Who is Really Better Off? Calculating Standard of Living for Northern Ireland and the Republic

Marissa Aulgur and Sadie Brownlee

 

Map of the United Kingdom of Great Britain and Northern Ireland and the Republic of Ireland

Since the final steps of the United Kingdom’s withdrawal from the European Union, conversations have arisen surrounding the possibility of a united Ireland. The leadership of the United Kingdom and the European Union both asserted that the Good Friday Agreement would continue to be upheld through the United Kingdom leaving the European Union. Still, breaches to this peace treaty have already begun to occur with the development of checkpoints for commerce entering the Republic of Ireland from the United Kingdom. The inability to uphold EU laws regarding trade now that Northern Ireland no longer remains part of the European Union has resulted in calls for a referendum to unify Ireland into one nation, with complete independence from the UK. This calls into question the economic differences between Northern Ireland and the Republic of Ireland and what the unification of these territories would mean for the populations of both of these territories. 

            A paper by Graham Gudgin, published by Queen’s University, asserts that Northern Ireland (a part of the UK) has 20% higher living standards than the Republic of Ireland (independent country, member of the European Union). It is essential to note the connection between Gudgin, Queen’s University, and the UK: the bias of the UK in potentially supporting propaganda pertaining to the importance of Brexit is not to be overlooked. The claim of Northern Ireland being 20% better off is pulled from a report that found the per capita spending is 20% higher in Northern Ireland than in the Republic of Ireland. This report was later revised to be a 4% difference amongst the territories, not accounting for differences in price (Gudgin claims if it did, the difference would remain the same) (Burke-Kennedy). Blanchard explains how consumption can be faulty in explaining quality of life. While it is easy to compare consumption between countries using exchange rates, this does not reveal quality of life because living costs are not accounted for, prices are not leveled out. In the example of Russia and the United States in the textbook on page 202, using only nominal consumption and converting rubles to dollars, Russia’s consumption is 10% of the United States. However, using Purchasing Power Parity and computing consumption relative to prices in both countries, Russia’s consumption is actually 53.5% of the United States. This new figure completely changes the perception of Russian consumption (Blanchard). Another study found, by GDP, that the Republic of Ireland is 50% better off than Northern Ireland. Additionally, poverty is found to be 8% higher in Northern Ireland than in the Republic of Ireland (Burke-Kennedy). This problem shows that determining which territory has a higher standard of living is nearly impossible because there is no agreed-upon way to measure this. 

In their paper “Income or Consumption: Which Better Predicts Subjective Well-Being,” Carver and Grimes investigate how best to measure quality of life through subjective well-being. Subjective well-being in this study was determined from a survey that asked respondents to evaluate their life satisfaction overall and in specific aspects. Carver and Grimes compared measurements of the Economic Living Standard Index (ELSI), a consumption-based measure that relies on self-rated questions, versus income for the population of New Zealand. Their study found that ELSI is a better way to assess subjective well-being than mere income, indicating that while there may be a correlation between money and happiness, income is inadequate in explaining quality of life. In regressions where both income and ELSI were included, income was almost always insignificant while ELSI was always significant. A key finding is the importance of the subjective factors of ELSI. When subjective aspects of ELSI were included in surveys, income was always insignificant. When income was compared to just the objective parts of ELSI, it was significant but only at the 10% level. Standard of living is a complex idea that requires qualitative and holistic measurements to attempt to explain it (since even ELSI has its flaws) (Carver and Grimes). Without uniform and effective ways to measure living standards, it will be challenging to assess countries like the Republic of Ireland and Northern Ireland and this will continue to fuel misconstrued conclusions that further political agendas rather than empirical analysis.  

Works Cited

Burke-Kennedy, Eoin. “Which Has a Higher Standard of Living – Northern Ireland or the Republic?” The Irish Times, The Irish Times, 18 Apr. 2021, www.irishtimes.com/business/economy/which-has-a-higher-standard-of-living-northern-ireland-or-the-republic-1.4540629. 

Carver, Thomas, and Arthur Grimes. “Income or Consumption: Which Better Predicts Subjective Well-Being?” Review of Income and Wealth, vol. 65, Nov. 2019, pp. S256-80. EBSCOhost, search-ebscohost-com.ezproxy.plu.edu/login.aspx?direct=true&db=ecn&AN=1834521&site=ehost-live&scope=site.

Blanchard, Olivier. Macroeconomics. 7th ed., Pearson Education Inc., 2017. 

“Map of the United Kingdom of Great Britain and Northern Ireland and the Republic of Ireland.” EveryCRSReport, 14 Mar. 2017, www.everycrsreport.com/reports/RS21333.html.