While we’re talking about food prices… We weren’t? Ah, no, we were talking about something else entirely. December 21, 2010
Posted by WorldbyStorm in Economy, Irish Politics.trackback
We hear a lot about how high social welfare is in this state in comparison with – say – the one next door, or across the Irish sea, or the border, delete as applicable. But reading Kathleen Barrington in the Sunday Business Post Markets section at the weekend was an eye opener.
For in a piece on Irish retailers she noted that ‘despite the recession and increased competition, Irish consumers still pay relatively high prices for groceries in supermarkets’.
How high?
Irish food prices are 29 per cent higher than the average in 27 EU countries, according to figures from EUROSTAT published earlier this year.
Okay, but that surely is ignoring the recession and the impacts of same where food prices dropped… er… no, no it’s not.
The figures related to 2009, a period in which Ireland was in the midst of the deepest recession in the EU.
That last point is important. The recession has hit this state particularly hard (one might argue that Greece is in a worse situation).
Barrington is typically tactful in ascribing reasons for this dynamic.
It was difficult for retail sector analysts to definitively identify whether the higher prices were down to higher costs or profiteering. Grocers tend to talk about higher costs, while consumers suspect higher profits are being made.
Though she asks us to consider the example of Dunnes Stores. There’s unfortunately a culture of secrecy – surprise, surprise – in relation to this retail area because ‘Irish grocers don’[t publish accounts'. Hmmm... odd that.
But as she notes 'Dunnes Stores (Northern Ireland) is the exception to this culture of secrecy, as it published its accounts for its operations in Britain and the North (thought not for the Republic).'
And accepting there may be some structural differences that would skew the figures upwards if one take their operations in NI, Barrington notes the 'juicy dividend which Dunnes Stores directors paid themselves earlier this year.
Juicy is, indeed, the word.
'...directors Margaret Heffernan and Frank Dunne, [..] were paid a dividend of £11.9 million (€14.3m ) for the 12 months to the end of January 2010′.
And…
‘…another indicator that times are good for supermarkets here is that Tesco has briefed British stock market analysists about how well it has done in Ireland.’
Another indicator again would be that…
‘[While] German discounters Aldi and Lidl have brought some welcome competition to the grocery sector…. successive surveys have shown that, while they may be undercutting the competition here, they are also charging more for groceries in Ireland than in other markets they operate in’.
But look, that’s in a way slightly to one point as respect social welfare, unless one is at the hard end of it.
What of our nearest neighbour? What of food prices there.
Barrington relays a sobering figure that might just explain how they are able to have lower levels of social welfare payments (and all this before we factor in a National Health Service, other provisions and so on – and in the Irish case additional costs of living such as rent/etc).
… British food prices are 3 per cent below the EU average…
My math isn’t great, but doesn’t that suggest a cumulative 32 per cent difference between RoI and UK food prices, and this in 2009 when prices here were supposedly (though not for many of us as we look at food bills) in free fall.
As a fairly regular grocery shopper in both Belfast and Dublin, I’d say that the price difference is a good deal less than it was a year ago. tbh – little price advantage across the majority of items these days – and certainly not 32 percent.
Absolutely not discounting what you’re saying, but much would depend where (and indeed for what – the figures referenced above have a specific range of products to enable cross comparisons) you were shopping. Even now the figures from this year show that of cross-border trips this year 77% were for groceries, 44% for alcohol and 40% for clothing. That suggests some significant price differentials in play even if one accepts that a strong pound, lower prices this side of the border and so on have an effect. And this isn’t fixed either, the prices vary across the year.
Worth noting the article in yesterday’s Irish Times which notes that year on year from 2007 to 2010 food prices are up almost 1%. So after the worst recession in living memory prices are higher now than they were while still during the boom (not sure I’d describe it as its height, but still pretty high).
And the IT article continues, take home wages have decreased by at least 3.6 per cent during this same period (if we factor in tax changes in the recent past – but not factoring in any potential wage cuts, etc).
Food prices are up in the UK too – production shortages in some basics (flour etc), and better producer prices being garnered on a wider set of foodstuffs.
The sort of grocery shop I’d typically do in Belfast would be the (in best Peter Kay tradition) ‘big shop’ – not so much on the fresh/frozen produce front, but lots of tins, jars, pasta, pulses, cereals, cleaning products etc. Both own-brand items and otherwise – usually Asda and Sainsburys on the Falls. It’s worth doing if you’re driving up and down regardless, or want to stock up on booze, paracetemol, or Veda, and used to be serious money-saver, but not so much these days – definitely not anywhwere near 32% savings. I doubt that my ‘big shop’ would be particularly skewed out of the typical grocery basket territory. What might account for some of the continuing pull of cross-border shopping is the greater range available in the bigger NI supermarkets – and some of the 44% booze trips presumably have a knock-on ‘get-groceries-as-well’ factor.
