For earners in the bottom half of the distribution, the drop-off in income growth was largely driven by a fall in employment income, a consequence of working fewer usual hours per week and a fall in full-time work relative to an increase in part-time hours worked.
Given that 2020 was its Covid-depressed nadir, the data indicates the sharp labour market recovery in 2021, in which an additional 200,000 people found work compared to the previous year, “was more muted” for those in lower-income households.While this decline “need not be cause for excessive concern”, the research highlights that income growth was declining even before the Russian invasion of Ukraine in early 2022 set off the “ongoing inflationary episode” underpinned by soaring energy prices.
Maintaining this equilibrium will be “a challenge” for the Government given other pressures on the public finances, said lead report author Barra Roantree, assistant professor of economics at Trinity College Dublin. “Policymakers will face difficult decisions in Budget 2024 about which groups to prioritise given our reliance on potentially transitory receipts from corporation tax, with untargeted tax cuts or increases in spending risking stoking further inflation.
Core spending is expected to rise by €5.25 billion in Budget 2024, or 6.1 per cent, giving an overall package of €6.4 billion, excluding one-off measures.