ESRI: "Inequality has not grown in Ireland as it has in other countries"

[Brendan Burgess]

A new report out today by the ESRI

ABSTRACT
Over the past 30 years, there have been periods of boom and bust, but average
household incomes have grown strongly in Ireland. The distribution of household
income has been broadly stable over this period, so that there has been substantial
growth for low-, middle- and high-income households. Ireland’s rapid, even growth
in incomes across the distribution is unusual in an international setting. During this
time, inequality has risen in many other countries. As a result, while Ireland was
once towards the high end of the inequality spectrum for an advanced country, it
now occupies a middle-ranking position. Market income inequality is high in
Ireland, but a redistributive tax and transfer system has helped to offset that. Over
the 1987 to 2014 period, discretionary changes in tax and welfare policy led to gains
which were greatest among those with incomes in the lowest 20 per cent of
households. Much of this differential growth in incomes arose from the
implementation of the recommendations of the Commission on Social Welfare
(1986), which raised the payment rates for the schemes with the lowest payment
levels.






My understanding of this table:
Since 1980, in Ireland, the bottom 10% have seen their incomes rise by 3.34% per year, whereas the top 10% have seen their incomes rise by 2.82% per year. In other words, they have all grown at around the same rate.

But in the UK, the top 10% have seen their incomes rise by 2% a year, much faster than the bottom 10% whose income rose only 1.2% a year. Or in common parlance, in the UK, the rich got richer faster than poor, who also got richer.

 

[Brendan Burgess]

Market income inequality is high in
Ireland

That does not sound right to me. It might be technically true because we have so many people who choose social welfare instead of work.

But if social welfare rates were cut, then more people would work and have an income and so market income inequality would fall dramatically.

Likewise, if we increase social welfare rates, more people will quit work to go on social welfare, and so market income inequality will rise.

Brendan

 

[Brendan Burgess]

This tells us that before tax and social welfare payments, Ireland is a bit more unequal than the US or the UK.

But after tax and social welfare, Ireland is a good bit less unequal than the UK or the UK.

In particular, inequality in Ireland before tax and social welfare payments, rose quite sharply during the Great Recession due to the bigger increase in unemployment here.



Brendan

 

[Brendan Burgess]

I am astonished at how little coverage this report has got.

From the Indo : Disposable income has risen for the poorest here

The Irish Times: Rapid growth in Irish incomes despite crash, research shows

RTE: a mention in passing in
Wage growth should be sustainable - Finance Minister


The Journal.ie : nothing

Can you imagine if the research had concluded "Inequality has grown in Ireland in recent years."?

 

[Conan]

Brendan,
The conclusions of this report cannot be true. After all they don’t fit with the narrative of SF, The People who never made any Profit, the Looney Left etc etc. This report must not receive any publicity as otherwise the impression might be created that Ireland’s tax system does a lot in terms of income redistribution.

 

[TheBigShort]

Interesting report for sure. Just some obs;

Since 1980, in Ireland, the bottom 10% have seen their incomes rise by 3.34% per year, whereas the top 10% have seen their incomes rise by 2.82% per year. In other words, they have all grown at around the same rate.

Im not a big fan of % for making conclusions.
For sure, they are useful for identifying trends and forecasts, but for making conclusions not always so.
While the report may identify similar trends in income increases in % terms, it is somewhat moot if we dont know what the incomes are in € terms are too.
A simple example might be a comparison between someone earning €100,000 getting a 2% increase and someone on €20,000 getting a 5% increase.
It doesn't take much to figure out that in % terms inequality has decreased, but in monetary terms it has increased. So a report detailing (in)equality trends through monetary amounts would also be interesting I think.
After all, we buy and sell in €€ not %%.

But if social welfare rates were cut, then more people would work and have an income and so market income inequality would fall dramatically

There is no evidence of this, not in this report anyway.
The biggest welfare increases in the history of this State coincided with the greatest levels of employment.

It might be technically true because we have so many people who choose social welfare instead of work.

Again, no evidence in this report of this. Despite the maintenance of social welfare rates during the recession, unemployment has fallen from 16% to now under 6%.
There is simply very little correlation between welfare rates and the uptake of employment. Probably something to do with most people choosing and preferring to take up employment once opportunities are available.

But if social welfare rates were cut, then more people would work and have an income and so market income inequality would fall dramatically

UK rates of unemployment benefit are a lot lower than here, and if my figures are correct unemployment rate is lower than here too, supporting your theory of lower welfare rates = greater participation in workforce.
But despite this, as the report shows, after tax and welfare the UK is more unequal.
So cutting welfare, and having more people at work, does not equate to greater equality, as the UK example shows in the report above.

 

[TheBigShort]

From the Indo : Disposable income has risen for the poorest here

"The ESRI report said that over the last three decades the income of low, middle and high-earning households have seen what it says is "substantial growth".

Surely the IT headline is more accurate?

 

[Brendan Burgess]

Hi Shortie

None of the headlines is good.

The real point here is that inequality has not grown in Ireland as it has elsewhere. This is contrary to the continual message of "the rich are getting richer and the poor are getting poorer"

That is the main message and , while none reflect it well, the Indo does it best.

Brendan

 

[TheBigShort]

Hi Shortie

The real point here is that inequality has not grown in Ireland as it has elsewhere. This is contrary to the continual message of "the rich are getting richer and the poor are getting poorer"

Brendan

Hi Brendan

Im not sure anyone could, when taking a period of 30yrs, disagree that all sectors of Irish society have benefited from increased incomes. I didn't think anyone was?

If we all, for the purposes of discussion, accept the conclusions of the report then it worth noting that the report identifies Irelands welfare parameters as being slightly ahead of growth, protecting the income of workers against what it calls, the 'fiscal drag'.
To me, this is a critical in our economic model. As it facilitates competitive wages (in effect, a subsidy to employers),
and provides an income floor for those dependent on welfare that has kept pace with general income growth.

The real 'continuous message' is how to protect a system that is, at least according to the report, reducing inequality.
Calls for social welfare cuts, higher taxes on lower incomes, reducing taxes on higher incomes, are all measures that will increase inequality.

As for the Indo headline, I was more taken with the opening line "
Poorer households have not lost out when the economy has grown, unlike the situation in other countries."

If you agree with this comment, surely this is a good thing?
Or do you think its unfair that poorer households in this country have not lost out on income while in other countries they have?

 

[Brendan Burgess]

Hi Shortie

I am just pointing out the fact that they have not got poorer as is the common perception.

And that if the findings were the opposite, the media and politicians would have had a field day.

Brendan

 

[TheBigShort]

Hi Brendan

And im just pointing out that, over a 30yr period, the common perception is that all sectors of Irish society have more income, not less.

And that if the findings were the opposite, the media and politicians would have had a field day.

For sure, as I think most people in media and politics are in favour of greater equality rather than inequality.

In the end, the report is broadly favourable toward welfare and tax transfers for reducing inequality.

 

[RETIRED2017]

Hi Shortie

I am just pointing out the fact that they have not got poorer as is the common perception.

And that if the findings were the opposite, the media and politicians would have had a field day.

Brendan

I have not heard anyone including your good self saying they have got poorer ,

 

[TheBigShort]

I have not heard anyone including your good self saying they have got poorer ,

Which is the salient point. Despite the Indo headline, nobody is actually arguing to the contrary of the findings of the report - probably why there is little coverage.
Old news doesn't sell well.