Again never disagreed with you – the ‘so on’ in the above comment covers issues like production shortages/food prices etc. The point is that last year, 2009, the divergence was on a basket of goods that is standardised by EUROSTAT and came in at 29 per cent.
There remains a divergence. No doubt next year we’ll get a handle on it when EUROSTAT releases its figures.
But arguing from the personal is, as you know, a tricky one at the best of times. Your (or my) situation may not be analogous to others.
On the broader issue the cost of living above and beyond food is from more than anecdotal evidence cheaper there than here. This also from last year. http://www.finfacts.ie/irishfinancenews/article_1017329.shtml
Given that the CPI has gone up in the year 2010 to November by 0.6 per cent (aggregated on various services/goods etc) and once more factoring the change from 2007 to 2010 where individual incomes have remained largely static or in significant tranches of the working population have decreased or been wiped out through unemployment it seems unlikely that that situation has changed too radically, although obviously there may be some movement here and there.
I think IKEA guaranteed that the Dublin shiopm would not charge more than a 7% differential. Anecdotally there is a huge variatuion. My plumber told me it was cheaper to import than go to a local supplier, if he had a lead in time. ASll types of medial services are much dearer, eg dentist. It is a rip off country and it is not justified by the minimum wage of otehr such stuff. It will be interesting how fast FG buries their pledge to do something about it. I think of the hyprocrisy of it that their election planner was also the head of the Hospital Consultants union ( a really successful union, quite unlike the performance of O’Connor and Begg).
It only took two posts before someone blamed it all on Fine Gael!
Nobody blamed it on FG. Jim simply pointed out that, being politically identical to Fianna Fáíl (though in reality, probably worse), they are unlikely to do anything about it.
I was a regular shopper at Aldi and Lidl and was surprised at the low prices of foodstuffs compared to other Irish supermarkets, particularly considering how much of it was imported from Germany and still undercut local produce. This makes it hard to attribute the high cost of food to things like transport costs. Even if one is a conscientious buyer of locally produced food, the prices are high.
If anyone’s interested in comparing, here in BC a 2-litre of milk costs $2.89 (2 euros 16c) and a loaf of bread e2.25.
I certainly am Tim.
The other interesting thing about Aldi/Lidl is how depopulated they are compared to – say – Dunnes. Up in Northside (or is Cromcastle – I never can recall) Shopping Centre in Dunnes it’ll be packed out and if you go a mere 100 meters or so down to Aldi it’s much much calmer, any given Saturday morning.
OT a little, but we ought to be careful on the left buying into a cheap food policy – it is, and always has been, a way to keep wages at the bottom low, by making it possible to just about feed a family on less than it ought to be economically viable to do so for.
The cost is borne by producers here, bullied into deals by monopolistic supermarkets, and competing with producers in low (-er) wage economies. Cheap food usually means someone is not been paid fairly at the start of the chain.
And the above goes double for cheap clothes
That’s certainly true and contingent on that are issues about the pressures that force producers to produce foodstuffs that are lower quality, that have no sense of the welfare of animals and so on.
“we ought to be careful on the left buying into a cheap food policy – it is, and always has been, a way to keep wages at the bottom low”
Funny you should say that. That section of the blog-space that is interested in economic inequality has been discussing Tyler Cowen’s article in The American Interest. One of the points he makes in it is that the increased availability of food in discount stores like Wal-Mart mitigates (to some extent) the increased inequality in incomes.
That’s interesting Tomboktu.
Interesting piece, but the Wal-mart line is poppycock: poor people always bought cheaper food than the middle-classes – or grew it/ raised it themselves – Wal-mart hasn’t magically made the lives of the poor more bearable: but it has acted as an anchor to their wages (along with workfare).
On that article by Cowen, I am not at all sure that the high income of a JK Rowling is not a problem. (It would be more difficult to deal with directly (as against indirectly, through a very high tax on income above a threshold) than income paid to you for running a large multi-national corporation.)
Yeah, I balked a little at that too: and his being relaxed about Tiger Woods income – well, I don’t actually care about what Tiger earns that much, because I don’t care about golf, but high incomes have destroyed football and are destroying cricket, sports I do care for….not sure if it’s possible to destroy golf tho’, unfortunately
SOS,
Hate to say it partner, but you’ve got to catch yourself on in terms of Wal-Mart and the like. The fact is that normal grocery stores charge significantly more for basic foodstuffs in poorer neighborhoods than in rich ones. Wal-Mart does the opposite.
When I was back Kansas for pheasant hunting my dad drove me by his grandfather’s house and the house (little more than shotgun shacks with basements) that his dad built by the silo in town. The yard that was there was much smaller than my own (which is by no means large), but back in his youth they contained a vegetable garden, an onion patch, chicken coop, and goose pen. Today the Wal-Marts in Colby(sixty miles north) and Garden City (A little closer than that to the south) which are of course super Wal-Marts (ie box store+grocery store) take up the bulk of what was once homegrown or locally produced.
