# "Ireland at risk of reaching US levels of income inequality"



## Brendan Burgess (16 Feb 2015)

A new report from TASC

_Cherishing All Equally: Economic Inequality in Ireland_
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The research says [broken link removed] is now the most unequal country in the EU when it comes to how the economy distributes income, before taxes and social welfare payments are included._

I have no idea if this is true or not, but let's assume it is true. Why would Ireland be a more unequal country than other countries in the EU?

Surely countries with much higher levels of unemployment should be more unequal?

I suspect that there are quirks in the system.  Most self-employed people earn less than €20,000 a year.  I suspect that part of the explanation for our inequality is that income is not being declared and so the numbers of low earners are artificially inflated.

We have very high, if not the highest levels, of invalidity and disability in the EU.  Other indicators of health are average, so this suggests malingering, which would be encouraged by our very high rates of social welfare.

_Our income inequality is reduced to close to the EU average when these factors are included. However, the report says it will get more expensive to narrow this gap if inequality continues to grow._

Because we have such high social welfare rates and such high tax rates on high earners.
If Jobseekers Allowance were cut, people would have an incentive to work, and the level of pre-tax and pre-welfare inequality would fall.


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## Brendan Burgess (16 Feb 2015)

The Irish data are very strange. We seem to have a very high proportion of people living in jobless households 




 If a husband and wife both work, they are going to earn a lot more pre-welfare and tax than a couple where neither spouse works.  But is the rate of this higher in Ireland than elsewhere? 

Maybe we should distribute jobs more equally?  Tell people to take a year off after 5 years of working?


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## Brendan Burgess (16 Feb 2015)

The assumption is that all inequality is a bad thing. 

People who study, get qualifications, and work, should earn more than those who leave school early, and don't look for work. 

That is good inequality. 

But maybe we need to improve the equality of work opportunity.


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## 44brendan (16 Feb 2015)

Brendan Burgess said:


> Because we have such high social welfare rates and such high tax rates on high earners.
> If Jobseekers Allowance were cut, people would have an incentive to work, and the level of pre-tax and pre-welfare inequality would fall


Interesting points Brendan and I often wonder why this debate has never arisen on AAM!
Now having said that I also wonder why reports issued by bodies such as TASC and The Iona Institute are taken up and quoted by the media as being "Independent". Is it likely that a group like TASC will produce a report that is fair and balanced or is it more likely that the findings will reflect the one-sided view of the commissioning agency!!


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## Purple (16 Feb 2015)

Brendan Burgess said:


> But maybe we need to improve the equality of work opportunity.


It strikes me that the root cause of this issue is education standards and parental attitudes to education rather than about taxation or wage levels.

The notion that inflating the minimum wage even further will help is nonsense; all it does in increase the proportion of low-skilled and no-skilled people who are unemployable as their economic value is less than the minimum wage.
This isn't about bad government or bad teachers, although they may be factors, it's about bad parents and a culture of mediocrity; kids/adults leave school early or even go to leaving cert level with no skills and then don't bather seeking to equip themselves with marketable skills. They then complain about not being able to get a job or earning a living wage. 
Our penal income tax rates on skills and hard work (wages) and very high welfare levels is just a way of mitigating the symptoms of the problem.


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## 44brendan (16 Feb 2015)

Brendan Burgess said:


> But maybe we need to improve the equality of work opportunity.


Now you have it!! That's where the Left are falling down. They promote equality as if it's a good given right rather than something that must be worked for and earned. I also noted another item on today's papers that should be promoted far more than it will be. I.e. the election of an single mother of 2 from Tallaght as president of the TCD Students Union. I'm sure that this lady could and should be a role model for those promoting greater opportunity for those who don't get the start in life that others do!
Would it not be fantastic to see Joe Higgins and others of the left doing more to promote self help and providing some examples of what can be achieved, rather than pointing fingers at those who are high earners and denouncing capitalism!


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## Purple (16 Feb 2015)

44brendan said:


> Would it not be fantastic to see Joe Higgins and others of the left doing more to promote self help and providing some examples of what can be achieved, rather than pointing fingers at those who are high earners and denouncing capitalism!


