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Economic Insights – Summer 2022 July 2022 Department of Finance www.gov.ie/finance Department of Finance | Economic Insights – Summer 2022 Page | 1
Executive Summary The Department’s Economic Insights series provides analysis and insights on topical economic issues and developments. The summer 2022 edition comes at a time of mounting inflationary pressures. The invasion of Ukraine has led to spikes in energy and other commodity prices and disruption of supply chains, with serious implications for both the cost of living and costs of production. Meanwhile, with the economic fallout from the pandemic hopefully in rear-view, there are signs that some of our economic behaviours and actions may have changed. These issues are addressed in three short notes. Over recent months, inflation has picked-up sharply, with price pressures exacerbated by the war in Ukraine. HICP inflation increased by around 8½ and 9½ per cent on an annualised basis in June in the euro area and Ireland, respectively. In response, governments have introduced a range of measures to mitigate these cost of living pressures, providing supports to households and firms. The first note outlines the measures taken to date in Ireland, which amount to some €2.4 billion, and examines the distributional impact of the package of supports announced in April. The analysis shows that the April package can be expected to have a progressive impact on disposable income, with those in the lowest three income deciles gaining proportionally the most, while the measures more than offset the negative income impacts of the 1 May carbon tax increases. Secondly, construction costs have returned to the forefront of the housing debate following the reopening of the sector last year. This note evaluates the rise in construction costs and provides an insight into the overall delivery costs of housing. Since 2017 construction costs have been growing steadily, and picked up pace over the past year due to numerous and somewhat inter-related factors including Covid-19 stoppages, depleted inventories, Brexit-related transport issues, and shipping delays. The war in Ukraine has further exacerbated all of these issues predominantly in form of the rise in commodity prices. These external impacts are felt on construction input costs, especially core building materials inputs and energy. The note also examines further issues related to housing delivery including but not limited to - the availability of land price data, the complicated planning environment, access to development finance as well as taxes and levies, and issues relating to productivity. The third note presents a selection of high-frequency data and indicators that provide an indication of behavioural changes brought about by the Covid-19 pandemic. Specifically, the analysis compares pre and post-Covid consumer behaviour, transport and mobility patterns, and labour market trends. The findings suggest that some indicators are expected to experience long-term, structural changes post- Covid; for instance, the shift away from physical cash spending toward cashless methods will become a salient feature, while others such as labour market developments were largely cyclical developments brought on by the pandemic. As such, the evidence for permanent behavioural changes is mixed and largely influenced by both these structural and cyclical effects. This note further discusses the policy implications of these changes for the Irish economy as it emerges from the pandemic and the strategies for ensuring a resilient transition; for example, policies surrounding the continued provision of remote working guidelines. Department of Finance | Economic Insights – Summer 2022 Page | 2
Contents1
page
Executive Summary 2
1 Distributional analysis of the Government’s April 2022 cost of living package 5
1.1 Introduction 5
1.2 Tax and welfare changes in 2022 5
1.3 Distributional analysis of Budget 2022, February 2022 cost of living package and
7
March 2022 excise reductions
1.4 Distributional analysis of the April 2022 cost of living package 7
1.5 Caveats 8
1.6 Conclusion 9
2 Evaluating the trajectory of rising construction costs in the Irish housing sector 10
2.1 Introduction 10
2.2 Long-run construction costs 10
2.3 Delivery costs 11
2.4 Recent developments 14
2.5 Policy actions 16
2.6 Conclusion 16
3 We got locked down, but did we get back up again? High-frequency indicators
17
post-Covid
3.1 Introduction 17
3.2 Underlying Economic Activity Indicator (UEA) 17
3.3 Consumption 18
3.4 Mobility 19
3.5 Labour market 20
3.6 Conclusion 21
1
The data and analysis set out in this document are compiled by Department of Finance staff. Every effort is made to ensure
accuracy and completeness. When errors are discovered, corrections and revisions are incorporated into the digital edition
available on the Department’s website. Any substantive change is detailed in the online version.
Department of Finance | Economic Insights – Summer 2022 Page | 3Figures Figure 1 Inflation in the euro area and Ireland 5 Figure 2 Government measures announced to address inflation 6 Figure 3 Distributional analysis of the April 2022 cost of living package 8 Figure 4 Long-run developments 11 Figure 5 Housing input costs and employment over time 11 Figure 6 Cost of delivery breakdown 12 Figure 7 Building standards and productivity 14 Figure 8 Recent trends input cost inflation 15 Figure 9 International outlook developments and uncertainty 16 Figure 10 Underlying Economic Activity Indicator and Spending 17 Figure 11 Mobility 19 Figure 12 Overseas passenger numbers and Job Postings 21 Department of Finance | Economic Insights – Summer 2022 Page | 4
Chapter 1: Distributional analysis of the Government’s April 2022
cost of living package 2
1.1 Introduction
Over recent months, inflation has picked-up momentum (figure 1). In June, euro area annual inflation
is estimated to have reached a record 8.6 per cent, with the rate in Ireland estimated at 9.6 per cent.
Indeed, double-digit inflation has been recorded across a number of euro area countries. In response,
governments have introduced a range of measures to mitigate these cost of living pressures, providing
supports to households and firms.
In Ireland, the Government has recognised the differential impacts of rising inflation across household
groups, as highlighted in recent Central Statistics Office (CSO) analysis, and has accordingly introduced
a range of targeted measures to help alleviate the burden on those worst affected by current price
pressures.3 This note outlines the measures taken to date in Ireland and examines the distributional
impact of the most recent package of supports announced in April 2022.
The analysis shows that the April package can be expected to have a progressive impact on disposable
income, with those in the lowest three income deciles gaining proportionally the most, while the
measures more than offset the negative income impacts of the 1 May carbon tax increases.
Figure 1: Inflation in the euro area and Ireland
A: HICP inflation in the euro area and Ireland, 2000-2020 B: HICP inflation across euro area countries, June 2022
6
25
Euro area Ireland
5
4 20
2 per cent price
3 stability target
2 15
1
10
0
-1
5
-2
-3
0
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
MT FR FI DE IT EA AT PT CY IE NL ES LU BE SI EL SK LV LT EE
Source: Eurostat Source: Eurostat
Note: EA is euro area
1.2 Tax and welfare changes in 2022
In an effort to alleviate inflationary pressures in 2022, in particular with regards to rising energy prices,
the Government has announced a range of tax and welfare changes. These measures were in addition
to those outlined in Budget 2022, and were detailed in three separate packages announced in February,
March and April 2022. Further details on the measures are contained in figure 2.
