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

Discussion in 'Economic issues' started by Brendan Burgess, 10 Jul 2018.

  1. Brendan Burgess

    Brendan Burgess Founder

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    Last edited: 10 Jul 2018
    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.

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    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.
     
    Last edited: 10 Jul 2018
  2. Brendan Burgess

    Brendan Burgess Founder

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    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
     
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  3. Brendan Burgess

    Brendan Burgess Founder

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    upload_2018-7-10_10-5-40.png
    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.

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    Brendan
     
  4. Brendan Burgess

    Brendan Burgess Founder

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    joe sod, Firefly, Purple and 2 others like this.
  5. Conan

    Conan Frequent Poster

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    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.
     
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  6. TheBigShort

    TheBigShort Frequent Poster

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    Interesting report for sure. Just some obs;

    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 %%.

    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.

    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.

    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.
     
  7. TheBigShort

    TheBigShort Frequent Poster

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    Last edited: 14 Jul 2018
    "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".

    :rolleyes:
    Surely the IT headline is more accurate?
     
    Last edited: 14 Jul 2018
  8. Brendan Burgess

    Brendan Burgess Founder

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    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
     
  9. TheBigShort

    TheBigShort Frequent Poster

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    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?
     
  10. Brendan Burgess

    Brendan Burgess Founder

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    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
     
  11. TheBigShort

    TheBigShort Frequent Poster

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    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.

    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.
     
  12. RETIRED2017

    RETIRED2017 Frequent Poster

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

    TheBigShort Frequent Poster

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    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.