s, ease of movement between our neighbouring islands greatly improved, and phone communication became easier. People no longer saw a move to Britain as being necessarily a permanent one. Those factors made people more mobile, so that by 1970 a 10 per cent premium in living standards was enough to induce people to move to the UK for work.

Convergence

As economic conditions and job openings at home improved, labour market flows went in both directions as some emigrants returned. Greater integration of the two job markets led Irish wage rates to rapidly converge towards UK levels. From 60 per cent of British wages before 1960, by the 1970s, Irish earnings had reached 90-100 per cent of UK rates. Earnings parity for non-graduates continued up to the early 2000s, though by then graduates earned about 20 per cent more in Britain than in Ireland, with an even bigger gap for those in financial services. An exception was in public administration and education, where graduates in Ireland earned the same as in Britain.

Graduates earn more in the education sector in Ireland than in any other European Union country

Although Ireland was badly hit by the 2008 economic crash and its aftermath, nonetheless over the last 20 years, national income per head has grown more quickly here than in the UK, and is now about 10 per cent higher than across the water. This has led to changes in the traditional relativities between Irish and British earnings and wage levels for workers with degrees, although earnings of non-graduates remain very similar in the two jurisdictions.

Irish premium

While previously graduates could earn more in the UK than here, that situation has now reversed: in 2018 graduate earnings in Ireland were almost 15 per cent higher than in Britain. This has occurred despite a major influx of graduates to Ireland from the UK and further afield. Now it is the higher potential earnings in Ireland that attracts immigration. Maybe the surprise is that British citizens of the 21st century seem less inclined to try their hand at emigration than did the Irish of the 20th century.

The premium for graduates working in Ireland, relative to Britain, varies by sector. The Irish premium is particularly high for graduates working in manufacturing, the IT sector, public administration and education. Graduates earn more in the education sector in Ireland than in any other European Union country. However, building professionals and those working in finance continue to earn more in the UK. The City of London is still attractive for Irish emigrants.

Comparison of wage rates (adjusted for currency differences) does not give a true comparison of relative standards of living. Differences in prices, in the cost of housing or creche fees, in access to the public health service and in taxation, all have a role in determining relative standards of living at a given pay rate. Given those factors, the premium for graduate earnings in Ireland relative to Britain looks quite small, although it does depend on where people live, and whether Dublin or London rents are involved. And adjusting for different price levels – and the NHS – people without a degree are probably better off in Britain at a similar wage level.

Looking further afield, the EU’s best-paid graduates are found in Germany. If Irish graduates speak German, and are seeking adventure, Frankfurt and Hamburg are now a much better bet than Manchester or Birmingham.

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