2
This note was prepared by Padraig O’Sullivan and Joanne Mulholland, economists in the Economics Division of the
Department of Finance. The analysis and views set out are those of the authors only and do not necessarily reflect the views of
the Department of Finance or the Minister for Finance. The authors would like to thank Matt McGann, Barra Roantree and Mark
Regan for useful comments. Any outstanding errors or omissions remain those of the authors.
3
See CSO: https://www.cso.ie/en/csolatestnews/presspages/2022/estimatedinflationbyhouseholdcharacteristicsmarch2022/
Department of Finance | Economic Insights – Summer 2022 Page | 5The Budget 2022 tax and social welfare measures, which amounted to over €1 billion, were framed in
the context of already rising prices. Since then, Russia’s invasion of Ukraine has exacerbated existing
price pressures. In February, the Government announced a €505 million package of supports to help
to mitigate the further increase in the cost of living. 4 In March, this was followed by a temporary cut to
excise duties, which is due to remain in place until end-August, at an estimated cost of €320 million. A
haulier support scheme was also introduced in March amounting to €18 million.
In April, a further package of measures designed to help households with the rising cost of energy was
announced. This included an extension of the temporary cut to excise duties until mid-October. This
package totalled €180 million. In May, the Government extended the use of the 9 per cent VAT rate for
the tourism and hospitality industry for a further six months, until 28 February 2023. The estimated cost
of this extension is €250 million. Overall, the package of supports amounts to some €2.4 billion.
Figure 2: Government measures announced to address inflation
Budget 2022 March 2022 May 2022
˃ Petrol excise duty reduced by 20 cent per litre ˃ Extension of VAT
˃ Diesel excise duty reduced by 15 cent per litre Hospitality 9 per cent
˃ Marked gas oil (green diesel) excise reduced by 2 cent
per litre
˃ €100 per week haulier support scheme
February 2022 April 2022 June 2022
˃ €200 energy credit ˃ €100 lump sum fuel allowance ˃ Further reduction
˃ Public transport fares reduced 20 per cent ˃ VAT rate on gas and electricity cut to 9 in the PSO Levy, of
˃ €125 lump sum fuel allowance per cent an additional €75
˃ Drug payment scheme reduced to €80 ˃ Reduction in the PSO Levy of €58.57 (VAT exclusive)
˃ Working Family Payment increase annually (including VAT). from 1 October
brought forward to April ˃ Extension of excise duty cuts from 2022.
˃ Reduction in caps for school transport August to October
fees ˃ Marked gas oil excise reduced by a
further 2.7 cent per litre
Source: Department of Finance illustration. Available at; www.gov.ie
4
Excluding VAT foregone of about €50 million.
Department of Finance | Economic Insights – Summer 2022 Page | 61.3 Distributional analysis of Budget 2022, February 2022 cost of living package and March 2022 excise reductions Ahead of Budget 2022, the Department of Finance, with input from the Department of Public Expenditure and Reform, undertook a distributional analysis of the direct tax, indirect tax and welfare measures.5 The analysis showed that the suite of tax and welfare measures announced in Budget 2022 was broadly progressive. While all income deciles experienced income gains, the lowest three income deciles saw the highest gains as a proportion of disposable income. Crucially, whilst the carbon tax changes were shown to be regressive, these impacts are more than offset by the overall Budget package, particularly the welfare measures. The Economic and Social Research Institute (ESRI) also analysed the budgetary measures, comparing the actual changes in the budget to a counterfactual inflation-indexed system.6 The ESRI analysis found that lower income households benefit relatively more from above-inflation increases to some welfare payments, while higher income households benefit more from the increased tax band and credits. Middle-income deciles, which contain many earners who do not pay tax or do not pay the top rate of tax benefit less from taxation measures. Furthermore, analysis into the distributional impacts of the measures announced in February and March 2022 was undertaken by the ESRI.7 The analysis shows that much of the impact of inflation is expected to be mitigated by growth in disposable income, which the ESRI projected at 4.8 per cent on average. 8 The analysis finds that earnings growth is the largest single contributor to disposable income growth, and Budget 2022 is the next largest contributor, with greater effects for low-income and elderly households. In addition, the analysis shows that lowest income households benefit most from the Government’s overall package of policy changes. 1.4 Distributional analysis of the April 2022 cost of living package The Department of Finance has undertaken an analysis of the distributional impacts of the April 2022 cost of living measures using the ESRI’s SWITCH model and a satellite model for indirect taxes, known as ITSIM, which was jointly developed by the Department and the ESRI. While the distributional analysis published with Budget 2022 accounted for the full effect of carbon tax increases announced at that time, as a number of the increases only took effect on 1st May 2022, the impact of these carbon tax increases is included below for comparative purposes. The analysis includes: a lump sum increase in the Fuel Allowance of €100; a cut in the VAT rate on gas and electricity from 13.5 to 9 per cent; a reduction in the public service obligation (PSO) levy of €58.57 annually; an extension of the cut in excise duty of 15 cent for diesel and 20 cent for petrol from 31 August 2022 to the Budget Day in October. The cut in excise duty for marked gas oil (i.e. green diesel) is not modelled in the analysis. Overall, in net terms, all households see increases in weekly equivalised disposable income, as shown in figure 3A.9 The analysis also finds that the measures introduced in April more than offset the carbon 5 See Department of Finance Analysis Budget 2022: Distributional Analysis 6 See ESRI Analysis. Available at: https://www.esri.ie/events/post-budget-briefing 7 See Box B, ESRI Spring 2022 Quarterly Economic Commentary 8 The ESRI analysis assumed gross income growth of 6 per cent for workers and 6.5 per cent for the self-employed based on estimates from the Department of Finance Budget 2022 Economic and Fiscal Outlook - see footnote 39 of the ESRI’s QEC article. However, projections for earnings growth have been particularly complex, with measures affected by the unprecedented impact of Covid-19 on the economy. As such, there is some ambiguity on how wages may adjust to cost-of-living rises. 9 Equivalisation adjusts household income on the basis of household size and composition. Department of Finance | Economic Insights – Summer 2022 Page | 7
tax increases for all income deciles. The average household income gain is approximately 0.3 per cent,
with the carbon tax having a minimal negative impact, reducing this gain by less than 0.05 per cent.
