Income Inequality and Poverty: Crisis Dynamics

Brian Nolan writes on the dynamics of income inequality and poverty during the crisis in this Irish Times article.

14 replies on “Income Inequality and Poverty: Crisis Dynamics”

I wonder…

If a medium-to-long term shareholder was foolish or too greedy not to cash-in gains soon after Feb 21, 2007, when Irish share prices hit an all-time record, then he/she was henceforth poorer.

Two individuals – – one in the public sector, the other in the private sector, doing similar jobs and earning similar salaries, are they equal or unequal?

One may fear losing his job or has lost it since the crash; dare I mention that one is likely to have a much better pension than another.

Unless issues like this are accounted for as they impact a large number of people, the statement that inequality has fallen, remains questionable?

‘Ireland […] is distinctive in that the recession had the greatest impact on national output of any OECD country.

… while many Irish households have seen significant real income losses and deprivation levels have risen, overall income inequality has fallen.

Gini has always had some ‘particular’ difficulty grasping the upper_echelon gouger 2% – as they tend not to talk to her or provide any data.

Inequality will fall when a number of those at the top and in the middle are pulled down closer to those at the bottom. It probably tells very little about how, why and to whom all this happening. And it highlights a fundamental policy question: how much inequality should one tolerate if it is accompanied by everyone’s income increasing? or the converse, how much equalisation of outcomes should be imposed before it damages the economic welfare of all?

Unfortunately Ireland is at the wrong end of thse questions – even if it doesn’t have to be.

Your right of course, the solution is to make all public sector workers poorer, as then that will magically solve the other people’s poverty….won’t it?
How’s kuala lumpur?

Vide Piaget and his use of containers of various shapes and sizes (but the same volume of liquid) to illustrate misconceptions of amount. Some were a tad ‘full’. Some a tad ’empty’. Hmmmmm.

Brian Snr.

@ Tonicforthetroops

It’s a common line to ignore the argument by demonising the antagonist as anti-group, anti-country or whatever.

There is always support for this approach as Bertie Ahern found in Bundoran in July 2007 and in the US last week, the singers of the mantra ‘class warfare’ encountered a real warrior, a gay soldier via video link from Iraq, and booed him.

The facts on who is winning the class war in the US is self-evident but facts often do not matter even when they are addressed.

Research by the Pew Research Center in 2008 showed that Republicans who had education, as distinct from being educated, were the most convinced that manmade climate change was a myth. Those with less formal education were more open minded.

An interesting Irish example over the past decade were the reports on the ‘benchmarking’ payments by researchers from different public institutions.

The findings were invariably rejected out of hand by those who had a self-interest in doing so.

Another interesting aspect to that issue was that its genesis was the argument that there were loads of people in the private sector making big fortunes because of a few newspaper stories about millionaires.

Who wants to be benchmarked with the private sector now (for the record, no evidence was ever published to support the original nonsense a decade ago about private sector workers).

As for KL, this is the season when burning peatlands in Sumarta give us some smog at times – – slash and burn farmers clearing some forest.

You are possible safe yourself from the revenge of the poor!

“While the budgets for 2010 and 2011 implemented cuts in social transfers for those of working age, they also further increased direct taxes, and the overall impact of tax/welfare changes since the crisis was still highly progressive, with percentage losses for the bottom 20 per cent being only about one-third of those for the top 20 per cent.”

Wouldn’t measuring just the bottom 20% given our levels of unemployment mean you are essentially measuring the unemployed?
That their standards of living have been largely protected is not really doubted that much by anyone. There are some exceptions (the christmas bonus, fuel allowances etc.)
However I think what would be interesting would be to measure if there has been increased inequality of the 20-40% (usually known as the working poor) v the top 20% or even 60-80% people.
The working poor have seen huge % increases in their taxes through the USC, and lowering of the tax bands. Where as the top 60%-80% people (public sector and professionals mainly) have had lower % increase in their tax burdens.

Inequality in the US

But Mr Kowalski knocks down the common assumption that Tiffany’s US growth comes from middle-income consumers who are saving money at dollar stores so they can buy silver trinkets such as $125 key rings.
Instead, as economic polarisation grows, Tiffany’s success is built on an increasingly concentrated group of high-spending wealthy Americans.
“The slower-growing product categories are clustered around lower price points … Predominantly silver jewellery at entry level price points,” Mr Kowalski says.
“Conversely, higher price point products with high diamond content are the fastest-growing, so you do see that income dichotomy reflected in the relative strength in our product categories.”
Jewellery’s share of sales – including diamond rings that can cost more than the average annual US household income of $49,445 – has risen from 70-75 per cent to 91 per cent over the past 15 years.

The defensive arguments of the public sector commenters intrigues me when it comes to the inequality debate, not helped when the debate keeps conflating and confusing “equality” as the relationship between public sector and private sector pay.

The big factor in inequality was the huge leaps in executive pay. The workers bees salaries may have increased (in western countries) but the C-level salaries sky rocketed.

Now, trade unions co-opt the language of the left so therefore people tend to assume that they are left, but the really odious aspect of benchmarking was how it was entirely predicated on imprinting the inequality of the private sector into the public sector. I will never understand how unions like CPSU stood back and agreed to tiny % increases for their members – the bottom of the heap -while the management found their salaries ratcheted up to private sector levels + (cos they had all that lack of accountability + great leave + barely funded pensions).

If the big trade unions were actually left wing, they would have said no to benchmarking and instead negotiated bigger increases for those at the bottom and smaller increases for those at the top. Instead they agreed to County Managers on 250k and the clerical workers languishing on 20k. Of course they could present the wins as being more significant due to the simultaneously negotiated income tax reductions, even though that left the exchequer overly dependent on indirect taxation, which as we know, weighs more heavily on the poor than the rich. So much for left wing economics there….

So the public sector people attacking MH really need to ask themselves what they mean by inequality. If we mean narrowing the gap between top and bottom then ask Blair Horan and Jack O’Connor what they intend to do about narrowing the gap between Assistant Secretaries and administrative officers.
If they mean getting private sector pay but without private sector conditions then sure, keep having a go at MH.

& as Breen, Hannan, Rothmann & Whelan put it over 21 years ago – ‘the Irish welfare state is a middle class construct’ … still is.

Point behind the income gap can be found also in the price given to human skills. Researchers claim that value of skills increases with the technological advance of society. Therefore, income inequality does not correlate so much with the values of assets people own.

Another point of view can be seen in the impact of anti-crisis measures on the income inequality, i.e. policies which directly contribute to the financial imbalance in society. Paradoxically, such an approach, originally envisaged to help the society, significantly makes the income distribution further split.

Comments are closed.