Then they would have to accept that people have some level of responsibility for themselves and not trot out the same old guff about the poor being poor because the rich are rich etc.


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## epicaricacy (16 Feb 2015)

It is particularly difficult to succeed in Ireland if one is born into poverty and the converse is also true - whereby, if you have the right social capital, all one needs is to be is 'average' at best to amass further wealth. I, like my father and grandfather, went to the same private school and therefore I've an insight into the way the system operates. If Johnny isn't particularly smart he gets expensive grinds in every subject, in addition to expensive grind schools, to help him get more points than Jimmy from a social housing complex. In addition, Johnny will spend several months in France every year to ensure he gets an A in French. If Johnny doesn't get enough points to get into Law, he can repeat in a grind school (10000 p.a) and if still can't get in, he can always to a BA degree (again replete with grinds) and then complete the conversion course (replete with grinds) and after barely passing Blackhall, a space awaits in his father's or some relative / associate of father's law practice. Johnny will then marry Mary - who will also have been educated in a private school - and their children will go to the same exclusive private schools (where one can only attend if your father is a past pupil) before they then join the professions in time. The inheritances that are passed down between the generations keep increasing which leads to an even bigger gap between the  rich and the poor. Looking out from this hermetically sealed world of privilege, it looks as if the poor are responsible for their own  poverty.


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## odyssey06 (16 Feb 2015)

Means testing is one of the factors here... we have a largely "all or nothing" based benefits system. We should expect one of the side effects of such a system is stats like this.
Also, it's important to note that it reflects inequality before transfers from government.


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## Brendan Burgess (16 Feb 2015)

epicaricacy said:


> It is particularly difficult to succeed in Ireland if one is born into poverty and the converse is also true - whereby, if you have the right social capital, all one needs is to be is 'average' at best to amass further wealth.



Hi epi

I agree, but what is the best way to address this issue?

I don't think that the way to solve it is to pull the guys from private schools down to our level.

Deis schools? 

Earnings are directly related to education.  The better educated people are, the more they earn in the long-term.

If people drop out of school before the Junior Cert., they are condemning themselves to poverty. 

Brendan


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## 44brendan (16 Feb 2015)

epicaricacy said:


> It is particularly difficult to succeed in Ireland if one is born into poverty and the converse is also true - whereby, if you have the right social capital, all one needs is to be is 'average' at best to amass further wealth. I, like my father and grandfather, went to the same private school and therefore I've an insight into the way the system operates. If Johnny isn't particularly smart he gets expensive grinds in every subject, in addition to expensive grind schools, to help him get more points than Jimmy from a social housing complex. In addition, Johnny will spend several months in France every year to ensure he gets an A in French. If Johnny doesn't get enough points to get into Law, he can repeat in a grind school (10000 p.a) and if still can't get in, he can always to a BA degree (again replete with grinds) and then complete the conversion course (replete with grinds) and after barely passing Blackhall, a space awaits in his father's or some relative / associate of father's law practice. Johnny will then marry Mary - who will also have been educated in a private school - and their children will go to the same exclusive private schools (where one can only attend if your father is a past pupil) before they then join the professions in time. The inheritances that are passed down between the generations keep increasing which leads to an even bigger gap between the  rich and the poor. Looking out from this hermetically sealed world of privilege, it looks as if the poor are responsible for their own  poverty.


Fair comment Epicaricacy. However assumption above is based on the highly privileged strata of society. I also accept that at the other end of the scale those at the extreme end of poverty are likely to need substantial assistance in order to avail of the educational opportunities available to many. However, the vast majority of us in this country live somewhere between those 2 extremes. We do our best to provide a full education for our children and in many instances saddle ourselves with debt in order to provide this education. Standard schooling is available to all but again many of us provide additional funding for grinds in order to help our offspring to get a good start in life which is provided by having a good Leaving Cert/College Degree. We pay for this from our earnings and by cutting back on spend on meals out/holidays etc!! For the vast majority of us there is no Daddy's firm and we can only hope that our educated children will get on the 1st rung of the ladder by providing them with the necessary education/skills required to do so. What really gets to me is the throwaway commentaries of those who regard us as the "privileged few" and that there is some kind of golden circle that excludes those without the necessary "handshake" or accent!


