1 week Ago
PORTUGAL HAS A youth problem. Ireland potentially faces a growing one. But it’s the former which has taken drastic action.
Simply put – young people are leaving Portugal in their droves. The exact number varies depending on the source, but it’s estimated that several hundred thousand young people have left Portugal in recent years. One estimate put it at 360,000 individuals aged between 15 and 35 have emigrated since 2008.
For a small country of 10.6 million, it’s a devastating brain drain. The main push factor is widely viewed to be economic – youth unemployment is around 20%, and many of those who do have work are in poorly paid roles.
Average salaries in Lisbon are approximately €1,500 a month. Around €800 a month would be considered decent to rent a small studio. Simply put, the numbers don’t add up.
To combat this, the Portuguese government has now taken the dramatic step of cutting income tax for the under 35s – to nothing. People on a typical salary of just under €20,000 currently pay a 26% rate of tax on anything earned over about €16,500. those aged 35 and under who earn up to €28,000 (£23,400) would pay nothing at all in tax in their first year of work.
The rate they pay would then progressively rise over the next ten years. It’s a dramatic policy, and one which has caught the eye of many countries across the EU. Given many young Irish are known to be getting itchy feet – is it something the government here should be considering? Let’s take a look.
The problems experienced by many young people in Portugal are also felt in Ireland, with high housing costs obviously being the big common denominator. But there are some key differences between the two countries – the biggest one being pay. Average annual earnings in Ireland are around €45,000 and increasing steadily.
But while earnings are higher, of course, so too are prices. Rent in particular, which tends to affect young people the most, seems to surge endlessly. The average rent across Ireland for new tenancies rose by more than 8% last year and is now at more than €1,600 a month.
This is a cost that young people have to bear for increasingly long amounts of time. The Central Statistics Office tracks the ‘changeover’ between renting and home ownership. That is the age at which it is more common to own a home (with or without a loan / mortgage) than it is to rent.
This was 27 in 2002, but has sharply risen in recent years. While they’re paying that rent, young people don’t tend to be saving much money. We previously explored how the ‘net wealth’ of a typical renter is just over €5,000, So the figures would suggest that young Irish people 35 and under are paying high costs, at least for housing, and struggling to save.
A shocking conclusion, we know. But while young Irish people may be getting stiffed on housing, is it enough to drive them to Portuguese levels of emigration? Survey results would indicate so. Almost 1 in 10 people aged between 18 and 34 say they are actively planning to emigrate from Ireland.
A further 16% say they would like to go, but can’t, pointing to a big cohort of people who seem to want out of Ireland. Emigration is rising. Over 69,000 people left the country in the 12 months to April 2024.
This was up from 64,000 during the same period last year, and represented the highest emigration figure since 2015. Younger people account for a major chunk of that – 48%, or 33,500 people, of the total emigrants were aged between 25 and 44. It’s also a number which has been steadily growing.
Leaving aside the Covid years of 2020 to 2022, in 2019 just under 26,000 people in this age group left Ireland. There’s also been a similar rise in those aged between 15 and 24 – 24,600 people in that group left Ireland in the year to April 2024, compared to 17,200 in the 2019 period. But what about those coming back? Many young people leaving only move abroad temporarily, such as those who go to the likes of Canada or Australia on working visas before moving back to Ireland.
This is where net migration comes in. Taking the number of people arriving compared to the number leaving, Ireland had net migration of 43,700 among those aged 25 to 44. That is, that was the ‘net’ number of people Ireland got in that age group because of high levels of immigration.
The 15 – 24 age group was a different story – net migration was a positive of just 10,000, essentially a rounding error in the figures. But the numbers overall point to the fact that while youth emigration may be increasing, high levels of immigration mean that Ireland doesn’t have a youth brain drain near the level of Portugal. Even still, while Ireland may not have a problem as severe as Portugal, the rising level of youth emigration is clearly causing some angst in the government ranks.
Fine Gael minister Peter Burke, the Minister for Enterprise, recently floated the idea of a €750 tax credit for people aged under 25. It’s an idea which he has said should be ‘front and centre’ of his party’s policy, so it’s clearly an issue which is causing concern. The idea got some blowback for not being drastic enough – after all, if you’re spending €1,600 a month on rent (or €800 if sharing, as many young people do) – will an extra €750 really sway your decision on where to live? Staying in this line of thinking, Oireachtas Finance Committee chair John McGuinness suggested going much bolder and increasing a potential tax break to up to €5,000.
But this is where realpolitik comes in. Everyone would like to be the minister in charge of giving away free money, particularly with a general election around the corner. But it’s not quite that simple Burke said his idea would cost €100 million a year, suggesting McGuinness’s would be a multiple of that.
And the move only applies to under 25s. Portugal’s government has estimated that its tax move would cost between €645 million to €1 billion a year – higher, but not nearly as much as might be expected due to how much bolder their measure is. It would suggest that for Ireland to introduce anything near as ambitious, the costs would be significantly higher.
And while Ireland has recently been swimming in cash due to a boom in corporate tax, that particular magic money tree What’s much more likely is that even if Ireland was to introduce some kind of youth tax incentive, it would be at a much smaller scale than Portugal’s. Which likely makes sense – at least, until we can see the result of Portugal’s bold move. Or until the stream of young people leaving Ireland turns into a flood.
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