Dr. Alan Barrett:

I thank the Chair for inviting the ESRI to appear before the committee to discuss recent ESRI work comparing the economies of Ireland and Northern Ireland. I am the director of the institute. I am joined by my colleagues Dr. Adele Bergin and Professor Seamus McGuinness. They have undertaken much of the work we will talk about today, so I want to give full credit to them. My main connection to the economics of Northern Ireland is through my membership of the Northern Ireland Fiscal Council but, as director of the ESRI, I am very proud of the work done by Dr. Bergin, Professor McGuinness and many other colleagues.

In 1999, 24 years ago, a former colleague of ours at the ESRI, Professor John Bradley, wrote: "Comparative discussion of the two economies of Ireland is a very recent phenomenon." He went on to note: "Limited communication over the years between Northern and Southern researcher ... led to a lack of shared knowledge about the different parts of the island." I am sharing these quotations for two reasons. First, they illustrate how the ESRI has been active in North-South research for quite some time. The quotations are from 1999, but we were thinking about this matter long before that. Second, and more importantly, as we have been doing the more recent work, we have been struck by the ongoing lack of North-South comparative research in economics. The work we will discuss today, much of which was funded by the shared island unit in the Department of the Taoiseach, aims to add to this comparative research because it is a good way of learning about economic issues on both sides of the Border.

We will present our summaries with reference to three research questions. The first is as follows: how do living standards and general levels of welfare in Northern Ireland compare to those in Ireland? In work published in the Cambridge Journal of Economics and in Irish Studies in International Affairs, Dr. Bergin and Professor McGuinness have comprehensively explored differences in living standards across a wide range of dimensions, including traditional economic measures but also other measures such as opportunities for life progression and general well-being, in an attempt to build a more complete picture.

There is an emerging body of research pointing to the existence of substantial gaps in income and living standards between Northern Ireland and Ireland. For example, GNI* per capitain Ireland was around 51% higher than GDP per capita in Northern Ireland in 2018. Members will see that I have used GNI* in the case of the Republic. Other metrics also point towards higher living standards in Ireland relative to Northern Ireland. OECD data show a gap in household disposable income of 12% in 2017 in favour of Ireland. In addition, the proportion of individuals at risk of poverty in Northern Ireland was 14.3%, compared with 8.9% in Ireland.

A broader, overarching measure that captures overall differences in general welfare and living standards is life expectancy. In 2018, life expectancy at birth in Ireland exceeded that of Northern Ireland by 1.4 years. We cannot be definitive about what is driving this gap. A broad range of factors, including income, education and access to healthcare services, determine life expectancy in a region. As such, differences in life expectancy across countries can be interpreted as a cumulative measure of differences in general welfare and living standards. The set of figures seemed to come as a surprise to very many people. We can dig further into this later in the discussion.

The second question we have addressed is the following: how do Northern Ireland's productivity levels compare with those of Ireland, and what are the explanations for any differences? The poorer performance of the Northern Ireland economy, relative to the economies of Ireland and British regions, was previously linked to its relatively low productivity levels. Productivity is measured as the value of goods and services produced per worker and is a key performance metric. While productivity levels were broadly similar in 2000 – it is important to keep that in our heads – over the period 2001 to 2020 productivity in Ireland increased by 0.2% per annum and fell by 1.1% per annum in Northern Ireland. By 2020, productivity levels were approximately 40% higher in Ireland compared with Northern Ireland.

Our statistical model of Irish productivity shows that sectoral productivity increases in respect of the share of educated workers employed and levels of investment. For example, with respect to education, the model suggests that a 1% increase in the share of graduates employed generates a 1% increase in sectoral productivity. The model also finds that export intensity is an important factor in driving Irish productivity. However, despite using comparable data sources and the same methodology, we do not find evidence of causal relationships between the usual factors that drive productivity – such as education, investment and exports – and Northern Ireland's productivity.

This apparent lack of evidence on the relationships between productivity and the usual drivers for Northern Ireland suggests that productivity in the region is likely to be relatively unresponsive to single policy levers such as changes in education and skills provision. Our analysis suggests that a comprehensive strategy is needed, aimed at improving competitiveness among Northern Ireland firms, reforming education and skills provision and increasing investment in an integrated way. "Integrated way" is the important phrase in this regard. More limited policies implemented in isolation are not guaranteed to enhance Northern Ireland's productivity.

The third research question is as follows: how do the education and training systems of Northern Ireland and Ireland compare with each other? In 2022 the ESRI published the first major comparative study of education and training systems in the North and South. Key findings from the study are that levels of educational attainment in the North are lower than those in the South, with a higher share of the population possessing lower levels of schooling. At the upper end of the qualifications spectrum, the proportion of people with third level qualifications is similar in both regions. However, Northern Ireland has only a very small proportion who attain a post-secondary, non-third-level qualification by comparison with Ireland, where post-leaving certificate courses have become more popular. Again, that is an important statistic. Ten per cent of the population in Northern Ireland has a qualification at the level in question compared with 30% in Ireland. At the other end of the spectrum, early school-leaving is two to three times higher in Northern Ireland by comparison with Ireland, and this gap has widened over time. The proportion of those between 16 and 24 who leave school with, at most, a lower secondary qualification is 14% in Northern Ireland by comparison with 6% in Ireland. This is concerning because early school-leavers are more likely to be non-employed or work in low-wage and potentially insecure jobs later in life. At all levels of qualification, wages are around 40% higher in Ireland than in Northern Ireland.

Social class is a much stronger predictor of educational failure in North Ireland, and the ongoing use of academic selection is likely to strengthen this adverse effect. During the course of extensive interviews and workshops with key stakeholders in both jurisdictions, there was a strong consensus that continued academic selection was generally damaging to social progression through education in Northern Ireland. In Ireland, the delivering equality of opportunity in schools, DEIS, programme was thought to have been very effective in lowering social inequalities and improving the outcomes of children from lower income groups.

As part of our research programme with the shared island unit, the ESRI has also undertaken research and published reports on topics such as primary healthcare, foreign direct investment, childcare and immigration, as well as a study on the evolution of cross-Border trade in services. Currently, work is being undertaken on topics such as housing supply and gender dimensions to the labour market. As members will understand, we do not have time to discuss all this work but we can certainly try to answer questions in the discussion. We thank the committee for the opportunity to discuss the comparative North–South research. We look forward to answering any questions members may have.