Analysis of Low Pay Sectors

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.

Author: Keith Walsh

Head of Statistics & Economic Research in Revenue

3 thoughts on “Analysis of Low Pay Sectors”

  1. Ta for link.

    @Kennedy, Stanley & McGuiness

    ‘The analysis is based on a unique longitudinal dataset drawn from Revenue’s administrative records, which follows over 100,000 taxpayers over a four year period. While analysis of incomes in Ireland and internationally is often based on a snapshot at a moment in time, this data allows measurement of income mobility over time. The analysis of profits in this paper is based on Revenue’s corporate and self-assessed tax records in 2013 and 2014.

    The analysis represents a new avenue of research for Revenue focusing on making the best use of the tax record data, strengthening public debate and improving the evidence base for policy-making.’

    Very useful … especially the focus on Micro and Small firms, and sectoral breakdowns.

  2. The problem of economic growth not resulting in real wage increases among the lower paid is now common throughout the Western world. At one time it would have fuelled a swing towards left-wing parties promising to rectify this injustice. Not so now. Its likely that massive immigration is one of the reasons for real wages among the lower paid to lag behind economic growth – and this is a factor behind the rise of Donald Trump, Brexit/UKIP and the National Front in France. The failure of the left to address this issue (mass immigration) is the main reason for their decline throughout Europe. Only SF (whose supporters are really more nationalist than socialist) are propping up the left-wing vote in Ireland. Take them away and all the other left-wing parties in Ireland don’t even reach 10% between them. I myself am lucky in that I probably benefit from mass immigration – no job competition and I avail of cheaper services. But, I can see how those working in construction, retail, hospitality etc see things differently – and it explains why they are moving to populist right-wing parties. Because of political correctness and the grip liberalism now has among the media and academic elites (e.g. Google), there is a tendency to sweep this issue (mass immigration) under the carpet.

    1. “The failure of the left to address this issue (mass immigration) is the main reason for their decline throughout Europe.”

      John, it is NOT the responsibility of the decaying Left to attempt to address the negative economic externalities of the unfettered free movement of people. Its EU political policy – The Four Freedoms and all that crap. QED.

      What will happen (is happening?) is that median wages/salaries will not increase sufficiently to provide the mandatory rate of economic growth demanded – for taxation revenues. So, it will be the responsibility of the ruling elites to ‘fix’ the problem – which they will not. They will ‘double-down’ on their existing ideology. Neither in hope nor expectation of a ‘fix’ – but to protect themselves. Ireland could then regress back to the 1950s within a generation. As that man actually said (but was mis-reported at the time) – “The wealthy you always have with you.”

      Several states in the US have regulated the use of Cannabis for ‘recreational’ use – and have experienced a tasty increase in state tax revenue. How far behind the 8 Ball are we? A long way.

      I’ll read the report later.

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