Readers may have seen that the Low Pay Commission recently published their report Recommendations on the National Minimum Wage for 2018.
Perhaps of most interest to readers of this blog are the detailed appendices, which include a study by Revenue and Irish Government Economic & Evaluation Service (IGEES) economists Seán Kennedy, Brian Stanley and Gerry McGuinness of the low pay sectors based on tax return microdata. This paper is also separately available here.
The paper examines the incomes and mobility of taxpayers and the profitability of employers in Ireland using Revenue’s tax record data. The distributional and mobility analysis of low income taxpayers is based on a longitudinal dataset, which follows approximately 100,000 taxpayers for 4 years from 2011 to 2014. These taxpayers are stratified random sample drawn from the entire population of 2.1 million tax units on Revenue records. While analysis of incomes in Ireland and internationally is often based on a snapshot at a moment in time, the longitudinal nature of this dataset allows measurement of income mobility over time.
Some of the key findings are as follows:
- One in three taxpayers are low paid, defined as those earning below two-thirds of median income.
- The highest proportions of low paid taxpayers are in the wholesale & retail trade (23 per cent) and accommodation & food (19 per cent) sectors.
- Five low pay sectors are identified, having median incomes that are substantially below the median income for all sectors. They include accommodation & food service activities, wholesale & retail trade and administrative & support service activities. Slightly over one third of employments are in low pay sectors.
- Low pay sectors have the highest proportions of the youngest taxpayers. Two in five taxpayers are aged 24 and under in the accommodation & food sector.
- In the low pay sectors, males earn slightly more than females while in the other sectors females earn more. The sectors with the highest ratio of males to females are construction, transport and agriculture (7.5, 2.9 and 2.8 times respectively).
- In Dublin, median incomes in low pay sectors incomes are 7 per cent higher than those outside Dublin (compared to 9 per cent higher in the other sectors).
Based on an analysis of income mobility, lower paid taxpayers working in low paid sectors have a higher chance of increasing their incomes in future years relative to others within the same sector. For example, in the accommodation & food sector almost half moved upwards from the bottom quintile between 2013 and 2014.