# Excellent lecture on 23rd January "Understanding income inequality in Ireland"



## Brendan Burgess (13 Jan 2020)

*The Statistical & Social Inquiry Society of Ireland [ssisi.ie]*

invites you to attend the 2019/2020 Barrington Lecture on the following topic:

*"Understanding income inequality in Ireland"*

By: *Barra Roantree *(Economic & Social Research Institute & Trinity College Dublin)

to be delivered on: *Thursday 23rd January *2020 at 5.30pm

at the: *Royal Irish Academy, Dawson Street.*



_Abstract: This paper examines how household income is distributed in Ireland today, how that compares to the past and to our neighbours in Europe. It finds that strong and balanced growth over the past 30 years – averaging around 4.5% annually – has acted to reduce disposable income inequality on most measures. However, market income inequality has risen at the top and now stands among the highest in Europe. The paper investigates the reasons for such high levels of market income inequality and considers the implications for policy, in particular for the design of our tax and benefit system.

Non-members are welcome to attend and participate in the discussion._



I heard Barra giving a presentation before and he was excellent. He worked for the Institute of Fiscal Studies in the UK.  The presentation I heard was at the Nevin Institute and he spoke about measures of life-long inequality. In other words, if you look at the distributions of income today, there is a fair bit of inequality. But when you adjust  it for a person's lifetime it is a lot less so.   Students have no income, but when they work, their incomes go above average, and then probably drop below average in retirement. 

Brendan


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## odyssey06 (13 Jan 2020)

That reminds of something I read by Thomas Sowelll in relation to the situation in America:
_Much has been written, for example, about how small percentages of the population receive large percentages of the nation's income, or hold some large percentage of the nation's wealth. The implicit assumption is that we are talking about classes of people when, in the US at least, we are in fact often talking about *individuals at different stages of their lives*.... The vast majority of the wealth of Americans is concentrated in the hands of people over 50 years of age. 

Studies which have followed individual Americans over a period of years found that most do not stay in the same quintile of the income distribution for as long as a decade... More who began in the bottom 20% had reached the top 20% by the end of the decade than remained where they were. Yet the 'poor' continue to be identified as the bottom 20%, instead of the 3% who remain at the bottom._


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## Brendan Burgess (13 Jan 2020)

Hi Odyssey

That is a great summary of the point made by Barra. 

Brendan


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## NoRegretsCoyote (13 Jan 2020)

odyssey06 said:


> _Much has been written, for example, about how small percentages of the population receive large percentages of the nation's income, or hold some large percentage of the nation's wealth. The implicit assumption is that we are talking about classes of people when, in the US at least, we are in fact often talking about *individuals at different stages of their lives*.... The vast majority of the wealth of Americans is concentrated in the hands of people over 50 years of age. _



It's astonishing how few people "get" this.

The CSO published work on wealth inequality in Ireland and the most remarkable thing about it was how so much is in the hands of the old, and very old.


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## Brendan Burgess (13 Jan 2020)

Here is a copy of the paper by Barra 









						A Lifetime Perspective on Taxes, Benefits, Inequality and Redistribution | Institute for Fiscal Studies
					

This presentation was delivered to the Nevin Economic Research Institute, Dublin on 13 July 2016




					www.ifs.org.uk


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## odyssey06 (13 Jan 2020)

People may not click through to the paper so I've just pulled out the headings from their main slides as a summary as I think they are key points:

The tax & benefit system does less to reduce inequality between people as *more of what it does is intrapersonal redistribution*
Even the *lifetime poor spend majority of lives in work*
Increases to i*n-work benefit*s most effective way of redistributing to poor
Increases in higher-rate of income tax for redistributing from rich  driven by strong persistence earnings at the top


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## PMU (14 Jan 2020)

It woudl eb very easy to dismiss this as typical NERI rubbish!  Of course it totally ignores the best way of improving the lot of the less well off, i.e. the competitive capitalist system.  It's not more efficient distribution we require but more capitalism.  And real disruptive capitalism, not the crony stuff we get in Ireland.  For example, up to the 1990s a mid week return to London with Aer Lingus cost 220 IEP, i.e. 279 EUR.  Today I can fly at short notice to London with Ryanair for 65 EUR.  It is as if every time you fly to London, Michael O'Leary gives you a present of 155 EUR off the historic Aer Lingus price.  So more people, particularly those at lower incomes who could never afford the Aer Lingus prices can now fly.  Similarly, Lidl, Aldi, Pennys, Vodafone, Amazon, etc. have disrupted markets and lowered prices.  NERI is incorrect in looking for  more efficiency in redistribution (e.g. more in-work benefits to the poor, which will probably price them out of labour markets), but rather what is required is more efficiency and competition in markets, as lower prices benefit in particular the less well off.