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## Purple (16 Feb 2015)

Well said 44brendan. The solution to poverty is education. The treatment for the symptoms of poverty is welfare but welfare will never lift anyone out of relative income poverty (we have no absolute poverty in Ireland, thankfully).
I know a few people who work in family businesses. Most of them have modest incomes and work very long hours. They all work longer and harder than other friends who don’t work in family businesses. A corner shop, a car dealer, a landscaping business etc; these are all family businesses where “jonnie” or “Mary” can get a job because of their family connections. There are few “idle rich” in Ireland. I do agree that in the so-called professions there is a propensity for children to follow in their parents footsteps but the same can be said for plumbers, carpenters, welders, artists etc..
We already spend more money per child in disadvantaged areas and this should continue or increase. There is[broken link removed]to back up the idea that the smaller the class size the better the education the child will get. Obviously there is a top limit but I’d rather see excellent teachers teaching a class of 28 than mediocre teachers teaching a class of 14. A smaller number of excellent teachers (and we have plenty of those) who are well resourced and well paid will do a better job than lots of teachers who aren’t as good teaching smaller classes in schools that are not as well equipped. Education is the great equaliser.


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## Brendan Burgess (16 Feb 2015)

How about paying higher social welfare to people with higher levels of education? 

Tell people that if they drop out of school to live on social welfare for the rest of their life, it's going to be very rough. 
At any stage, they can return to school and if they get their Junior Cert , they will get more money.
If they get their Leaving Cert, they will get a higher rate again.
If they get a degree, they will get more again. 

But the message would get across very quickly that quitting school does not pay.

Brendan


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## Brendan Burgess (16 Feb 2015)

There is an opinion piece from Paul Sweeney today

*Super rich or super angry: where are you on Ireland’s income pyramid?*


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## Purple (16 Feb 2015)

Brendan Burgess said:


> How about paying higher social welfare to people with higher levels of education?
> 
> Tell people that if they drop out of school to live on social welfare for the rest of their life, it's going to be very rough.
> At any stage, they can return to school and if they get their Junior Cert , they will get more money.
> ...


Good idea. I'd apply the same thing to people in prison; remission only with qualifications.


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## ColmFitzgerald (16 Feb 2015)

We don't want a stagnant swamp where everybody gets the same irrespective of their contribution 

There is a mean level of inequality which is progressive - letting inequality go either side of that mean is probably regressive for Irish society.


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## Purple (16 Feb 2015)

ColmFitzgerald said:


> We don't want a stagnant swamp where everybody gets the same irrespective of their contribution
> 
> There is a mean level of inequality which is progressive - letting inequality go either side of that mean is probably regressive for Irish society.


I agree. I've always thought of it as a bell curve.
That said Social Justice Ireland want a society based on equality of outcome. I am 100% opposed to that.


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## odyssey06 (16 Feb 2015)

As Stephen Pinker points out in The Blank Slate...
Parental love causes the fundamental paradox of politics: no society can be simultaneously fair, free and equal. If it is fair, people who work harder will accumulate more. If it is free, people will give their wealth to their children. But then it cannot be equal, for some people will inherit wealth they did not earn. Ever since Plato called attention to these tradeoffs in 'The Republic', most political ideologies can be defined by the stance they take on which of these ideals should yield.

I agree with the points here that equality of outcome = stagnation (and also oppression, as a government powerful enough to direct a society to equality of outcome is not one someone who values freedom should want to live under).


