Jennifer O’Connell: 2020 was a tale of two Irelands

Four out of five Irish people saw incomes grow or stay the same in the pandemic. Covid-19 created schisms – between old and young, ill and well, home workers and frontliners, the laid off and the people who couldn’t spend their wages

What kind of Ireland will be waiting when we emerge from the shadow of Covid? A better question might be: how many kinds of Ireland?

Covid-19, we now know, has not been a great leveller. The pandemic created a schism between young and old; between those who could carry on working in the safety of their homes, and those who work on the frontline; those with underlying health conditions, and those without.

Economic data suggests yet another gulf. This year has been a tale of two Irelands: those who have suffered financially, and those who have survived, or in many cases even – for want of a less jarring word – flourished.

The first story you could tell about the financial impact of Covid involves entire sectors of the domestic economy shut down overnight, with widescale pay reductions and job losses – hospitality, accommodation and travel. Arts, entertainment and recreation fell by 75 per cent during the first lockdown. Building sites went silent as construction declined by over 40 per cent, though it has since recovered, says David Higgins, a research analyst with Carraighill.

Both of those sectors in Ireland suffered the most significant drop in the UK or the EU, according to the ESRI. Ireland also took one of the largest hits to household spending in Europe, as livelihoods dried up and society ground to a halt.

We don’t want the kids to feel that there’s an issue. Because it’s not their problem, it’s ours. But whatever savings we had are pretty much gone

One of the most immediate impacts of this was on aviation.

Mark, an airline pilot in his 40s, who requested that his surname be withheld, flew one of the last planes out of the country before it went into lockdown in March. By the time he made the final leg of the journey home from Gatwick, “everything had locked down”.

As soon as it became clear the world wouldn’t be bouncing back to normal in a couple of weeks, the “writing was on the wall financially”. Pilots agreed to a 50 per cent pay cut. With three children and a mortgage, the impact on his family was “huge”. “But we had no real choice.”

Mark and his wife took a three-month mortgage break, which they extended by three months until September. Nine months on from the first lockdown, he is flying just enough to keep his licence current, and is still on a 50 per cent pay reduction. He recently calculated that he has lost about €35,000 since April. “I’m very fortunate that, on 100 per cent pay, I’m very well paid.”

His priority has been to insulate the children as much as possible. “We don’t want them to feel that there’s an issue. Because it’s not their problem, it’s ours.” But the reality is, he says, “whatever savings we had are pretty much gone.”

And with no immediate recovery or additional Government support for the airline sector imminent, he is very worried about the future.

Beyond those whose incomes were slashed, hundreds of thousands of people lost their jobs overnight. The unemployment rate was less than 5 per cent at the start of the year. By June, it had soared to 22.5 per cent. By September, the Covid-adjusted unemployment rate fell to 14.7 per cent. In November, it was back up at 21 per cent.

The ESRI predicts the jobless rate is likely to remain high throughout next year, running at around 15 per cent, and will still be around 10 per cent in 12 months. One year from now, it predicts, 240,000 people will be out of work.

The outlook for the hospitality sector, facing into its third lockdown in January, is particularly bleak.

Tom Ryan has been able to open his pub, Philly Grimes’s pub in Waterford city, for just four weeks since the first lockdown in March. They were the worst weeks in his 22 years in the business. He traded for two weeks at level 2 in September, and a further two weeks at level 3, which meant he could only serve up to 15 people outside.

Publican Tom Ryan, owner of Philly Grimes’s pub, has been open for just four weeks since the first lockdown in March. Photograph: Patrick Browne
Publican Tom Ryan, owner of Philly Grimes’s pub, has been open for just four weeks since the first lockdown in March. Photograph: Patrick Browne

He hated turning regulars away and having to remind people about mask-wearing. He loathed what Covid did to “the magic that happens in a pub”, the connections between strangers. “For me, [being open with so many restrictions] wasn’t hospitality.”

He’s staying afloat with Government supports, including the Covid Restrictions Support Scheme (CRSS). But despite the pub being closed, his insurance costs have come down by only 25 per cent. He has tried to resign himself to the fact that “realistically, until the vaccines are widespread and the numbers are right down”, we won’t go back to normal. “It’s very hard when you don’t have control of your life.”

Alan Barrett of the ESRI points out that the divisions in Irish society are not just visible by sector, but also by demographic. Three very clear groups of individuals emerge as having suffered the worst effects: young people, migrant workers and lower-skilled women.

A recent ESRI report points out that ethnicity is another factor in people’s resilience to the financial impacts of pandemic. While western European and non-EU nationals had a similar experience to Irish workers, those from eastern Europe suffered a much greater hit. “Women from eastern Europe are particularly vulnerable to job loss and temporary lay-offs for Covid-related reasons,” the report notes.