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## cremeegg (15 Jan 2020)

PMU said:


> For example, up to the 1990s a mid week return to London with Aer Lingus cost 220 IEP, i.e. 279 EUR.  Today I can fly at short notice to London with Ryanair for 65 EUR.  It is as if every time you fly to London, Michael O'Leary gives you a present of 155 EUR off the historic Aer Lingus price.  So more people, particularly those at lower incomes who could never afford the Aer Lingus prices can now fly.



I just wanted to repeat this as it cannot be said often enough.

As a low earner in London in the 1990s it cost me a weeks wages to fly home. 

The €155 extra mostly supported surplus staff at Aer Lingus, and the FF politicians they voted for. Claire Daly was a shop stewart there.


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## galway_blow_in (15 Jan 2020)

NoRegretsCoyote said:


> It's astonishing how few people "get" this.
> 
> The CSO published work on wealth inequality in Ireland and the most remarkable thing about it was how so much is in the hands of the old, and very old.



Not that astonishing, there are several lobby groups - Quangos which earn a living portraying the elderly as poverty stricken. 

It's a strong narative


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## Brendan Burgess (23 Jan 2020)

Reminder: This is on tonight.  They have released research today. 

*Irish tax system does most in Europe to reduce inequality*

January 22, 2020
Taxation, Welfare and Pensions
No other tax system in Europe does more to reduce household income inequality than Ireland’s, according to a new study by an economist at the Economic and Social Research Institute (ESRI).
While the distribution of household income in Ireland is the most unequal in the EU before taxes and benefits, the study finds that Ireland’s highly progressive tax system substantially offsets this, bringing inequality in take-home income very close to the EU average.
ESRI economist and author of the study, Dr. Barra Roantree, said:
“Before taxes, inequality in Irish household income is much higher than the EU average. But our tax system does more to reduce this than any other country in Europe.”
“Two particularly progressive features of our tax system are the broad-based Universal Social Charge and the early level that the higher-rate of income tax kicks in. Together, these bring the level of inequality in take-home income very close to the EU average”, he added.
The analysis will be presented during the 130th Barrington Lecture this evening [Thursday 23rd January] at the Royal Irish Academy on Dawson Street. It draws on household survey data collected by the ESRI, Central Statistics Office (CSO) and other European statistical agencies between 1987 and 2017, and marks the most in-depth study of how income inequality in Ireland has evolved over the last 30 years.
Other findings include:
- Inequality in income before taxes and benefits has increased over the last 30 years, leaving that of the top 10% of households more than 2.6 times that of the median – or middle – household in 2017 (the most recent year for which data is available).
- However, inequality in household take-home income has declined on most measures over this time. This is largely because growth was particularly strong for lower-income households between 1997 and 2007, when incomes for the bottom fifth of households rose by an average of more than 12 per cent per year in real terms (after accounting for inflation).
- While benefits reduce income inequality substantially in all EU countries, the tax system does relatively more in Ireland than in any other EU country. In 2017, taxes lowered the Irish Gini coefficient (see note below) by a fifth: almost twice the EU average


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## Protocol (23 Jan 2020)

Barra Roantree says the following:



			https://twitter.com/barratree/status/1220299372124086273
		


*Our study shows that while benefits reduce household income inequality in all countries (including Ireland), the tax system does relatively more here than other EU countries.

Paper goes into why that's the case too (big reason is that there's lots of working age households without any market income). Slides will be online from this evening.*



[broken link removed]


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## Protocol (23 Jan 2020)

My question is:

*why is pre-taxes/transfers market inequality so high here?*


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## Brendan Burgess (23 Jan 2020)

Protocol said:


> why is pre-taxes/transfers market inequality so high here?



Because we have a much higher proportion of families where no one is working.  They have a zero income for this calculation. 

If we cut welfare and housing benefits dramatically, people would be better off working and our pre transfer inequality would fall.

