OECD Economic Surveys O E C IRELAND D E c o SPECIAL FEATURE: INCLUSIVE GROWTH n o OECD Economic Surveys m ic S Most recent editions u r v Australia, December 2014 Israel, December 2013 ey IRELAND s Austria, July 2015 Italy, February 2015 Belgium, February 2015 Japan, April 2015 Brazil, October 2013 Korea, June 2014 Canada, June 2014 Latvia, February 2015 Chile, October 2013 Luxembourg, March 2015 China, March 2015 Mexico, January 2015 Colombia, January 2015 Netherlands, April 2014 Czech Republic, March 2014 New Zealand, June 2015 V SEPTEMBER 2015 o Denmark, January 2014 Norway, March 2014 lu Estonia, January 2015 Poland, March 2014 m e Euro area, April 2014 Portugal, October 2014 2 0 European Union, April 2014 Russian Federation, January 2014 1 5 Finland, February 2014 Slovak Republic, November 2014 / 1 France, March 2015 Slovenia, May 2015 8 Germany, May 2014 South Africa, July 2015 Greece, November 2013 Spain, September 2014 Hungary, January 2014 Sweden, March 2015 Iceland, September 2015 Switzerland, November 2013 India, November 2014 Turkey, July 2014 Indonesia, March 2015 United Kingdom, February 2015 Ireland, September 2015 United States, June 2014 IR E L A Consult this publication on line at http://dx.doi.org/10.1787/eco_surveys-irl-2015-en. N D This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information. Volume 2015/18 ISSN 0376-6438 2015 SUBSCRIPTION September 2015 (18 ISSUES) S e p ISBN 978-92-64-24032-2 t 9HSTCQE*ceadcc+ e 10 2015 17 1 P m b e r 2 0 1 5 OECD Economic Surveys: Ireland 2015 This document and any map included herein are without prejudice tothe status of or sovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundaries andtothenameofanyterritory,cityorarea. 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TABLEOFCONTENTS Table of contents BasicstatisticsofIreland,2014............................................... 7 Executivesummary......................................................... 9 Mainfindings........................................................... 12 Keyrecommendations................................................... 12 Assessmentandrecommendations........................................... 15 Macroeconomicperformanceandrisks .................................... 17 Furtherstrengtheningthefiscalposition................................... 21 Ensuringfinancialstability............................................... 24 Makinggrowthmoreinclusive............................................ 27 Fosteringproductivity ................................................... 34 Improvingenvironmentalsustainability.................................... 39 Bibliography............................................................ 41 Annex.Structuralreform..................................................... 43 Thematic chapters Chapter1.Growingtogether:TowardsamoreinclusiveIreland................... 51 HowinclusiveisgrowthinIreland?........................................ 52 Towardsmoreinclusivegrowth ........................................... 60 Fosteringinclusivegrowththroughfairerandmoreefficientwelfare andtaxation ........................................................... 65 Amoreinclusivebusinesssector.......................................... 74 Recommendationsforincreasingtheinclusivenessofgrowth..................... 77 Bibliography............................................................ 78 Chapter2.MigrationinIreland:Challenges,opportunitiesandpolicies............ 81 Thepatternsofmigration................................................ 82 Theeconomicimpactofmigration ........................................ 88 MaintainingtheattractivenessofIrelandasadestinationforskilledworkers ... 92 Integratingmigrants..................................................... 97 Recommendationsforgettingthemostoutofmigration......................... 105 Bibliography............................................................ 106 Annex.Estimationofbilateralmigrationflows.................................. 109 Boxes 1. UncertaintiesabouttheIrisheconomy’sprospects ....................... 23 1.1. Corporateinvestmentinhumancapital ................................ 77 2.1. EmploymentpermitsinIreland........................................ 94 OECDECONOMICSURVEYS:IRELAND©OECD2015 3 TABLEOFCONTENTS Tables 1. Progressonstructuralreforms......................................... 