Lower income households experience proportionally greater gains, reflecting the progressive nature of
the package. The gains in the lowest two income deciles are 0.7 and 0.6 per cent respectively, or 0.6
and 0.5 per cent respectively when the carbon tax impacts are included.
Figure 3b outlines the change in weekly equivalised disposable income by family type, with the analysis
incorporating all measures. Single people of retirement age benefit the most, which is in line with
expectations due to the nature of the fuel allowance payment and because people of retirement age
are less likely to earn a market income and more likely to rely on social transfers.
Figure 3: Distributional analysis of the April 2022 cost of living package
A: Change in weekly equivalised household B: Change in weekly equivalised disposable income, per
disposable income, per cent cent, by family type
0.8 0.8
0.7 0.7
0.6 0.6
0.5 0.5
0.4 0.4
0.3 0.3
0.2 0.2
0.1 0.1
0.0 0.0
-0.1 -0.1
-0.2 -0.2
Single Lone Couple Couple Single Couple Other All
w/a, n/c parent w/a, n/c w/a, r/a r/a
PSO Levy w/c Excise Cut
PSO Levy Excise Cut
VAT Cut Fuel Allowance VAT Cut Fuel Allowance
Carbon Tax 1 May Total Carbon Tax Total
Source: Analysis undertaken using the ESRI’s SWITCH 1.4
micro-simulation programme and ITSIM indirect taxes satellite
Source: Analysis undertaken using the ESRI’s SWITCH
model.
1.4 micro-simulation programme and ITSIM indirect
Note: w/a = working age; n/c = no children; w/c = with
taxes satellite model
children; r/a = retirement age.
Note: Other tab only reflects ITSIM analysis and therefore
does not include the PSO Levy or Fuel Allowance.
1.5 Caveats
The results reflect a micro-simulation of the economy in 2022 within the ESRI SWITCH model (using
SILC data) and the IT SIM model jointly developed by the ESRI and Department of Finance (using
Household Budget Survey data). These models are used widely by both the Department of Finance
and the ESRI for pre and post-budgetary analysis.10
The cut in excise duty is modelled similarly to the approach used by the ESRI in the spring 2022
Quarterly Economic Commentary (QEC), and reflects only the impacts of extending the relief from 31
August to Budget day. The cut in the VAT rate was undertaken using the IT SIM model, with prices for
gas and electricity uprated to March 2022 to reflect the ad valorem impact of the VAT reduction.11
10
Available at: https://www.esri.ie/events/post-budget-briefing
11
Inflation reflects CSO’s HICP (harmonised indices of consumer prices) data for gas and electricity as of March 2022 –
available at: https://www.cso.ie/en/statistics/prices/consumerpriceindex/
Department of Finance | Economic Insights – Summer 2022 Page | 8The reduction in the PSO Levy is set to be introduced by 1 October 2022. Generally, PSO levy payments are calculated each year on the basis of the estimated generation required and the estimated wholesale electricity market prices for the year ahead. These payments are then adjusted to take account of the actual generation and wholesale electricity prices. 12 This analysis compares the April zero rate PSO Levy with the pre-existing annual rate (i.e. €58.57), and not a counterfactual rate. This analysis does not incorporate the further reduction in the PSO Levy, announced in June. 13 The analysis reflects the impact of this measure on a full year basis, as unlike other measures analysed, there is no end-date specified and also unlike other measures, this is not subject to consideration at Budget time, wherein a further distributional analysis will be undertaken. The above analysis is focused on the April cost-of-living package and does not consider the effects of other measures undertaken by Government in recent times, including tax and welfare measures introduced in Budget 2022, changes announced in the cost of living package in February 2022, and cuts to excise duty announced in March 2022. Reference is made to distributional analysis of these measures in Section 1.3. 1.6 Conclusion Following a fall in prices in 2020 as a result of the Covid-19 pandemic, consumer price inflation increased significantly in the latter half of 2021, with similar trends seen across the euro area and in other advanced economies. Inflationary concerns have also been significantly exacerbated by Russia’s invasion of Ukraine, with HICP inflation increasing by around 8.5 and 9.5 per cent on an annualised basis in June in the euro area and Ireland, respectively. The Government response has included a number of measures designed to limit the impact of higher rates of inflation on households. However, as many of the drivers of the current inflationary pressures are global in nature, they are beyond the reach of Government policy to address directly. It is also vital that policy measures avoid generating second round effects that could lead to an inflationary spiral. A focus on temporary and targeted measures, aimed at those most in need, is the appropriate response to a ‘terms-of-trade’ shock - whereby a country’s import bill rises because of higher prices – as the public balance sheet cannot fully absorb the costs of this shock. This is particularly the case in light of the high levels of uncertainty and downside risks attaching to the economic outlook. It is in this context that the Government announced a range of measures in February, March and April of this year to address rising prices. This note examined the distributional effects of the suite of measures announced in April and shows that these measures can be expected to have a progressive impact on disposable income, with those in the lowest three income deciles gaining proportionally the most in income terms. Furthermore, it is clear that these measures more than offset the negative income impacts of the 1st May carbon tax increases. 12 Available at: https://www.cru.ie/cru-publishes-public-service-obligation-levy-for-2021-2022/ 13 Available at: https://www.gov.ie/en/press-release/5d9bc-government-announces-package-of-measures-to-secure-electricity- supplies-into-the-future-and-to-help-mitigate-rising-household-electricity-bills/ Department of Finance | Economic Insights – Summer 2022 Page | 9