Brendan


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## Protocol (23 Jan 2020)

Ok, so we know that there's lots of working age households without any market income.

(1) One suggestion is that there is an *endogeneity*.

The tax/transfers system has a harder job to do, has to reduce gross inequality from a high starting point, because of the design / incentives of the welfare state itself.

If this is true, then we need to re-design the welfare state.

(2) However, another suggestion is to do with *caring*.

We care for many people (children, disabled adults, etc.) informally, supported with carers payments, and some tax credits.

Maybe in other countries these people would be cared for formally, allowing the carers to join the labour market.

If we as a society want this model of informal care, maybe a higher level of households with no market income is a trade-off worth accepting?


I don't know how much of the cause is (1) and/or (2.)


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## Purple (31 Jan 2020)

The French model of childcare would greatly help women enter the workforce.


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## dereko1969 (31 Jan 2020)

Purple said:


> The French model of childcare would greatly help women enter the workforce.


Can you state what that is?

Slides are up, wish I'd managed to get to this


			https://www.esri.ie/sites/default/files/media/file-uploads/2020-01/Slides_1.pdf


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## Purple (31 Jan 2020)

dereko1969 said:


> Can you state what that is?
> 
> Slides are up, wish I'd managed to get to this
> 
> ...


Kids are minded in their schools from early morning to 6-7 in the evening for a small fee. The necessary facilities are provided.


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## nest egg (31 Jan 2020)

Purple said:


> Kids are minded in their schools from early morning to 6-7 in the evening for a small fee. The necessary facilities are provided.



I've lived in France and can attest to the considerable supports available. You're also not paying as much in pre/after school fees as the school day is also longer, starting around 8:30am and finishing around 4:30pm for the younger kids, and even later for older ones, with a much longer lunch time (1.5 hrs).  Lunch itself is also provided by the state/school in the canteen.  The only thing Ireland does better in my experience in maternity leave which is much shorter, and with a much greater expectation that women return quickly to the workplace.


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## Purple (31 Jan 2020)

mojoask said:


> I've lived in France and can attest to the considerable supports available. You're also not paying as much in pre/after school fees as the school day is also longer, starting around 8:30am and finishing around 4:30pm for the younger kids, and even later for older ones, with a much longer lunch time (1.5 hrs).  Lunch itself is also provided by the state/school in the canteen.  The only thing Ireland does better in my experience in maternity leave which is much shorter, and with a much greater expectation that women return quickly to the workplace.


Sounds better all around in the context of closing the gender pay gap. If you were hiring a key person in a  small company you'd be out of your mind to hire a woman in Ireland as no small company/ start-up would survive 6 months with a key person missing. 
The fact that childcare is available and cheap makes it much easier for women to go back to work in France since both societal expectations and personal choice make it far more likely that the mother will be the one to cut back/ stop working when the sprogs come along.


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## josh8267 (31 Jan 2020)

Purple said:


> Sounds better all around in the context of closing the gender pay gap. If you were hiring a key person in a  small company you'd be out of your mind to hire a woman in Ireland as no small company/ start-up would survive 6 months with a key person missing.
> The fact that childcare is available and cheap makes it much easier for women to go back to work in France since both societal expectations and personal choice make it far more likely that the mother will be the one to cut back/ stop working when the sprogs come along.


I have family in Austria same over there ,
Social insurance is high but everyone earning pay's almost the same amount, there is a tax break for the self employed to allow them build up a fund if  there income fall through no fault of there own to match supports for the direct employed,


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## Sophrosyne (31 Jan 2020)

The problem in drawing conclusions from the Gini coefficient is that it only relates to income distribution.

Two countries one wealthy and one poor could have the same Gini coefficient, but the basic standard of living in the poor country could be far below that of the wealthy country.

Two families with the same income and equal in all respects might differ substantially in wealth because one family is better at money management.

As other posters have mentioned it is taken at a point in time. Fortunes can go up or down as people progress through life.

But there is also the problem of expected outcomes and observable results. For instance, people with a good education should have greater earning power. What if they don’t? Is this the result of an unknown variable?

I think the most important issue is on the final slide:

*“… and –of course –to collect better data*
-Know little about intergenerational inequality & mobility
-… or the joint distribution of income, consumption & wealth
-… or the composition & extent of incomes at the very top”.


