Cost of living and Credit

PrimeTime tuesday night ran a story about the huge increase in credit. Private credit keeps rising and is now running at 17% yoy. Mortgages are running at 24%, and Mabs is reporting more and more ordinary earners running into debt problems.

Banks argue that is all ok, and that they screen ability to repay. Auctioneers and some Economists say that its all perfectly normal. But IFSRA is worried about excessive lending, and the consumers association says that a person on the average industrial wage can't enjoy a modest lifestyle now in urban Ireland without using credit. Has Ireland has become unaffordable for people in this bracket. Who is right? I heard the debate again on Today FM

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the consumers association says that a person on the average industrial wage can't enjoy a modest lifestyle now in urban Ireland without using credit

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I wonder what exactly they mean by "modest" in this context?

Average

The average industrial wage is €28,000. After paying tax whats left over isn't likely to allow a lavish lifestyle. I dunno but i guess modest means precisely what you could get for a net €22 to €24 k ? I earn nearly twice this amount and live in greater Dublin. I pay a mortgage of €130,000 and I can't save - the rest goes on expenses. I don't know how most people survive on lower salaries. I don't use credit.

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Some rough figures: €28000 gross is approximately €2000 take home monthly. A 20 year €130,000 mortgage at 4% is approximately €780 per month (less when mortgage interest relief is taken into account) leaving €1220 for other expenses and disposable income. Doesn't seem that tight to me. However, I see that the average Dublin house price is hitting €300K these days.

Consumer association nonsense

If the comment attributed to the CA is accurate, I am surprised.

("the consumers association says that a person on the average industrial wage can't enjoy a modest lifestyle now in urban Ireland without using credit"

Unless I am totally out of touch, the growth in private credit is not mostly to pay for food, or children's shoes, or schooling. It is to pay for televisions, DVD players, newer cars, holidays and so on. People who borrow are making a choice - instead of opting for deferred gratification (i.e. saving up for something) they are prepared to incur some extra cost in the form of interest in order to enjoy something now. It is completely wrong to suggest (as the above quote seems to do) that you can have a better lifestyle using credit - you give up something (your future money) in exchange for something else (the right to consume now instead of later). Who can say which is better? Certainly not the CA.

Personally, I think that borrowing for non-essential, non-productive assets (other than your home) is silly. But I respect the right of others to disagree and to incur the cost of borrowing so that they can have whatever it is they want now instead of later. Undoubtedly many people do not make informed choices - in that credit is frequently sold rather than bought. The role of bodies like the CA should be to ensure as far as possible that people make informed choices.

Credit

MOB is right - in the theory of the thing, but the idea that credit is used just for DVD's TV etc runs the danger of stereotyping. In the past few years there has been a noticeable increase in stealth taxes, things like waste charges and parking fees where before there was none.

Its all very fine those of us on higher incomes extrapolating that €500 per week isn't restrictive, but I suspect that it is, if you had it yourself. In the recent past I've ran a cash diary for about three month's and I was shocked at what the family was spending, and not just on non-essential items. I'm not sure if the consumer group are right, but my guess is that they are hitting a real issue for many workers who are relatively young and trying to make ends meet while paying off mega mortgages.

Maybe Skinflint is being to hard on Cormac K?

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Maybe Skinflint is being to hard on Cormac K?

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I was simply crunching the numbers and giving my own personal opinion. I have lived on €118 p.w. unemployment benefit in the past (admittedly with no mortgage/rent overheads) without undue hardship as it happens.

Re: .

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Some rough figures: €28000 gross is approximately €2000 take home monthly. A 20 year €130,000 mortgage at 4% is approximately €780 per month (less when mortgage interest relief is taken into account) leaving €1220 for other expenses and disposable income. Doesn't seem that tight to me. However, I see that the average Dublin house price is hitting €300K these days....

..open to original poster to comment on this but 780Euro is juts the mortgage, there is also the home insurance, life assurance & other possible (accident illness, redundancy. Then of course there are the household utility bills. Running the car etc. (& don't forget to eat) That quickly enough starts to deminish the 1200Euro left over per month...

Guess my point is that even earning over the industrial norm doe not mean that one can have a 'lavish' lifestyle.

ninsaga

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780Euro is juts the mortgage, there is also the home insurance, life assurance & other possible (accident illness, redundancy

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Yes - but I assumed an interest rate 0.5% to 1% higher than prevailing rates to allow for additional costs such as these. Obviously it doesn't include utility bills etc. My point is that c. €1220 to cover these and any other essential (or even non essential) outgoings is hardly insignificant. I certainly could live on it. I've lived on far less.

Above

I respect Skinflint's point of view, but I'd be suspect that its representative of the norm. Skinflint might instead represent the Ebeneezer Scrooge among us. Skinflint hasn't chosen his or her pen name by accident!

€500 per week quickly evaporates in a city. According to Morning Ireland, there's more today in the INDO and Examiner I think.

AIW

The average industrial wage is nowhere near 28k, I don't care what anyone says. I'm not sure who was included in this survey to arrive at this figure.

I earn mid 30's in salary. but for years I worked for an "industrial wage" in a factory in Galway, which equated to about 15K (Euros) before tax and I doubt very much that this has gone up. My former colleagues, who I am still in contact with, have said they find it harder and harder to survive on what they earn as prices go up.

We supplemented our income by working as much overtime as we could but even then the hourly rate was so pitiful that we never brought home much green. It annoys me to hear 28K being quoted as the AIW.

David McWilliams interviewed John Pilger a few weeks ago on Agenda and Pilger laughed in his face when he claimed that the average industrial wage was 17 Euros per hour (Works out a 34K per annum) When David began to argue the case Pilger just said something to the effect of "I don't think I'd have to look too far to prove you wrong on that one." He was right.

Above

Good post, confirms my suspicions-thanks. If it is the case that credit is being used for normal cost of living items, we are heading into uncharted waters.Anybody know how the AIW is calculated in simple English?

AIW In Plain English

The following is from a few years ago, so ignore the figures.

The concept of the average industrial wage is one with which many of us are familiar. The average industrial wage is the average annual wage paid to those in the Industrial sector. The Industrial sector, as defined by the Central Statistics Office, includes the manufacturing, mining, and quarrying, and the electricity, gas and water
sectors only.

The average industrial wage in Ireland varies considerably across the twenty-six Counties. The average value for the entire country is £14,461.41. However, extremes can be found in Counties Dublin and Donegal, where wages are £18,334.41 and £10,853.24 respectively.

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-Rd

Txs

Thanks Daltonr. Any views on the main question?

Average wage in industry

The average wage in industry, according to the CSO, in Ireland, for June 2003, is:

13.56 per hour
= 540.27 pw
= 28,094.04 per year

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Average wage in industry

Load of b*llocks. Sorry but its just completely wrong. see my above post.

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Hmmm ... the CSO statistics versus AB's personal story and Robert Fisk on the radio? I think I know who I'd give most credence...

CSO data

CSO data are professional, reliable and accurate.

The link to the latest data on earnings in industry is:

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Have a look at it.

BTW, average earnings in the Public Sector are 700 pw.

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Stats

Note that this average wage includes everybody working in Industry, not just operatives on the production line.

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CSO data are professional, reliable and accurate.

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Exactly - that was my point!