Chapter 2: Evaluating the trajectory of rising construction costs in the Irish housing sector 14 2.1 Introduction Following the reopening of the sector last year, construction costs have returned to the forefront of the housing debate. Recent developments in Ukraine and international energy markets are continuing to exacerbate pressures already prevalent in the aftermath of Covid-19. Such pressures are unlikely to dissipate in the short-run. This note examines some of these challenges in the context of long-run developments in the sector. Despite the severity of the 2008 housing crash, evidence suggests that high materials and labour costs are a structural feature of the sector and unlikely to fall substantially - even in the event of an economic downturn. High costs present a major challenge to the goal of increasing the supply of affordable housing at scale, particularly in urban areas. Despite recent increases in inflation, ‘Housing for All’ and other ongoing initiatives present an opportunity to break some of the structural constraints that embed high costs in the sector. 2.2 Long-run construction costs In a recent Economic Insights series,15 the evolution of prices and affordability in the Irish housing market was highlighted. The paper noted current pressures including, inter alia, the ongoing supply- demand imbalance; demographics; economic growth; and a relatively low interest rate environment. The article also noted that while affordability for prospective buyers improved during the 2000s, it was due to extremely lax credit conditions. The improvement turned out to be an illusion with the credit bubble having disastrous impacts on the economy and the public finances. Today, Irish residential prices are just 2 per cent below their 2007 peak, while affordability constraints for newly built homes are pressing.16 Despite the limitations of price to income ratios, it is clear that rising construction costs have worsened affordability in the new home sector of the market. This is true of both the purchase and rental markets. As illustrated in figure 4, the Irish output price index, a measure of the price that building contractors pay for the input factors in residential construction,17 remained relatively stable from 2011 to 2017. From 2017, however, the index started to grow at a faster pace and recorded growth of 13 per cent by 2021, a trend mirrored across the EU. As illustrated in figure 5, inflation in input costs (materials and labour) deviated from the consumer price index (CPI) in the late 1990s and has maintained that differential in the years since. By 2016, input costs had grown 25 per cent above the rate of CPI, before reaching an estimated 38 per cent by 2021.18 Most notably, input costs remained at an elevated level throughout the 2010s despite the total collapse 14 This note was prepared by Gerard McGuinness and Martin Erskine, economists in the Economics Division of the Department of Finance. The analysis and views set out are those of the authors only and do not necessarily reflect the views of the Department of Finance or the Minister for Finance. The authors would like to thank Paul Cotter and Aileen Gleeson for useful comments. Any outstanding errors or omissions remain those of the authors. 15 See; Overview of the housing market: a long-term perspective. Economic Insights - Spring 2022. Available at: https://www.gov.ie/en/publication/daaa2-economic-insights-spring-2022/ 16 In the aftermath of the Global Financial Crisis (GFC) Irish house prices plummeted resulting in the average price to income ratio falling to around 6 in 2013, slightly below the long-run average. The trajectory of the ratio has pointed upward ever since in particular for new units. By 2021 the yearly average ratio for new dwellings was 10.4, with the price new apartments reaching as high as 12.1 of average incomes. The high ratio of new apartment prices to income means many new apartments fall outside the reach of homebuyers. 17 The output price index for construction reflects the prices paid by a client to the contractor and includes materials, labour, plant and equipment, transport, energy, productivity, profit margin and other related costs. Available here. 18 The wholesale price index for materials is used in a proxy for period beyond 2016. Labour costs are not included in the wholesale price index but are included in the house construction cost index. Department of Finance | Economic Insights – Summer 2022 Page | 10
of the residential construction sector from 2008 onwards (figure 5B).19 The failure of prices to adjust to
the fall-off in demand for goods and labour points to a sticky price level for building inputs.
Figure 4: Long-run developments
A: Ratio of average new house prices to income B: Output price index in construction, 2015=100
14 130
12 120
10 110
100
8
90
6
Ireland
80
4 European Union - 27 countries (from 2020)
70
2
60
0 50
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
House Apartment
Yearly average Long-run average
Source: CSO, DHPLG, DoF analysis Source: Eurostat
Note: The long-run average covers the period 1982-2021. Note: Captures input costs of new residential buildings
Figure 5: Housing input costs and employment over time
A: Housing input costs (excl. land), 1991=100 B: Numbers employed in Irish construction (‘000s)
300 300
Housing input costs CPI
250 250
25 per cent higher
200 200
150 150
100 100
50 50
0 0
1998Q1
1999Q2
2000Q3
2001Q4
2003Q1
2004Q2
2005Q3
2006Q4
2008Q1
2009Q2
2010Q3
2011Q4
2013Q1
2014Q2
2015Q3
2016Q4
2018Q1
2019Q2
2020Q3
2021Q4
1976
1981
1986
1991
1996
2001
2006
2011
2016
2021
Source: CSO and DHPLG
Note: The house construction cost index covers the years
1976-2016. The series has been extended to 2021 by using
the wholesale price index for materials as a proxy Source: CSO
2.3 Delivery costs
The overall cost of delivering housing is much more than the key input costs outlined above. According
to the Society of Chartered Surveys Ireland (SCSI), in 2020, the overall cost of delivering a house in
the Greater Dublin Area was approximately €370,000, an increase of 12 per cent from 2016.20 The cost
of building an apartment in 2020 was €411,000, just under 3 per cent higher than in 2017.21
19
Employment in the construction sector fell from a peak of around 240,000 in 2007 to around 83,000 in 2012 (a fall of around
180 per cent).
20
These figures refer to the delivery of a 3-bedroom semi-detached home. The data on houses included in the SCSI study are
taken from 30 development sites in the Greater Dublin Area (Co. Dublin, Co. Wicklow, Co. Kildare and Co. Meath). See Real
cost of new housing delivery 2020. SCSI. Available at: https://scsi.ie/scsi-real-cost-of-new-housing-delivery-report-2020/
21
This figure represents the cost of constructing a two-bedroom apartment (lower range suburban medium rise) in Dublin. See
Real cost of new apartment delivery. Available here.
Department of Finance | Economic Insights – Summer 2022 Page | 11Construction costs (i.e. labour, materials, site work etc.) amounted to almost 50 per cent of total delivery
costs for each unit. The ‘soft costs’ (e.g. levies, VAT, profit margin etc.) made up the rest (figure 6).22
Some of the most significant costs in developing residential units are discussed below.
Figure 6: Cost of delivery breakdown
A: Apartment, 2020 B: House, 2020
Other,
Other, 8% 4%
Margin,
12%
Margin,
11% Finance,
5%
Finance, Levies, 4%
6% Construction, Construction,
47% 48%
Levies, 5%
Land,
16%
Land, 11%
VAT, 12% VAT, 12%
Source: SCSI Source: SCSI
Development land
Land costs are a substantial component of the overall cost of delivering housing. Although the price
varies significantly depending on, inter alia, location and access to local amenities, land accounts for
around 11 per cent of the delivery cost of apartments and 16 per cent of houses (figure 6).23 Official
data on land transactions and prices is incomplete. The lack of information on land transactions
represents a significant gap in knowledge and acts as a hindrance to effective policymaking.
Specifically, a land price index would go a long way in addressing the current gap in knowledge. The
ongoing work on data improvements under Housing for All represents an excellent opportunity to
remedy this shortfall.
