Ireland ranks 13th in EU living standards survey

Figures focus solely on consumption and excludes multinational accounting which inflates Irish GDP

A previous analysis by former Central Bank governor Patrick Honohan based on 2019 figures estimated that Ireland might be around 8th to 12th place in terms of the EU prosperity league, when distortions to GDP data are factored out. Photograph: Gareth Chaney/Collins

A previous analysis by former Central Bank governor Patrick Honohan based on 2019 figures estimated that Ireland might be around 8th to 12th place in terms of the EU prosperity league, when distortions to GDP data are factored out. Photograph: Gareth Chaney/Collins

 

Ireland has ranked 13th out of the 27 EU countries in new EU data on household living standards in 2020. The figures show Ireland ranking slightly below the EU average, a completely different picture from GDP-per-head data, which has Ireland in second place.

The figures produced by Eurostat, the EU statistical agency, aim to take account of all the goods and services consumed by households, including not only what they purchase directly but all Government-provided services like education and health.

Because they focus purely on consumption, the figures – known as actual individual consumption (AIC) – are not distorted by multinational accounting, which significantly inflates Irish GDP figures.

Average

The figures show Ireland’s AIC at 94 per cent of the EU average in 2020, similar to 95 per cent in 2019. Eurostat says the data is preliminary and the collection was affected in some cases by the pandemic. Final figures will be produced in December. The figures adjust for different price levels across the EU so they are designed to measure the actual level of goods and services which households consume with their disposable income. Ireland ranked 11th in the 2019 figures.

The figures show Luxembourg, Germany, Denmark and the Netherlands as the countries with the highest level of material household living standards, all between 123 per cent and 131 per cent of the EU average.

For Luxembourg, like Ireland, the GDP per head figure greatly exceeds AIC due to the activity of international companies, in its case mainly involved in finance. For most other countries the figures are similar.

The figures also reflect the relatively high level of prices in Ireland, which has consistently appeared near the top of Eurostat surveys of price levels, with the high cost of renting and buying housing one of the key issues.

High levels of State provision of services such as health in some other countries are also likely to be a factor in the comparisons.

Distortion

The figures are further evidence of the level of distortion caused to Irish data by multinational accounting practices.

A previous analysis by former Central Bank governor Patrick Honohan based on 2019 figures estimated that Ireland might be around 8th to 12th place in terms of the EU prosperity league, when distortions to GDP data are factored out.

There has also been questioning of aspects of the AIC data, as measuring total consumption, particularly in areas like housing, is very complicated, but they are generally seen as a better guide than GDP per head.