17 2. Macroeconomicindicatorsandprojections.............................. 21 3. Fiscalpolicyindicators ............................................... 22 4. Climatechangescorecard............................................. 39 1.1. Highsharesoflabourearningsareconcentratedatthetopandbottom ofthescale ......................................................... 56 1.2. Thelow-educatedaremorelikelytobejoblessthantheOECDaverage...... 57 1.3. Assetsaredistributedunevenlyacrossincomeandsocio-economicgroups.. 59 1.4. TaxratesandbandsforPAYEtaxpayers:ActualandalternativeScenarios ... 68 1.5. Themarginaleffectivetaxrateforthelowpaidcanbereduced bychangingin-workbenefits.......................................... 70 1.6. Taxationisnotneutralacrossdifferentassetclasses ..................... 71 Figures 1. StronggrowthisreturningtoIreland................................... 16 2. RegainedcompetitivenesscontributestoIrishexports.................... 18 3. Therecoveryiswellunderwayandbecomingmorebroad-based ........... 19 4. Debtandnon-performingloansarehigh................................ 20 5. Balancingthebudgetwouldputdebtonadownwardtrend ............... 22 6. Propertymarketsarereviving ......................................... 26 7. Wellbeingindicatorsaremixed........................................ 28 8. Irelandperformswellinsomeinclusivenessdimensions.................. 28 9. Incomesupportforthelong-termunemployedisgenerousinIreland ...... 29 10. Marginaleffectivetaxratesarehighforlowincomefamilies .............. 30 11. Long-termunemploymentishigh...................................... 30 12. Numeracyskillsarelacking........................................... 32 13. Thecostofchildcareishigh........................................... 34 14. Ireland’strendGDPgrowthratehasdeclined............................ 35 15. InvestmentinKnowledgeBasedCapitalhasslowed...................... 35 1.1. Ireland’smarketincomeGINIisthehighestintheOECD.................. 52 1.2. Ireland’sdisposableincomeGINIisbelowtheOECDaverage............... 53 1.3. TheincreaseinmarketincomeinequalityinIrelandwaslargelydriven byemploymenteffects ............................................... 53 1.4. Internationallyincomeisbecomingmoreconcentratedatthetop.......... 54 1.5. Shareofthebottom20%householdsinmarketincomeislowinIreland .... 55 1.6. Riskofpovertyishighwithoutsocialtransfers .......................... 55 1.7. Skill-basedwagedifferentialsarehighinIreland......................... 57 1.8. Skillmismatchesarehigh ............................................ 61 1.9. Alowproportionofadultshavehigh-levelskills ......................... 62 1.10. AveragetaxwedgeislowforthelowpaidandclosetotheOECDaverage forthehigherpaid................................................... 67 1.11. Someundesirablejumpsinthemarginaleffectivetaxratearebuilt intothecurrentsystem............................................... 68 1.12. Lowerincomehouseholdswithchildrenfaceadditionaldisincentives towork............................................................. 69 1.13. Taxesonpropertyarelowbyinternationalstandards..................... 72 1.14. ThestandardVATrateishighbuttherevenuebaseisnarrow.............. 73 4 OECDECONOMICSURVEYS:IRELAND©OECD2015 TABLEOFCONTENTS 2.1. TheIrishlabourmarketisexceptionallyopentomigrationflows........... 83 2.2. Destinationsandoriginshavechangedovertime ........................ 84 2.3. Migrationisconcentratedinyoungestcohorts........................... 85 2.4. ThesizeoftheIrishyouthcohorthasdecreased......................... 86 2.5. Salariesforrecentgraduateshavedeclined ............................. 87 2.6. Manyemigrantswereinemploymentpriortotheirdeparture ............. 87 2.7. OneoutoffiveIrishemigrantsisemployedinthehealth andsocialworksector................................................ 88 2.8. Netmigrationisexpectedtoremainnegativeintheshortrun ............. 90 2.9. Theshareoftheforeignbornpopulationthatiswell-educatedishigh...... 91 2.10. Migrationislargeamonghighlyeducatedindividuals .................... 91 2.11. Immigrantswereparticularlyhitbythecrisis ........................... 98 2.12. Over-qualificationandmismatchesratesarehigherforforeign-born ....... 100 2.13. Chancesofhavingawell-matchedjobdependonfieldofstudy............ 