The data gaps mean it is difficult to properly assess the impact of land price appreciation on overall
costs and prices. The introduction of the Residential Zoned Land Tax (RZLT), aims to dis-encourage
hoarding and speculation by incentivising landowners to sell or develop land that has been zoned for
residential use. From both a fiscal and economic perspective, taxing immovable property such as land
has many advantages. However, implementation requires careful policy design to address sources of
market failure, while avoiding unintended consequences.24
Planning
Over recent years, market participants have sought improvements to the planning system, which they
view as overly complicated, inconsistent and difficult to navigate. To improve the process, a review of
planning legislation is being undertaken by the Attorney General. This review will feed into a wider
review of the system underway in the Department of Housing, Local Government and Heritage. Indeed
22
‘Soft costs’ include professional fees, levies, land and acquisition costs, sales, marketing and legal fees, finance costs,
margin and VAT. A number of adverse/abnormal costs may also occur, however are not factored into the average house costs
of the projects presented in the SCSI study.
23
Land costs are estimated to amount to around €60,000 per house and €46,000 per apartment.
24
OECD Fiscal Federalism Chapter 3: Reforming the tax on immovable property (2016). Available here.
Department of Finance | Economic Insights – Summer 2022 Page | 12evidence from other jurisdictions shows that restrictive planning environments lead to fewer homes being built and increased prices for home buyers.25 Planning delays also add to cost. Of the 249 planning permissions granted for Strategic Housing Developments to January 2022, 74 were subject to judicial review (JR). 26 The SCSI estimate that the cost of delay ranges from €8,000 to €12,000 per unit (houses and apartments) for every year a development is delayed.27 As Ireland’s urban and suburban areas move — out of necessity — towards a higher density-housing model, there has been an inevitable reaction by local residents groups and third parties. This has been particularly evident when the tenure type is rental as opposed to owner- occupier. Opposition to the shift towards higher density rental accommodation in urban areas (either subsidised or private) slows the pace of supply and adds cost. Finally, infrastructural deficits on zoned land adds to further delay and cost. It is estimated that almost 25,000 homes in Dublin were on hold in Q4 2021 due to a lack of water supply, while an additional 30,000 units are reported to require significant investment in infrastructure before proceeding. 28 Development Finance Over recent years, the development finance landscape has changed dramatically. During the 2000’s developers could expect most, if not all, of their funding to come from the banking sector. Today, banks are typically unwilling to lend more than 65 per cent of the development cost, with the gap being filled by, inter alia, developer equity, external equity providers or non-bank funding.29 Crucially, given the risks associated with residential development, funders will only lend to projects that are considered commercially viable. Moreover, for a project to be considered viable for lending, funders will generally seek to ensure that the proposed development will reach a profit margin of c. 15%. Financing typically accounts for a further 5 to 6 per cent of the cost of a residential unit (figure 6). Assuring viability has become increasingly difficult. Construction cost inflation, rising interest rates and planning challenges are further exacerbating the viability challenges in funding development. Taxes and Levies Taxes — in the form of VAT, stamp duty and development levies — account for around 16 per cent of the cost of a typical new home (figure 6). This relatively high proportion has led to calls for various reductions, waivers and reliefs to reduce the cost of development. It is not the purpose of this paper to explore the benefits or otherwise of tax interventions, however, a number of brief points can be made. Beginning in 1981, numerous tax relief schemes were introduced to encourage the supply of housing and other forms of property. These and similar schemes remained in operation until just before the financial crisis in 2008. The dependence and extensive use of these incentives in the past were extremely broad based and created negative spill overs long after their expiry. Although some were successful, especially in earlier years, numerous reports have highlighted significant issues with their 25 See Tax Breaks and the Residential Property Market. ESRI. Available at: https://www.esri.ie/publications/tax-breaks-and-the- residential-property-market 26 Houses of the Oireacthas housing provision January 19th. Available at: https://www.oireachtas.ie/en/debates/question/2022- 01-19/599/ 27 SCSI Pre-Budget Submission 2022. Available at: https://scsi.ie/wp- content/uploads/2021/08/SCSI_PreBudgetSubmission_Final.pdf 28 See Housing Supply Coordination Task Force For Dublin – Quarter 4 2021 returns. Available at: https://www.gov.ie/en/publication/47c56-housing-supply-coordination-task-force-return-reports-q1-q4-2021/ 29 Home building finance Ireland – Financial statements 2020. Houses of the Oireachtas. Available at: https://www.oireachtas.ie/en/debates/debate/committee_of_public_accounts/2022-03- 03/3/?highlight%5B0%5D=2020&highlight%5B1%5D=37&highlight%5B2%5D=questions Department of Finance | Economic Insights – Summer 2022 Page | 13
operation. These include deadweight loss, the significant cost to the Exchequer and their role in
narrowing the tax base.30
In unrestricted markets, a lowering of the cost of production for private sector participants via a tax cut
should result in increased supply and lower prices. However, if market rigidities exist — such as in the
supply of labour, land or materials — the impact on supply and price would be muted. It would be hard
to argue that such rigidities do not currently exist in the Irish housing market.31 If they do, tax
interventions could be ineffective while failing to address underlying structural rigidities.
Productivity
Finally, based on standard metrics the Irish construction sector suffers from low productivity. Ireland’s
gross value added (GVA) per hours worked in the construction sector — a measurement of labour
productivity — was approximately €26.50 in 2019, 5 per cent below the EU average (figure 7B).32 There
are numerous factors that may contribute to low productivity in the construction sector and these have
been identified across all three main stages of the project lifecycle.33 On the other hand, the residential
buildings now being produced are of a far higher quality than in previous years (figure 7A). Of course
a trade-off exists between improvements in the quality of new housing and cost of delivery.
Figure 7: Building standards and productivity
A: Building Energy rating by period of build B: Productivity, GVA per hours worked in construction
80
100
90 70
80
70 60
60
50
50
40 40
30
30
20
10
20
0
1983-1993
1994-1999
2000-2004
2005-2009
2010-2014
2015- present
10
0
FR
FI
LU
MT
LT
LV
IS
IE
IT
GR
NO
DK
CH
DE
NL
UK
CY
CZ
HU
HR
RO
BE
AT
SE
EU
ES
SI
EE
SK
PT
PO
BU
A B C D or lower
Source: CSO Source: Eurostat; Dept. of Finance analysis
2.4 Recent Developments
The cost of construction has risen substantially over the past year. Numerous factors including Covid-
19 related stoppages, depleted inventories, Brexit-related transport issues and shipping delays are all
30
Regling K and Watson M. A Preliminary Report on The Sources of Ireland’s Banking Crisis. 2010. Available here ;
Indecon review of property-based tax incentive schemes (2006). Available here & Economic Impact Assessment of Potential
Changes to Legacy Property Reliefs, Department of Finance (2011). Available here.
