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Rural Ireland and the impact of Covid-19

As we navigate through the global crisis caused by COVID-19, it is clear that rural areas will bear a significant social and economic impact over the long-term.  The challenges that faced rural Ireland prior to the current pandemic remain, and new challenges have emerged, not least the impact of a potentially prolonged period of unemployment on areas that were already struggling.

Challenges facing rural Ireland

Some of the key issues in rural Ireland prior to the current pandemic that still have to be addressed are:

  • Rural areas generally have an older population, higher rates of part-time employment, lower median incomes, higher dependency ratios and higher poverty rates than the national average.
  • The average distance to most everyday services for people in rural areas is at least three times longer than for people in urban areas.  For supermarkets, GPs and pharmacies, the average travel distance was seven times longer for rural dwellings. This raises challenges for delivery of services.
  • The driver of the rural economy in Ireland has moved from the primarily agricultural to a more diverse base involving services, manufacturing, tourism and others.  
  • Two out of every five jobs in Ireland are at high risk of automation with towns where employment is dominated by agriculture and manufacturing most exposed to the impact of automation on employment[1].
  • Supporting rural households to ensure that they have sufficient incomes will be crucial to the future of rural Ireland. 
  • High quality and connected public transport links and sustainable regional employment opportunities are vital to the future of rural economies.
  • Lack of quality broadband is a considerable barrier to the sustainable development of rural Ireland. 
     

The regional impact of Covid-19 

A recent paper from the Department of Employment Affairs and Social Protection gives an outline of the immediate impact Covid-19 in terms of job losses and wage supports on a county and regional level[2].

Some of the key findings of this paper are:

  • By the week ending April 24th, there were more than 1.1m persons in receipt of State support interventions to the labour market, including those on the Live Register and those in receipt of the newly introduced Pandemic Unemployment Payment (PUP) and the Temporary Wage Subsidy Scheme (TWSS)[3]. In addition, there was an increase in those availing of short-time working arrangements.
  • While there have been job losses in all sectors, individuals working in tourism, hospitality, food and retail have seen the largest job losses.
  • The hit to these sectors will be potentially long lasting for two reasons. First, they are dependent on international travel which is likely to be subject to restrictions and an abundance of caution until the virus has abated entirely. Second, domestic consumers are likely to curtail demand for social activities for a similar time.
  • The Wage Subsidy Scheme (TWSS) - the share of employers using the scheme is heavily weighted towards smaller firms; with over 80 per cent of employers availing of the TWSS seen in firms with less than 20 workers, albeit that this is smaller than their representation across all firms. This may have consequences for the recovery of smaller firms once the containment restrictions are eased, as recruitment is costly and time-consuming for both employers and employees.

From a regional and rural development perspective the breakdown of affected sectors is particularly concerning.

There are four sectors in which the proportion claiming the PUP exceeds twenty-five per cent, namely Accommodation and Food Services, Construction, Administrative and Support Services and Wholesale and Retail Trade and Repair of Vehicles.  These sectors are classified as severely affected. 

A further two sectors have been identified as moderately affected, in which the proportion claiming the PUP is between ten and twenty-five per cent.  These sectors are Transportation and Storage and Manufacturing.  Combined, these sectors provide a large proportion of the employment in rural and regional areas.  Therefore it is reasonable to conclude that the impact in terms of job losses in the region will be significant, and the fact that many of sectors will be slow to open back up, indeed some may never open back fully.

The recent Department of Finance Stability Programme Update projections for unemployment point to an optimistic scenario where unemployment remains high for the next 12-24 months . When recovery comes, it is likely that many low income workers, and employees with precarious employment conditions, will be the last to experience it. Without a concerted policy effort, many will be stuck in poverty for some time.

Regional economies

A report published by the Three Regional Assemblies[4]  gives a Covid-19 Regional Economic Analysis.  The report analysed which counties are more likely to be exposed to significant economic disruption caused by the COVID-19 outbreak. The report found that coastal and rural counties are more likely to be exposed due to their reliance on commercial units that generally require human interaction and cannot be operated remotely. The county with the highest “COVID-19 Exposure Ratio”  was Kerry, with 53.8 per cent of its commercial units operating in the sectors likely to be worst affected, followed by Westmeath at 51 per cent, Donegal at 50.6 per cent, Cavan at 50.5 per cent and Clare at 50.4 per cent.

The report also examined which towns are more likely to be exposed to significant economic disruption caused by the COVID-19 outbreak. Popular coastal towns and rural based towns are particularly exposed.

The OECD in a recent paper estimate that the implied shock of Covid-19 could amount to a 45-70% decline in the international tourism economy in 2020[5].  The domestic tourism economy is expected to recover more quickly once containment measures are lifted, however even this will be slow moving and health concerns and the impact of social distancing and other measures may influence consumer sentiment and lead to a situation of very muted demand in the domestic tourism economy. Also, it is unlikely that domestic tourism could compensate for the decline of international tourism flows. This will translate into significant macro-economic effects in countries, cities and regions where the sector supports many jobs and businesses.