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## Dermot (16 Feb 2015)

Liked the honesty of your post .  I know some of those people in life. I did not have the "privileged background  that you describe. My education was limited because of financial constraints at the time which was quite common at the time.  I made the best of what was available to me in life.  I had to work hard for what I have now and I am as satisfied as I could hope to be.
I look back on my life and I cannot see what lesser opportunities that a lot of people who are drawing social welfare have than I had.  In fact I would think the vast majority of them have more opportunities than I had.
I always had a strong work ethic and I never depended on social welfare.
I never inherited any wealth.
I do not begrudge anyone who is intelligent and working hard getting on in life.
I do have a problem with connected people using their connections to elevate less well qualified people ahead of more qualified people.  Maybe I am a bit naive to be thinking like this as it is very widespread everywhere.


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## gillarosa (16 Feb 2015)

it's because wages have been decimated during the past eight years, we have the dubious honour within OECD of being second to US for percentage of workers existing on minimum wage, close to the old days of    
our Eurovision winning days, an honour which is a dishonour.


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## Purple (17 Feb 2015)

gillarosa said:


> it's because wages have been decimated during the past eight years, we have the dubious honour within OECD of being second to US for percentage of workers existing on minimum wage, close to the old days of
> our Eurovision winning days, an honour which is a dishonour.


Can you back that up with anything?
Our average per capita income is just below the OECD average and while there is a big gap between the top 20% and the bottom 20% we have high welfare rates and high earners pay very high income tax rates while low earners pay almost no income tax.
The reason we have an increased proportion of people on the minimum wage is that it acts as a floor on the market. We set that floor much higher than most countries so we will have more people at that level.
If you want fewer people on the minimum wage then lower the rate. If you increase the rate then you will have more people earning it. You will also have far more people with no job but that's a different discussion.
The last time I looked there were about 5% of earners on the minimum wage. What is it now?

Average earnings have dropped by 0.5% per hour and 2.5% per week over the last 5 years due to people working fewer hours. We have seem big increases in taxation  and public sector employees have been forced to make a larger contribution to their pensions (though they still come nowhere near funding them) so take home pay rates have dropped. This is due to our insistence as a state that we continue to spend so much money running the country. If you want more money in your pocket then ask the government to waste less and generally stop doing things that people would be better off doing for themselves.


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## Purple (17 Feb 2015)

Dermot said:


> I do have a problem with connected people using their connections to elevate less well qualified people ahead of more qualified people. Maybe I am a bit naive to be thinking like this as it is very widespread everywhere.


If employees of a business or, worse, a state funded entity, use their connections to employ a friend or family member it is wrong. I think this is more common in the "professions" and less common in the state sector where, to be fair, there are transparent employment procedures.
If you own a shop or other business and you employ a family member or want to have a family member run your business is that wrong? If it is then why is it different to leaving your assets to your children?
The great thing about open markets is that if your child is a fool then they will lose the business and someone else who is competent will fill the gap in the market.


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## michaelm (17 Feb 2015)

Purple said:


> Average earnings have dropped by 0.5% per hour and 2.5% per week over the last 5 years due to people working fewer hours.


That sounded too innocuous to me so I checked my net pay.  Right enough my net pay is only down 0.5% on my pay 5 years ago (although I do more hours now), go back 7 years though (Jan 2008) and my current net pay is down 13% on that.


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## Purple (17 Feb 2015)

michaelm said:


> That sounded too innocuous to me so I checked my net pay.  Right enough my net pay is only down 0.5% on my pay 5 years ago (although I do more hours now), go back 7 years though (Jan 2008) and my current net pay is down 13% on that.


Pay, not net pay. Tax rates are higher.


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## michaelm (17 Feb 2015)

Purple said:


> Pay, not net pay. Tax rates are higher.


OK.  It seemed clear that gillarosa was referring to net pay so I assumed your reply to them was too.  Surely net pay is more relevant to people than gross pay.  gillarosa referred to 8 years, arguably the bigger cuts were made before your narrower 5 year time-frame.  Is it fair to assume that the average figure of a 2.5% earnings drop in gross income over 5 years takes no account of inflation and perhaps could be viewed as intended to be somewhat emollient?


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## Purple (17 Feb 2015)

My net pay is lower than it was in 2006. That's despite pay increases over that period.
As the state wastes more of my money they have to take more to fill that hole. That's the way taxation works in this country. If you want less taxation then get the government to waste less of your taxes.


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