Saturday 21 April 2018

Middle-income earners were worst hit during downturn

Middle-income earners felt the brunt of the downturn
Middle-income earners felt the brunt of the downturn

Charlie Weston Personal Finance Editor

MIDDLE-income families have taken the biggest hit during the economic downturn. A new academic study has found that the most severe recession in the history of the State has affected the middle-aged and those on middle incomes the most.

The bursting of the property bubble, the global recession and the banking crisis have pushed ordinary people into arrears and left them struggling to afford day-to-day essentials.

Those who are working in retail and construction and the self-employed have paid the highest price during the household budget crunch.

As the study only goes up to 2011, the authors conclude that a number of tax hikes, property tax and pay cuts introduced since then have meant that the position of middle earners will have worsened.

Sponsored by the Department of Social Protection, the 60-page study is by two Economic and Social Research Institute (ESRI) economists and a professor of sociology at Queen's University, Belfast.

Authors Prof Christopher Whelan, Bertrand Maitre and Helen Russell conclude that their findings are "consistent with the middle-class squeeze thesis, as viewed in social class terms".

This contradicts previous findings from think-tanks such as the ESRI that found that better-off families and those on welfare were the biggest losers from the austerity budgets.

The new study says working families have been hit with income cuts, tax hikes, a string of child-benefit reductions, higher costs for health care and rising third-level fees.

High levels of of unemployment, Celtic Tiger debts, pay cuts and levies have wreaked havoc on family finances for those in their 30s and 40s on average incomes, the study finds.

In contrast, pensioners, those on social welfare and the wealthy have escaped the worst ravages of the six-year financial hit,

"There is clear evidence of a squeeze for the precarious and lower middle-income class groups," the study, 'Trends in economic stress and the great recession in Ireland', says.

Recently, research professor at the ESRI Tim Callan said there was no evidence of a squeezed middle.

"When I hear talk of a squeezed middle, I want to reach for a gun," he said in 2012.

Yesterday, he explained that his 2012 research had only looked at incomes, adjusted for family size. The new research includes the impact of debts, age, numbers of children and social class.

Irish Independent

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