31
See Tax Breaks and the Residential Property Market (2015). ESRI. Available at https://www.esri.ie/publications/tax-breaks-
and-the-residential-property-market
32
Relative to similar western European countries, GVA per hours worked in the construction sector is 25 per cent lower than
the UK, 45 per cent lower than the Netherlands, 72 per cent lower than Belgium and 100 per cent lower than Denmark.
33
The three main stages are identified as Initiation and Planning, Execution, and Performance and Monitoring. See Economic
analysis of productivity in the Irish construction sector. Available here.
Department of Finance | Economic Insights – Summer 2022 Page | 14at play.34 The war in Ukraine exacerbated all of these issues, predominantly via increased commodity
prices.35
The result of these supply side shocks has been rapidly increasing wholesale prices for building
materials, which grew by 8½ per cent in 2021 (figure 8A). Within that, rough timber was up over 40 per
cent, while steel prices grew almost 20 per cent. In contrast, wage increases were more muted. Average
weekly earnings in the construction sector for 2021 increased by 4 per cent relative to 2020, while
earnings for all sectors grew by 5 per cent (figure 8B).
Figure 8: Recent trends input cost inflation
A: Material input costs B: Average earnings per week €
190 950
Materials
180 900
Cement
170
Structural steel and 850
160
reinforcing metal
150 Rough timber 800
140 Other timber 750
130 Electrical fittings
700 All NACE economic sectors
120
650 Construction (F)
110
100 600
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
2018Q4
2019Q1
2019Q2
2019Q3
2019Q4
2020Q1
2020Q2
2020Q3
2020Q4
2021Q1
2021Q2
2021Q3
2021Q4
2022Q1
Source: CSO Wholesale Price Index
Note: The wholesale price index also includes the price of a
Source: CSO
number of other commodities. The ones included in this
chart experienced the most growth
The rapid increase in energy prices has been the primary driver of the increase in headline inflation. 36
With high energy prices, global inflationary pressures and raw material shortages, companies reported
the second fastest rise in input prices since June 2000 in April. Since then, the high levels of input price
inflation have led to a falloff in new orders and a slowing down of construction activity in June. 37
Although futures markets suggest that oil prices will ease in the second half of 2022 (figure 9A), price
expectations in the construction sector have remained elevated (figure 9B).38
34
A Researched Forecast into Rising Building Material Costs 2022-2024. CIS blog. available at: https://www.cisireland.com/a-
researched-forecast-into-rising-building-material-costs-2022-2024/ .The SCSI/PWC report that 76 per cent of surveyors say
their organisation was impacted by Brexit with supply chain delays or increased costs for construction projects. Available at:
https://www.pwc.ie/publications/2022/scsi-pwc-construction-market-monitor-2022.pdf
35
See Economic and Financial Impacts of War in Ukraine: April 2022 Update. Available at:
https://www.gov.ie/en/publication/b148c-economic-and-financial-impacts-of-war-in-ukraine-april-2022-update/
Additional EU sanctions on Russian energy introduced in late May are likely to further add to the inflationary pressures .See:
EU reaches deal on ban of most Russian oil imports. Irish Times available here.
36
Inflation – Transitory or Persistent?, Economic Insights Winter 2021: here.
37
BNP Paribas Real Estate Ireland Construction PMI April 2022. Available here.
BNP Paribas Real Estate Ireland Construction PMI June 2022. Available here.
38
The futures markets for gas is more volatile and suggests that these prices will not ease until the second quarter of 2023.
Increasing prices in oil and gas is further adding to pressures in the construction sector as evidence from the UK highlights that
energy intensive industries pass on the impact of higher prices to contractors.
Department of Finance | Economic Insights – Summer 2022 Page | 15Figure 9: International outlook developments and uncertainty
A: Oil and gas price futures B: Price Expectations over next 3 months, SA adjusted
120 3.0 100
Oil price ($ per
barrel)
100 2.5 50
Gas price (£ per
therm)
80 2.0 0
60 1.5 -50
Futures
40 1.0
-100
20 0.5
-150
01/01/2006
01/04/2007
01/07/2008
01/10/2009
01/01/2011
01/04/2012
01/07/2013
01/10/2014
01/01/2016
01/04/2017
01/07/2018
01/10/2019
01/01/2021
01/04/2022
0 0.0
2019Q1
2019Q2
2019Q3
2019Q4
2020Q1
2020Q2
2020Q3
2020Q4
2021Q1
2021Q2
2021Q3
2021Q4
2022Q1
2022Q2
2022Q3
2022Q4
2023Q1
2023Q2
2023Q3
2023Q4
Source: Macrobond Source: EC Business and Consumers sentiment
Note: Data refer to May 2022 Note: Data refer to May 2022
Despite recent challenges, most housing activity indicators have been broadly positive. In the 12 months
to May, a total of 30,200 units were commenced, the ninth consecutive month in which the rolling twelve
month total surpassed 30,000 units. In the 12 months to end March 2022, there were some 44,500 units
for which planning permission was granted. Moreover, data on apprenticeships show an encouraging
trend that may be indicative of improving labour supply in the construction sector. 39
2.5 Policy actions
The Government’s overall objective under Housing for All is that every citizen in the State should have
access to good quality homes that are affordable and built to a high standard.40 Incorporating over 200
initiatives, the Plan’s central focus is on increasing the supply of new housing to 33,000 units per annum.
Housing for All acknowledges the need to reduce costs and recognises many of the issues discussed
in this note.41 Of particular importance is the examination of residential costs being undertaken by the
Department of Housing, Local Government and Heritage. The intention is to gain an understanding of
cost drivers with a view to identifying opportunities for reductions. There is also significant work ongoing
in relation to Modern Methods of Construction and support for digitisation. Longer-term, the introduction
of the RZLT under Housing for All is intended to incentivise development and lower land costs.
2.6 Conclusion
The residential construction sector has been characterised by high costs for around a quarter of century.
Working in combination with low productivity, labour market constraints, structural inefficiencies and a
volatile land market, such costs are reflected in worsening affordability in the new-build segment of the
market (both purchase and rental). Structurally high costs can only be addressed via structural reforms.
Continuing improvements in productivity; further increases in the labour supply; planning reform;
changes to the land market; and a clear focus on input cost reductions are some of the long-term
changes that can yield sustainable improvements.
