Department of Economics, Kemmy Business School, University of Limerick
Contract Type: Tenure Track (five year fixed term). During the term of the contract the successful applicant will have the opportunity to apply for tenure in accordance with the University’s Policy and Procedures for Granting Multi-annual Status to Tenure Track Academic Staff
Salary Scale: €40,599 – €55,818 p.a.
Informal enquiries regarding this post may be directed to: Professor Eoin Reeves Head Department of Economics Kemmy Business School University of Limerick Email: firstname.lastname@example.org
The closing date for receipt of applications is Thursday, 17th June 2021. Applications must be completed online before 12 noon, Irish Standard Time on the closing date.
[Disclaimer: This blog represents my personal views and not those of the Central Bank of Ireland or the European System of Central Banks.]
Last week, the CSO released the latest in its Insights from Real Time Administrative Sources series on the “Impact of COVID-19 Income Supports on Employees”. Using administrative data on employee earnings and COVID-19 support scheme payments (PUP and T/EWSS), it tracks the individual gross weekly earnings of matched cohorts to Q4 2020 (‘matched cohort’ means the CSO is comparing the (median) earnings of same group of individuals year-on-year).*
For policy makers deliberating the future of COVID supports (PUP and WSS), the information in the release provides several useful insights.** I highlight three aspects in this post: (i) the strong earnings growth of non-recipients of supports throughout 2020; (ii) the diverse earnings experience of different demographic and income groups; and (iii) the different earnings growth experienced by PUP versus T/EWSS recipients, which, for the first time, is shown separately in this release. Some more details on each below.
For non-recipients, earnings grew strongly throughout 2020 One of the most striking observations is the strong growth in earnings for non-recipients of either PUP or T/EWSS, as shown in Chart 1 below.
The fourth quarter, with year-on-year earnings growth of 7.1%, is particularly strong for non-recipients (as we already knew from the previous release to Q3, the group of all recipients experienced large falls in earnings in 2020). Year-on-year growth for the bottom 20% per cent of (non-recipient) earners was over 21% in Q4 (see Figure 1.5 in the release). The release notes that this increase is mainly among younger age groups, and workers in the wholesale & retail and health sectors. Some of this likely reflects the steep slope of the age-earnings profile for younger workers, and also perhaps longer hours worked during the pandemic. However, the CSO also notes that it reflects individuals changing jobs during the pandemic, which could point to more permanent effects on the level of earnings.
But it is not just at the bottom where we see earnings growth for non-recipients. We see growth right across the distribution. For example, the top-20% of (non-recipient) earners registered growth of 4.7% in Q4 2020. In fact, the combination of strong growth with the size of the non-recipient group (75% of employees in Q4), puts growth for the median of all workers (i.e. non-recipients plus recipients) in positive territory in Q4 (+4.6%). This is a remarkable outturn for the year that was in it. As highlighted in this piece with Tara McIndoe-Calder in March, the fact that average household incomes actually grew during 2020 is one of the reasons for the large jump in savings we saw during the year.
The earnings growth of recipients differs significantly across demographic groups Reflecting the concentration of shut-downs in face-to-face services and some retail sectors, we know that the pandemic has affected the employment of some groups more than others, notably females, lower paid and younger workers (see, for example, this recent speech by Deputy Governor Sharon Donnery). However, when we look at earnings growth, and including supports, the same groups tend to be the least affected during 2020 (see Table 1 below, which is based on Table 1.2 in the release). The fact that some groups fare less badly reflects, in part, the level of supports relative to pre-pandemic earnings. We know, for example, that younger and female workers generally work fewer hours during the week (i.e. part-time), and tend to work in lower-paying sectors. So, these are almost like ‘reference effects’. Note that the CSO analysis is of gross earnings, i.e. before income tax, and there may be future tax liabilities for some recipients where supports were not taxed at source.