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## NoRegretsCoyote (31 Jan 2020)

A lot was familiar but this was new:


Sophrosyne said:


> The problem in drawing conclusions from the Gini coefficient is that it only relates to income distribution.
> 
> Two countries one wealthy and one poor could have the same Gini coefficient, but the basic standard of living in the poor country could be far below that of the wealthy country.



Of course, which is why the UN uses dollar or two-dollar a day thresholds to measure absolute poverty. This wouldn't be popular in Ireland as no one is dollar-a-day poor!

On your other point, higher-income countries tend to have lower inequality than poor-income countries.

Also, income inequality tends to fall only when countries have very strong periods of growth moving from low- to middle-income status as a nation for example.

Ireland is already a rich country though, so I don't expect the Gini to shift much in my lifetime.


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## josh8267 (31 Jan 2020)

NoRegretsCoyote said:


> A lot was familiar but this was new:
> 
> 
> Of course, which is why the UN uses dollar or two-dollar a day thresholds to measure absolute poverty. This wouldn't be popular in Ireland as no one is dollar-a-day poor!
> ...


Don't think Ireland is as rich as you think , using taxes to remove inequality only works while Ireland has a high income sector that could change very quickly as we seen in the last downturn,
Are you saying you don't see how this could happen in your life time, total income can go down fast in Ireland ,
people who have high income prospects already move when Ireland cannot match the going rate they can earn in other places,


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## NoRegretsCoyote (31 Jan 2020)

josh8267 said:


> Don't think Ireland is as rich as you think ,



Ireland is a rich country. Not as rich as the US or Switzerland, but a rich country.


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## josh8267 (31 Jan 2020)

NoRegretsCoyote said:


> Ireland is a rich country. Not as rich as the US or Switzerland, but a rich country.


You may be correct,NoRegretsCoyote
Ireland is a rich country but very small changes could change all that, the same small changes to USA or Switzerland would hardly notice it happened,


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## josh8267 (1 Feb 2020)

mojoask said:


> I've lived in France and can attest to the considerable supports available. You're also not paying as much in pre/after school fees as the school day is also longer, starting around 8:30am and finishing around 4:30pm for the younger kids, and even later for older ones, with a much longer lunch time (1.5 hrs).  Lunch itself is also provided by the state/school in the canteen.  The only thing Ireland does better in my experience in maternity leave which is much shorter, and with a much greater expectation that women return quickly to the workplace.


In Ireland we use the Income tax system to reduce inequality most other EU Countries use social insurance,
In Ireland in the last  down turn the so called rich found themselves poor over night with the loss of there job,/work/company/buisness,


Purple said:


> The French model of childcare would greatly help women enter the workforce.


The French model is close to what is used in most of the  EU,
I do not agree Ireland is a rich Country like USA/Switzerland,
You yourself seen your wages reduce by around 45% in the down turn ,the loss of payroll tax's from the reduction affected you, the state borrowed to fill the gap left by lower taxes when it came to Inequlity, when your wages went up I bet you are going to pick up the tab in higher taxes lower state pension in the future,
There is nothing rich about this State,


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## Brendan Burgess (5 Feb 2020)

He will be giving the same lecture in Cork 

*The Statistical & Social Inquiry Society of Ireland [ssisi.ie]*

invites you to attend the 2019/2020 Barrington Lecture, *"Understanding income inequality in Ireland", *by *Barra Roantree *(Economic & Social Research Institute & Trinity College Dublin)

to be delivered on: *Thursday 27th February *2020 at 1pm

at the: *Central Statistics Office, Skehard Road, Cork* (T12 X00E)*.*



_Abstract: This paper examines how household income is distributed in Ireland today, how that compares to the past and to our neighbours in Europe. It finds that strong and balanced growth over the past 30 years – averaging around 4.5% annually – has acted to reduce disposable income inequality on most measures. However, market income inequality has risen at the top and now stands among the highest in Europe. The paper investigates the reasons for such high levels of market income inequality and considers the implications for policy, in particular for the design of our tax and benefit system._

Please note the *different time and location* of the talk. The Central Statistics Office has kindly offered to provide refreshments for the talk. For that reason, those intending to attend the meeting are requested to notify Chloe Horan, of the Office of the Director General, using the email in CC (DGOffice@cso.ie).

Non-members are welcome to attend and participate in the discussion.


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