An obvious challenge for policy makers in Ireland is that rural areas were more dependent on social welfare transfers than urban areas and had lower median incomes than urban areas prior to Covid-19.  The current pandemic will exacerbate this situation and any policy response must address income sustainability in the long-term. 

Policies such as increased investment in healthcare and other public services and ensuring affordable and accessible quality public services to all regardless of urban or rural location must be part of the response.  Improved and expanded public services could contribute to regional attractiveness in remote and rural areas, while also supporting the transition to a low carbon economy[6].

Rural proofing and public service delivery according to the equivalence principle will play a key role here and should guide policy.

A recent report from Smith School at Oxford University notes that the recovery packages, soon to be designed and implemented, will reshape the economy for the longer-term, representing life and death decisions about future generations, including through their impact on the climate[7].  The report recommends that governments should steer investment towards a productive and balanced portfolio of sustainable physical capital, human capital, social capital, intangible capital, and natural capital assets consistent with global goals on climate change.  The authors are clear that any recovery package must also address existing concerns such as poverty, inequality and social inclusion.

The report identifies five policy areas with high potential on both economic multiplier and climate impact metrics.

  1. Clean Physical Infrastructure
  2. Building Efficiency Retrofits
  3. Investment in Education and Training
  4. Natural Capital Investment
  5. Clean Research and Development

These have obvious implications for Ireland 2040 (National Development Plan) and for public policy.  Renewable energy and clean energy infrastructure are job intensive and they offer high returns on public investment as they drive down the cost of transition to clean energy.  Residential and commercial retrofitting, natural capital spending in areas such as rural ecosystems, biodiversity and expanding parkland are identified as fast-acting climate friendly policies that will have an immediate impact and long-term returns.  Natural capital spending is identified as particularly appropriate in current circumstances because worker training requirements are low, many projects have minimal planning and procurement requirements, and most facets of the work meet social distancing norms.

Ensuring a sustainable recovery

The investment plans associated with Covid-19 recovery will be critical in setting the environmental pathway for the next few decades, and crucial for Ireland’s climate ambitions and targets. The OECD recommend three overarching principles to accelerate a fair, low-carbon recovery.  The new Government should adopt these when developing Ireland’s post-Covid investment strategy.

  1. Aligning the short-term emergency responses to the achievement of long-term economic, social and environmental objectives and international obligations (the Paris Agreement and the SDGs). This includes, in the short run, securing jobs while avoiding unconditional subsidies to polluting activities.
  2. Preventing both lock-in of high-emissions activities and worsened well-being of those in the bottom 40% of the income distribution. COVID-19 has dramatically worsened the conditions of vulnerable groups, both in advanced and developing economies. The efforts to build an inclusive and sustainable future must prioritise a fair transition to a low-carbon economy.
  3. Systematically integrating environmental and equity considerations into the economic recovery and stimulus process. Support to the most affected sectors and investment in infrastructure must pass the test for contributing to a low carbon economy going forward.

Translating the OECD principles to the Irish context the new Government should:

Integrate a Sustainable Development Framework into economic policy.  This would ensure that policies are socially, economically and environmentally sustainable.   Sustainable development is defined as ‘development which meets the needs of the present, without compromising the ability of future generations to meet their needs’. It encompasses three pillars; environment, society and economy.  A sustainable development framework integrates these three pillars in a balanced manner with consideration for the needs of future generations. Maintaining this balance is crucial to the long-term development of a sustainable resource-efficient future for Ireland.

Develop a new National Index of Progress.  We must look beyond growth and take a new approach to economic policy which recognises the equal importance of social and environmental issues .  Government should develop a new National Index of Progress encompassing environmental and social indicators of progress as well as economic ones. By measuring and differentiating between economic activities that diminish natural and social capital and those activities that enhance them, we can ensure that our economic welfare is sustainable. 

This would involve moving beyond simply measuring GPD, GNI and GNI* and including other indicators of environmental and social progress.  Indicators such as the value of unpaid work to the economy and the cost of depletion of our finite natural resources among others would be measured.   Wellbeing indicators such as health (physical and mental), economy and resources, social and community development, participation, democracy and good governance, values, culture and meaning and environment and sustainability would be an appropriate frame for developing a new National Index of Progress.  Social Justice Ireland’s Sustainable Progress Index[8] could inform this process.  The index uses 80 indicators across the 17 SDGS and compares 15 EU countries across all UN SDGs, assesses their performance on each individual SDG and creates a ranking table for performance overall.

Investment underpinned by a Just Transition Strategy.  One of the fundamental principles of a Just Transition is to leave no people, communities, economic sectors or regions behind as we transition to a low carbon future.  Transition is not just about reducing emissions.  It is also about transforming our society and our economy, and investing in effective and integrated social protection systems, education, training and lifelong learning, childcare, out of school care, health care, long term care and other quality services,  Social investment must be a top priority of transition because it is this social investment that will support those people, communities, sectors and regions as we make the difficult transition to a carbon-neutral economy, transforming how our economy and society operates.  Transition to a sustainable economy can only be successful if it is inclusive and if the social rights and wellbeing of all are promoted.