One thing we do not see in the Q4 data – at least for growth at the median – is much evidence of an impact from the change in payment rates from mid-October onwards, when payments were more closely aligned to pre-COVID gross earnings. In my paper with Brian Cahill (CSO) from February, when we only had data to Q3 2020, we thought this could change income for some groups. But we do not see it in this release. As the payment could have both risen for some (the top rate increased to €350) and fallen for others, it could be washed out in the median, and we would need to dig down to the individual data to see it. The Christmas Bonus, when there was additional PUP payment in December, could also be a factor.
Very different earnings growth by type of support and demographic group The release provides, for the first time, a breakout of earnings growth (plus supports) for the two different types of supports, PUP and T/EWSS***. Whilst I focus on earnings here, the update on numbers receiving various supports released last week is also relevant.
In Q2 and Q3, earnings for PUP (only) recipients fell by around 5% (for the median), less than half of the fall for T/EWSS recipients (Chart 2, below). So, even with employer top-ups, the gross earnings of (all) wage subsidy recipients fall a lot during this period (at the median). The one positive is that by Q4 both groups’ earnings were back at around Q4 2019 levels.
Focusing on all recipients misses some of the variation within demographic or regional groups (Charts 3-5). For some workers – like males, older workers and workers in Dublin – wage subsidy recipients fare ‘better’ in terms of earnings growth, than PUP recipients in these groups. I say ‘better’, but in all quarters, earnings plus wage subsidies are still significantly lower than pre-COVID earnings for these sub-groups.
In contrast – for females, younger workers and workers outside of Dublin – PUP recipients fare better than wage subsidy recipients, and, in almost all quarters, earnings plus PUP are higher than pre-COVID earnings (although this is less so the case for the non-Dublin group). For wage subsidy recipients in these sub-groups, earnings in Q2 and Q3 are below pre-COVID levels (except for under-25s), before recovering somewhat in Q4.
The timing of different health restrictions, and specifically which sectors were closed and when, likely explains some of the differences we observe between certain groups. For example, the closure of construction, with higher earnings on average and more male workers, could explain some of the gender differences we observe (this is also related to the ‘reference effect’ I mentioned above). Related to this, we also need to be careful about comparing medians across individual quarters, as the composition of matched cohorts varies from quarter-to-quarter, as shown in Table 1.9 in the release.
Conclusions With the above caveats in mind – plus the fact that this is aggregate data, albeit medians for specific groups – these patterns point to at least two important considerations when considering the future for these supports as the economy re-opens.
First, and most obviously, not all workers will be affected equally by changes to PUP or wage subsidies. Taking PUP as an example, changes to the scheme as different sectors reopen could impact younger, female and, to a lesser extent, workers outside Dublin more.
Second, and related to the first point, for some recipient groups median earnings increase during 2020, notably PUP recipients. Therefore, whatever changes are made, and at what speed, could have a bearing on work incentives and labour supply. I am not saying that workers on PUP do not want to return to work, but rather we should pay close attention to the literature and evidence on how unemployment benefits affect unemployment (see, for example, this recent paper on youth unemployment duration and unemployment benefits by Maynooth economists Aedin Doris, Donal O’Neill and Olive Sweetman). Furthermore, labour supply is a multi-dimensional issue, of which pay is just one. In the current context, other factors like the spread of the virus, migration (and how the pandemic affects cross-border flow of workers), caring responsibilities and health concerns also play a role.
Notes: (*) Average weekly earnings are estimated by summing all earnings during the quarter and dividing by weeks worked in the quarter. (**) Revenue pays the wage subsidy (T/EWSS) directly to qualifying employers who then pay employee wages. So, formally, it is a support for employers.For convenience, I refer to it broadly as an ‘income support’ in this post. (***) The release also provides data on the earnings growth of a third group: employees who receive both PUP and T/EWSS during a quarter (but not necessarily at the same time). This group accounts for around one-in-five recipients in Q4. For a clear comparison between the experience of recipients on the two types of supports, I omit this third group here.
I thank, without implicating, Brian Cahill (CSO) for answering my many queries about the data in the release.