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Income inequality: how big is the gap between Ireland's rich and poor?

In July of this year, 39 families were made homeless in Dublin, Ireland’s capital city. In that same month, a report found that one in every 40 people living in the same city could be classed as a millionaire. While the criteria for measuring millionaires in that report may have its flaws; on the face of it, it would seem that with so many wealthy residents and so many residents who are being made homeless due to their financial situation, Ireland has a problem when it comes to income equality.


While we have turned a corner in terms of unemployment statistics and we have a welfare system that is effective at preventing people from falling into poverty, there are some warning signs that Ireland is failing some of the most vulnerable members of society, including children and those who are living with disabilities. These issues need to be addressed if Ireland is ensure that we do not become like New Zealand, a country of similar size to our own in terms of population. New Zealand’s income gap grew significantly in the 1980’s and 1990’s and there are some who argue that this gap is yet to be closed.


After sweeping economic reforms and deregulation of labour markets in the 1980’s and 1990’s, the gap between New Zealand’s rich and poor began to climb significantly. This has led to New Zealand being ranked 20th among the 34 OECD countries in 2010 in terms of income inequality. As a consequence of this, New Zealand now has high rates of mental illness, drug use, teenage birth rates and levels of imprisonment in comparison to other OECD countries. There are organisations, such as Closing the Gap who are working to highlight this issue in New Zealand but as yet in Ireland, we do not have such organisations. So is it time that we took a closer look at addressing Ireland’s income inequality issue, or is the issue as bad as it seems at first glance?


There are a number of positives that Ireland has in its favour according to Dr. Donal de Buitléir, Director of PublicPolicy.ie, an independent body that carries out research on public policy issues that affect the citizens of Ireland. “We have a very progressive tax system,” he says, before going on to add that, “Before the tax and transfer system comes into operation, half the people in the country are at risk of poverty. After that system operates it is one in six.”

This is a good sign and Dr. de Buitléir is also very keen to point out that Ireland’s social welfare system is one of the most effective in protecting against poverty. While this is encouraging to hear when one is worried about income inequality, his colleague Cormac O’Sullivan explains that this is necessary. “We have an incredibly, by European standards, unequal distribution of market income,” explains Cormac, before going on to add that, “We’ve got a very progressive tax system and we’ve got a decent welfare system that’s good at preventing poverty but we need to have a very progressive system and a very good welfare system to counteract our natural unequal distribution of market income.”


Dr. de Buitléir is also sceptical of the report that claims one in every 40 people in Dublin is a millionaire. “The plain fact is we have no information on personal wealth in this country,” he says. However this could well be addressed soon as the Irish Central Bank are currently carrying out a survey on people’s personal wealth. This will allow PublicPolicy.ie and others to properly analyse the finanical situation of Ireland’s citizens for the first time. At the moment, as Cormac explains, “When we’re looking at inequality, we can only look at the income component and then of course you’ll say something about income inequality and people will say ‘well what about people with high mortgages?’ They might have high income and be alright in the income equality statistics but you might have a high mortgage. So for the first time we’re actually going to have information on people’s asset positions.”


This is sure to make for an interesting study when the figures are available and it may well give a clearer picture of Ireland’s income distribution. As Dr. de Builtéir explains, there is a big difference between a person earning €30,000 per year but is paying a large mortgage and another person who is earning the same amount but inherited their home from a parent. For this reason, Dr. de Buitléir says that he is in favour of an inheritance tax in Ireland although he acknowledges that this would be difficult to implement in a country where farmers have historically passed on land to their children. Although he also points out that, “The evidence is that land that is passed on is much less efficient than land that’s bought.”


When looking at the statistics, it would seem that Ireland is broadly in line with the rest of Europe. “On the two numbers on the Gini we, after the tax and transfer system, we’re actually not too far off the EU average. On the quintile ratio we’re pretty much bang on, slightly better,” says Dr. de Buitléir. What he is speaking of here is the Gini Coefficient, which measures the degree of inequality in the distribution of family income in a country. 100% on the Gini Coefficient would imply complete inequality, with one person in the country holding all of the wealth. The EU average Gini Coefficient score is 30% and Ireland’s score currently stands at 31%. However, as Cormac explains, the Gini Coefficient only shows the overall picture of inequality and doesn’t show where that inequality exists, for example, is it between the top earners and the middle income earners or the top earners and the bottom earners? This is why the quintile ratios are also important as they measure the differences between different income groups in a society. In Ireland, as Donal explains, “Its 5.0 and the EU average from memory is 5.1.” So would it be fair to say that Ireland is in a pretty good place when it comes to income inequality? “I don’t think the data would support that it’s worse than anywhere else,” says Donal before adding, “That doesn’t mean we shouldn’t be better.”


Cormac agrees that there are encouraging signs for Ireland. “The jobs figures so far have been really encouraging and in terms of social policy, in terms of protecting people from poverty, in terms of decreasing inequality that’s a really good sign,” he says although he also notes that, “We’re going to join the rest of Europe as it were in sort of worrying about working poor and those issues but that’s a better place than where we are now when we have non-working poor.”


This evidence seems to show that Ireland, although still with its problems, is not the most unequal society and we are in a pretty good place in terms of tackling income inequality. But increased levels of homelessness and protests at water charges that are going to heap more financial burden on to already stretched families seem to tell a different story and Donal and Cormac point out a statistic that may explain why so many families are so stretched. This is the jobless household figure, or very low work intensity. “The percentage of persons aged between 18 and 59, excluding students, who are in households which are working less than one fifth of the time in Ireland in 2012 was 23.4% which is the highest in the EU by a distance,” says Dr. de Builtéir. “These are people who don’t necessarily turn up in the unemployment statistics because the unemployment rate is 11.2% so they might not be caught in that statistic,” explains Cormac.


What is even more alarming is that, according to the Work and Poverty in Ireland, 2004-2010 study carried out by Dorothy Watson, Bertrand Maitre and Christopher T. Whelan, of those in the jobless household figures;


“Eighteen per cent are adults with a disability and 41 per cent are people who live in a household with one or more adults with a disability. In almost one third of cases, the householder had no educational qualifications, or was unemployed. A quarter of all children are in jobless households, and they represent one third of the total jobless household population”

It would seem that while Ireland may not be the most unequal society in the world, we may be letting down those who are in the most need of our help.

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