Wal-Mart has indeed made the lives the poor consumer (which should be differentiated from the lives of their workers and the workers of their suppliers) “easier” in as much as it allows them to consume greatly subsidized products at greatly discounted prices. Of course it’s not sustainable and comes at a great cost, but like so much outlined in the linked articles, much of that cost is “hidden”, at least if you want it to be.
it allows them to consume greatly subsidized products at greatly discounted prices.
How do you mean ‘greatly subsidised’?
Not arguing with your knowledge – you being there an’ all – I did notice in passing in the states that grocery stores in poorer areas of big cities were way worse in terms of stock and just general appearance than their equivalents here or in the UK would be. But what you say about Wal-mart being cheaper in poorer areas unlike other stores – that’s pretty much the Tesco model too, which has a near monopoly in some parts of the UK and is getting there here in Ireland. (and Asda in the UK even more)
SOS,
Well the truth is that the prices for consumer items are cheaper at Wal-Mart, but since their business practices are extraordinarily destructive to both local communities, the environment, workers etc. the prices are subsidized by our “paying” for their other actions so to speak. Not sure if that explanation itself makes sense, let alone sheds light on that last comment.
The Wal-Mart model is just the extreme end of the chain in terms of our relationship to food. As noted, “respectable” grocery chains still truck all the crap in, and charge more in poor areas. They also really put the kibosh (I think that’s the word I want) on local corner food stores that would serve a small neighborhood area.
Are you saying that Dunnes and Tsco are better payers than ALDI etc. Or that the proverbial corner shop pays well.
On producers, all the outlets except farmers markets buy from the same sources.
The solution to monoploy bullying is mass action, boycotts etc. which have had siome success.
Further point the outlets that charge so much here are the same as in the UK.Why the differential.
Oh My pet annoyance, Easons with magasines
you mean why do magazines cost so much in Easons? in the UK, magazines fall under ‘books’ and so have 0% VAT. In Ireland they don’t, so 13.5%. I share your annoyance.
All very true, but I think this is most relevent where the argument is made that it is justifiable to cut welfare/wages because prices are coming down, where patently, thats a nonsense
That’s precisely it. In a situation where prices are increasing even by the government’s own figures by 0.6 and remain 1 per cent above 2007 levels (and by the way it’s not as if social welfare is at 2007 levels given the cut in the Christmas bonus which equalled a percentage I can’t recall off the top of my head) any cuts seem invidious in the extreme.
There’s a new paper by Tim Callan, Brian Nolan, Claire Keane, and John Walsh (essentially all ESRI — Nolan is now at UCD, but he was ESRI until that recentish move) on “Inequality and the Crisis: The Distributional Impact of Tax Increases and Welfare and Public Sector Pay Cuts”. (I haven’t read it yet.)
Just downloaded it. Well worth a read it seems.
An outstanding post, WBS.
You have concentrated on social welfare but alluded to wages, and, of course, slashing the minumum wage is also ‘justified’ by the Irish minimum being ‘the second biggest in Europe’. Eh, just like food prices!
Lidl branches are usually busy I think but for leisurely shopping (if trade unioinsts are supposed to shop there) the Parnell Street Aldi is a stroll.
Good you picked up on that dividend to the Dunnes. The reporting of this, in the IT anyway, was confined to the financial pages. Compare the publicity about this ‘bonus’ to the bank and public service bonuses. Now the argument you will be given is that the latter are paid from the public purse and bear no relation to private sector payments. I, for one, don’t look upon it that way. All wealth is social wealth and is produced by labour. At a time when some people are depending on charity for food, this €14 million should be taken for the public pot.
It also reflects on the corporation tax debate. Are retailers, and Irish based ones, going to close down and abandon their profitable sales because the tax is, say, doubled? It is argued that the exporting multinationals have a gun to our head. Can the same be said of profitable Irish companies in relation to after-profit taxes on profits made from sales and services here?
Good point on the corporation tax.
Even within the bounds of the “low tax economy” model, it can’t be beyond the imagination of the Revenue and Dept of Finance economists to come up with a graduated scale of corporation taxes which would leave open the door for the flight-inclined FDI giants, while at the same time increasing the tax take from those corporations which derive their profit from trade within the state.
I’d like to hear an orthodox economist deny that the single corporation tax rate is not a free ride for non-FDI businesses.
In support of dmfod’s post below, there were two different corporation tax rates during the early 90′s. I think it was 10% (effectively about 1-2%) for the multinationals and about 25% for the Gombeen Men. The EU told the government that corporation taxes had to be harmonised and 12.5% was deemed a reasonable compromise.
On corporation tax: I had the depressing experience recently of having a conversation with someone in a low paid and insecure job who, when discussing SF’s economic policy, was vehemently opposed to increasing corporation tax beyond 12.5%. And I think Vincent Browne has made reference to being approached by employees of Microsoft in a pub and being harangued because he supports increasing it. Hegemony, or what!
There used to be different rates for FDI and domestic capital but the rates were standardised in the ’90s I think under EU competition rules.