39
In 2021 there were 5,300 individuals in apprenticeships in Ireland, which is a 40 per cent increase from 2019 (3,840
apprenticeships).
40
Housing for all – new housing plan for Ireland, Department of Housing, Local Government and Heritage. Available at:
https://www.gov.ie/en/publication/ef5ec-housing-for-all-a-new-housing-plan-for-ireland/
41
To deal with inflationary impacts on public works contracts and direct social housing builds, the Government introduced the
“Inflation Co-operation Framework”. See: Minister McGrath introduces measures to address the impact of Construction Material
Price Inflation on Public Works Projects. Available here.
Department of Finance | Economic Insights – Summer 2022 Page | 16Chapter 3: We got locked down, but did we get back up again?
High-frequency indicators post-Covid 42
3.1 Introduction
The Covid-19 pandemic highlighted the need for real-time information on economic shocks. Indeed,
given the rapidly changing situation and somewhat unprecedented nature of the pandemic, institutions
such as the Department of Finance made use of ultra-high-frequency data; data that is published on a
daily or weekly basis, to monitor the state of the economy and help guide the effective implementation
of policy.43 In response, research on economic activity has been transformed by the surge of newly
available high-frequency data and indicators, which have allowed “real-time” impacts of shocks such as
the pandemic to be gauged.
This note examines pre and post-Covid-19 trends in consumer behaviour, transport and mobility, and
labour using real-time indicators. The findings suggest that some indicators, such as mobility, are
experiencing structural changes largely influenced by shifts in behaviours brought about by the
pandemic, e.g., homeworking. Elsewhere, there is mixed evidence of change; with a strong rebound
evident in employment and labour force participation rates, although paired with a softening in consumer
sentiment, with both cyclical and structural changes at play. As the Irish economy emerges from the
pandemic, policy implications and options for ensuring a resilient transition are also discussed.
3.2 Underlying Economic Activity
The Department of Finance’s Underlying Economic Activity Indicator (UEA) is an important tool used to
assess economic activity in real-time.44 The UEA provides a summary of over 70 monthly economic
indicators while also providing insight into the behaviour of the Irish economy and its cyclical changes.
Specifically, the UEA is a single indicator that summarises a number of data, including monthly changes
in the labour market, prices, and soft indicators such as consumer sentiment and business confidence
(figure 10A).
Figure 10: Underlying Economic Activity Indicator and Spending
A: Underlying Economic Activity Indicator B: Daily card spending and cash withdrawals activity
6 200 100
€Millions (7-day moving average)
90
Covid-19 Stringency Index
4
Std. from average growth
80
150
70
2
60
0 100 50
40
-2 30
50
20
-4
10
-6 0 0
Consumption Financial ATM Withdrawals
Fiscal Housing
Industrial Output Investment Debit Card PoS & CC Spending
Labour Market Prices
Soft UEA Stringency Index
Source: Department of Finance Source: Central Bank, Our World in Data
Note: Indexed to early March 2020
42
This note was prepared by Sarah Hogan, an economist in the Economics Division of the Department of Finance. The
analysis and views set out are those of the author and do not necessarily reflect the views of the Department of Finance or the
Minister for Finance. The author would like to thank Luke Rehill for helpful comments and Transport Infrastructure Ireland for
providing useful data. Any outstanding errors or omissions remain those of the authors.
43
See here. Department of Finance; Dashboard of High-Frequency Indicators.
44
Department of Finance, 2020. Where are we now? Examining Irish Economic Developments in real-time.
Department of Finance | Economic Insights – Summer 2022 Page | 17Pre-Covid figures for 2019 show that the decomposition of the UEA was largely driven by labour market and industrial output improvements. In comparison, when the UEA hit peak negative values in April 2020, this was mainly driven by negative developments in the labour market, investment, and the fiscal side. The UEA has been recovering since early 2021; although this rebound has slowed in recent months due to cyclical factors such as inflation and global supply constraints. Indeed, the soft indicator rebounded in 2021 from peak negative values in 2020; however, the soft indicator has once again weakened as consumer confidence is buckled by other cyclical factors such as increasing price pressures and uncertainty. Nonetheless, consumption has recovered somewhat in recent months encouraged by the sustained reopening of the economy (discussed below). 3.3 Consumption As a result of public health restrictions introduced in early 2020, which included the closure of the services sector, consumption opportunities became extremely limited, with households increasing savings as a result.45 In line with this, spending data for early 2020 shows that the total value of card and ATM transactions hit peak negative consumption values in April 2020 (figure 10B). The recovery in spending towards the latter half of 2020 demonstrated the adaptation of behaviours from firms and consumers throughout the pandemic, primarily through homeworking and e-commerce. Indeed, the fall in January 2021 from the previous month was much smaller than the initial shock in April 2020.46 The stringency index in figure 10B shows the unwinding of public health restrictions earlier this year, with total card spending to date (April 2022) already higher than the same pre-Covid period in 2019. This cyclical recovery is likely to continue as consumer spending across certain sectors of the economy, such as the tourism and hospitality industry, is boosted by the consumption of pandemic savings to compensate for the loss of travel and leisure activities over the last two years. However, higher price levels may mask some changes in spending behaviours, especially in areas with particularly high inflation, such as energy and fuels. The pandemic also appears to have prompted a structural change in spending habits, with data showing a substitution effect away from in-store cash exchanges towards card and online spending. Figure 10B illustrates a sharper decline in ATM withdrawals than on PoS spending, reflecting the apparent shift away from physical cash spending during the height of the pandemic and public health restrictions (April 2020). Indeed, total card spending was around 12 per cent higher for March 2022 (post-Covid) compared to March 2019 (pre-Covid).47 This trend reflects the health and safety concerns of both businesses and consumers during the pandemic; although, due to the convenience and security of digital payments, cashless transactions are expected to continue even as Covid-19 recedes from headlines and are expected to be higher than pre-pandemic levels. However, as noted by Auer et al. (2020), if the acceptance of cash decreases, households without access to digital payment mechanisms could face barriers to making or receiving payments.48 For instance, this reduction in cash usage could disproportionally impact cohorts without access to digital payments or bank accounts, such as senior citizens, inhabitants of rural areas, migrants, and those with limited financial capability.49 45 Department of Finance, 2021. Will Household Savings Stimulate a Consumer-Led Recovery? Lessons from Special Savings Incentive Accounts. 46 This was also in part due to differing stringency levels of restrictions with each wave. 47 Central Bank of Ireland, 2022. 48 Auer, R., Frost, J., Lammer, T., Rice, T. and Wadsworth, A., 2020. Inclusive payments for the post-pandemic world. SUERF Policy Notes, 193. 49 Ceeney, N, M Bloom, J Daley, D Hensley, M Kalia, P Kenworthy, R Lloyd, L Malenczuk and S Williams (2019): Access to Cash Review: Final Report, March. Department of Finance | Economic Insights – Summer 2022 Page | 18
3.4 Mobility
Mobility data played an important role in measuring the impact of social distancing efforts, economic
activity, and refining interventions of the pandemic, with the crisis warranting an explosion of these data.