100 OECDECONOMICSURVEYS:IRELAND©OECD2015 5 This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examinationoftheeconomicsituationofmembercountries. TheEconomicsituationandpoliciesofIrelandwerereviewedbytheCommittee on9July2015.Thedraftwasrevisedinthelightofthediscussionandgivenfinal approvalastheagreedreportofthewholeCommitteeon28July2015. TheSecretariat'sdraftreportwaspreparedfortheCommitteebyDavidHaugh, Yosuke Jin, Alberto Gonzales Pandiella and Muge Adalet Mcgowan under the supervision of Patrick Lenain. DamienAzzopardi, Penelope Silice and ElikaAthari providedthestatisticalresearchassistance,andBrigitteBeyeler,MikelInarrituand AnthonyBoltonprovidedtheadministrativesupport. ThepreviousSurveyofIrelandwasissuedinSeptember2013. Follow OECD Publications on: http://twitter.com/OECD_Pubs http://www.facebook.com/OECDPublications http://www.linkedin.com/groups/OECD-Publications-4645871 http://www.youtube.com/oecdilibrary OECD Alerts http://www.oecd.org/oecddirect/ This book has... StatLinks2 A service that delivers Excel ® files from the printed page! Look for the StatLinks2at the bottom of the tables or graphs in this book. To download the matching Excel® spreadsheet, just type the link into your Internet browser, starting with the http://dx.doi.org prefix, or click on the link from the e-book edition. BASICSTATISTICSOFIRELAND,2014 (NumbersinparenthesesrefertotheOECDaverage)* LAND,PEOPLEANDELECTORALCYCLE Population(million) 4.6 Populationdensityperkm² 65.6 (34.9) Under15(%) 22.0 (18.1) Lifeexpectancy(years,2013) 81.1 (80.5) Over65(%) 12.7 (16.0) Men 79.0 (77.8) Foreign-born(%,2011) 16.4 Women 83.1 (83.1) Latest5-yearaveragegrowth(%) 0.3 (0.6) Latestgeneralelection February2011 ECONOMY Grossdomesticproduct(GDP) Valueaddedshares(%,2013) Incurrentprices(billionUSD) 251.1 Primarysector 1.6 (2.6) Incurrentprices(billionEUR) 189.0 Industryincludingconstruction 24.1 (26.5) Latest5-yearaveragerealgrowth(%) 1.9 (1.9) Services 74.3 (71.0) Percapita(000USDPPP) 48.8 (39.0) GENERALGOVERNMENT PercentofGDP Expenditurea 38.3 (41.9) Grossfinancialdebta 107.6 (112.1) Revenuea 34.2 (37.8) Netfinancialdebta 81.8 (69.0) EXTERNALACCOUNTS Exchangerate(EURperUSD) 0.753 Mainexports(%oftotalmerchandiseexports) PPPexchangerate(USA=1) 0.841 Chemicalsandrelatedproducts,n.e.s. 57.8 InpercentofGDP Miscellaneousmanufacturedarticles 12.8 Exportsofgoodsandservices 113.7 (53.7) Machineryandtransportequipment 11.2 Importsofgoodsandservices 95.4 (49.6) Mainimports(%oftotalmerchandiseimports) Currentaccountbalance 6.1 (0.0) Machineryandtransportequipment 27.0 Netinternationalinvestmentposition(2013) -100.2 Chemicalsandrelatedproducts,n.e.s. 21.2 Miscellaneousmanufacturedarticles 12.7 LABOURMARKET,SKILLSANDINNOVATION Employmentratefor15-64year-olds(%) 61.7 (65.7) Unemploymentrate,LabourForceSurvey(age15andover)(%) 11.3 (7.3) Men 66.9 (73.6) Youth(age15-24,%) 23.9 (15.0) Women 56.7 (57.9) Long-termunemployed(1yearandover,%) 6.6 (2.5) Participationratefor15-64year-olds(%) 69.7 (71.2) Tertiaryeducationalattainment25-64year-olds(%,2013) 41.5 (33.3) Averagehoursworkedperyear 1821 (1770) GrossdomesticexpenditureonR&D(%ofGDP,2012a) 1.6 (2.4) ENVIRONMENT Totalprimaryenergysupplypercapita(toe,2013) 2.9 (4.2) CO2emissionsfromfuelcombustionpercapita(tonnes,2012) 7.8 (9.7) Renewables(%,2013) 6.2 (8.8) Municipalwastepercapita(tonnes,2012) 0.6 (0.5) Fineparticulatematterconcentration(urban,PM10,µg/m3,2011) 17.8 (28.0) SOCIETY Incomeinequality(Ginicoefficient,2012) 0.304 (0.308) Ratioofincomesofthetop10%vs.bottom10%,2012 7.4 (9.6) Relativepovertyrate(%,2012) 8.4 (10.9) Educationoutcomes(PISAscore,2012) Mediandisposablehouseholdincome(000USDPPP,2012) 22.0 (21.9) Reading 523 (496) Publicandprivatespending(%ofGDP) Mathematics 501 (494) Healthcare(2012a) 8.1 (9.0) Science 522 (501) Pensions(2011) 5.8 (8.7) Shareofwomeninparliament(%,August2015) 19.9 (26.0) Education(primary,secondary,postsec.nontertiary,2011) 4.6 (3.9) Netofficialdevelopmentassistance(%ofGNI) 0.39 (0.36) Betterlifeindex:www.oecdbetterlifeindex.org a) 2013fortheOECDaggregate. * WheretheOECDaggregateisnotprovidedinthesourcedatabase,asimpleOECDaverageoflatestavailabledataiscalculatedwhere dataexistforatleast29membercountries. Source: Calculationsbasedondataextractedfromthedatabasesofthefollowingorganisations:OECD,InternationalEnergyAgency, WorldBank,InternationalMonetaryFundandInter-ParliamentaryUnion.