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

Brendan Burgess

Brendan Burgess

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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
 
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.
 
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.
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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.
 
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 in-work benefits 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
 
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.
 
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.
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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.
 
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.
Click to expand...

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

It's a strong narative
 
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
 
Barra Roantree says the following:


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]
 
Protocol said:
why is pre-taxes/transfers market inequality so high here?
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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
 
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.)
 
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.
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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.
 
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.
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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.
 
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.
Click to expand...
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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