There’s a persistent group of young people who are probably going to be out of work for some time into next year

“Recessions are always harder on lower-skilled people, and on people in more precarious positions. But it was like this recession has magnified that effect, precisely because of the sectors impacted,” says Alan Barrett, an economist and director of the ESRI.

One of the reasons people under 25 accounted for 47 per cent of people on Government supports in November is because they are heavily represented in hospitality, Higgins points out. “There’s a persistent group of young people who are probably going to be out of work for some time into next year,” he predicts.

Even among typically better-educated, higher-skilled remote workers, women were worse affected than men, because they were left to deal with more of the domestic and homeschooling burden. “Even within that group that were doing reasonably well” there was an uneven distribution of resources within the household, Barrett says.

Fewer opportunities for spending meant people whose incomes were untouched saw their bank accounts fatten without much effort on their part

Then there’s the other story you could tell about Ireland during Covid.

Those working in IT multinationals and pharmaceutical companies – both sectors in which exports grew this year – are emerging largely unscathed. So are those in the public sector.

Fewer opportunities for spending meant people whose incomes were untouched saw their bank accounts fatten without much effort on their part. The ERSI estimates that Irish people have accumulated an additional €9 billion in savings this year, boosting savings to €25.5 billion.

Combined with the construction slowdown, this is why some economists are predicting house price rises next year. “I think they’re going to rocket next year,” says Danny McCoy, chief executive of Ibec.

For some people, far from robbing them of their dream of home ownership, the pandemic has brought it closer.

Andréa Henry, who is 29, was made redundant from her advertising job over the summer. Almost simultaneously, she also lost a freelance contract. Early in lockdown, sensing her employment situation might be insecure, she gave up her house share in Dublin, and returned home to Wicklow town, where the rent is cheaper.

“I think we’re very lucky to live in a country where we could get the PUP payment. It’s a significant amount of money. We were in lockdown so it’s not like I had all those normal expenditures like nights out, dinners, parties, commuting. My only overheads have been a grocery shop and my rent.”

I would go as far as to say 80 to 85 per cent of people have had a positive experience of Covid financially and economically, and 15 per cent negative

She found a job again recently, and, because she could save her redundancy payment, sees buying a house in the next few years as a realistic plan, something she could never have imagined last January.

The Covid-19 pandemic has given her and many of her friends an opportunity to reassess their lives. At some point, the access to parties and the capital’s cultural life might have come to seem less attractive than a house with a garden and home office somewhere farther away, she suspects. But the pandemic accelerated that.

So how do these two Irelands break down? Those whose lives were derailed, versus those who have survived and even thrived?

“It’s not a 50-50 split. I would go as far as to say 80 to 85 per cent of people have had a positive experience of Covid financially and economically, and 15 per cent negative. Around 5 per cent were really distressed,” says McCoy.

“Between 36 and 38 per cent of people on the PUP payment were actually on a pay rise.” For every one person who is significantly worse off because of Covid, he suggests that four are unaffected or in a better position financially than they were at the start of the year.

What do these new divisions and emerging inequalities mean for social solidarity and Ireland’s recovery?

“We might have a K-shaped recovery, whereby the work-from-home sector takes off and the productivity goes up. And the retail sectors and hospitality are permanently damaged by this. Consumer spending in Ireland has taken a much larger hit than in other countries,” says Higgins.

Still, he predicts the economy will have reopened by mid-year to the extent that “next September, the All-Ireland winners will celebrate in Coppers. Every sector of the economy will be open again. But the bigger question is will they have recovered? I don’t think you’ll have all the pubs and nightclubs back at full capacity until 2022.”

In the longer term, Higgins says, “the debt that Ireland and other countries are racking up is going to become an issue. There’s typically only three ways that you get rid of debt. Austerity, cancel it, or inflate your way out. None of those are politically or societally nice.”

Barrett suggests that the Government should consider incentivising or encouraging people who have done well financially this year to consider putting those additional €9 billion savings into pensions. “There is a significant wall of cash. Some of it will just be spent, and will be tremendous in terms of reigniting the worst-hit industries. But if a lot of that money just hits in the housing market next year, we’ll be back into house price increases and the same old story.”

Another longer-term threat to recovery, McCoy suggests, may be “complacency” among those who have benefited from multinational investment over the past few years, and have now been shielded from the pandemic’s worst affects. There was already evidence of a desire to strategically “lean out” from their working lives among some demographics, for lifestyle rather than family reasons. This could impact future productivity, he believes.

Covid has impacted every aspect of our lives and changed Irish society in ways we could not have predicted last February, decimating some sectors and boosting others. One of the most surprising outcomes is that it has left as many as four in five people unaffected, or even better off.

How Ireland navigates the emerging chasm between those two Irelands could be one of the biggest challenges for the years ahead.