Indeed, the movement of persons is generally linked to economic activity comprising of work, education
and tourism, with Covid-19 causing significant disruptions to all aspects of economic mobility; leaving
some potentially lasting effects on the ways in which people work, shop and socialise.
Data from Transport Infrastructure Ireland (TII) shows road traffic patterns falling dramatically for all
routes from 2019 to 2021 (figure 11A). For instance, the 7-day moving average for all vehicles in early
2019 (pre-Covid) averaged just over 6 million, whereas for the same period in 2020, traffic numbers
almost halved; with the largest decline in all forms of transport demand observed in April 2020. 50 TII
data shows that the volume of cars across all Irish routes in 2019 was around 31 per cent higher than
2020 while buses were around 34 per cent higher during the same period. 51 Similarly, both HGV and
LGV usage was higher in 2019 compared to 2020.
The public responded to rising Covid-19 infections by avoiding public transport; with the number of
visitors to public transport stations falling dramatically from baseline figures (figure 11B).52 Visits to
public transport stations still remain below pre-pandemic figures; as car traffic recovery continues to
outstrip public transport (bus) passenger numbers (figure 11). However, post-Covid data shows that
traffic patterns for the all vehicles series are recovering to a higher than pre-Covid peak across a 7-day
moving average (figure 11A). On the other hand, although overseas travel remains lower than pre-
pandemic levels; passenger arrival and departure figures are beginning to show a gradual rebound from
peak negative figures in early 2020 as Covid-19 retreats (figure 12A).
Visits to retail and recreation locations have largely recovered to pre-pandemic levels.53 In the early
weeks of 2020, retail and recreation visitor numbers fell dramatically from baseline figures, reflecting
the closure of non-essential shopping facilities. Figure 11B also observes a volatile trend for parks and
outdoor spaces, representing large day-to-day changes. Indeed, visits to outdoor areas are heavily
influenced by the weather and holidays.
Figure 11: Mobility
A: Changes in road traffic data (30th June) B: Changes in visitors by category (30th June)
8M 90K 150
7 day moving average (thousands)
7M 80K
7 day moving average (millions)
100
% change from baseline
70K
6M
60K
5M 50
50K
4M
40K 0
3M
30K
2M -50
20K
1M 10K
-100
K K
02/01/2019 02/01/2020 02/01/2021 02/01/2022
All Vehicles Cars HGVs & LGVs
retail & recreation grocery & pharmacy
Bus Other residential transit stations
parks workplaces
Source: TII Source: Our World in Data
Note: Categories ‘buses’ and ‘other’ are measured in thousands (RHS)
50
Transport Infrastructure Ireland, 2022.
51
Transport Infrastructure Ireland, 2022.
52
This compares to baseline figures which takes the median value for the 5-week period from January 3rd to February 6th, 2020.
53
This includes places like restaurants, cafes, shopping centres, theme parks, museums, libraries, and movie theatres.
Department of Finance | Economic Insights – Summer 2022 Page | 19Mobility patterns are likely to experience long-term effects post pandemic, partly influenced by the future of hybrid working enabled by the digital revolution. 54 Indeed, as changes in managerial attitudes are becoming more evident in favour of greater flexibility, workplace mobility remains well below pre- pandemic levels (figure 11B). An increase in homeworking will have spill-over effects onto transport demand and the general movement of persons while homeworking also has the potential to increase productivity and well-being as workers save time on commuting; simultaneously decreasing congestion and carbon emissions.55 3.5 Labour market Figure 12B shows that the introduction of restrictions in early 2020 had an immediate negative and cyclical impact on the labour market. New job postings on website Indeed.com - a real-time indicator of labour market developments - fell to their lowest in April 2020 relative to baseline figures, while numbers out of work and in receipt of the Pandemic Unemployment Payment reached nearly 606K for the same month. However, during the first three months of 2022, new postings recovered to approximately 80 per cent above the baseline, reflecting the strong demand for workers and the adaption of firm behaviours. Indeed, the State support provided to firms to protect employment, limit Covid-19 economic shocks, and minimise scarring has been unprecedented and contributed to a faster overall recovery. The latest labour market figures show that job vacancies now exceed pre-Covid levels. The post-Covid job vacancy rate for the first three months (Q1) of 2022 increased to 1.6 per cent, the highest level on record, and up from 1 per cent in the same period (quarter) in 2019.56 The level of employment for the first three months of 2022 stood at a record 2.5 million; an increase of just over 12¼ per cent compared to the same period in 2021. 57 Employment has been strengthened by a much higher female participation due to the remote working revolution, with more than 100,000 additional women part of the workforce compared to the first three months of 2020. 58 The shift to remote working as a result of Covid-19 has the potential to provide an opportunity for a number of people to join the workforce, boosting labour force participation rates with changes expected to be structural. 59 Pre-pandemic research suggests that remote working could provide more employment opportunities for women, people with disabilities, and caring responsibilities (Chung and Van der Sostero et al., 2020; Liden, 2014). Indeed, the Irish labour force is already experiencing some positive spill-over effects with the participation rate increasing by nearly five percentage points in the first three months of 2022 compared to the same period in 2021.60 54 Department of Finance, 2021. Impact of Covid-19 on remote working in Ireland. 55 Criscuolo et al., (2021), “The role of telework for productivity during and post-COVID-19: Results from an OECD survey among managers and workers”, OECD Productivity Working Papers, 2021-31, OECD Publishing. 56 Vacancy rate measures job vacancies on the last working day of the quarter (CSO, 2022). 57 Labour Force Survey; CSO, 2022. 58 CSO, 2022. 59 National Remote Working Strategy, 2021. 60 Labour Force Survey; CSO, 2022. Department of Finance | Economic Insights – Summer 2022 Page | 20
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