Writing in today’s Irish Times Vincent Browne has an opinion piece that purports to look at the impact of austerity in Ireland. Much of the argument is based on this graph from a presentation by Thora Kristin Thorsdottir at a NWCI/TASC conference on Monday.
I don’t know anything about the Icelandic data used in the graph but it may be worth noting a couple of points on the Irish element of the graph:
- It does not show real changes.
- It does not reflect earnings.
- It does not relate to couples.
- It does not illustrate data from 2008-2009
None of these are terminal errors but if the Icelandic data reflects the titles and labels, the Irish data should not be on the same graph. I was not at the presentation so am unclear as to whether the graph was presented as evidence of “the impact of the crisis measures adopted by governments” but this is claimed in the Vincent Browne article and also in this Colette Browne article in The Irish Examiner (who makes it a double whammy with the additional misinterpretation of the WEO analysis of the IMF’s fiscal multipliers).
The Irish data used in the above graph come from the 2010 Survey of Income and Living Conditions. We previously presented the CSO’s version of the graph and highlighted the possibility that the numbers would be incorrectly interpreted.
I could spend a long time explaining how this graph should to be interpreted, what equivalised means, and elaborate on the little information that can be ascertained from it. Suffice to say, it says close to nothing about the impact of budgetary changes on household income. Incomes fell because, at the time the data was collected, the Irish economy was still in freefall and the collapse in employment was the key factor in explaining income changes.
The impact of Irish budgetary policy in the crisis on household income was examined by Callan, Keane, Savage and Walsh in an article published with the ESRI’s Spring 2012 Quarterly Economic Commentary. This graph and subsequent paragraph summarise the findings:
Figure 1 shows that over this 4 year period, the distributional impacts show a strongly progressive pattern, with the lowest income group losing by about 4 to 5 per cent and the highest income group losing by close to 13 per cent.4 The scale of the progressive impact of earlier budgets, which raised income tax, abolished the ceiling on PRSI payments, and introduced the Universal Social Charge is much greater than the regressive impact of Budget 2012. The net effect over the whole period is therefore strongly progressive.
There has been income reductions but most of this is because of unemployment. There has been hardship because of the efforts being made to narrow the deficit but they have been progressive. Using selective, incorrectly presented, wrongly interpreted data in support of a narrative that does not exist should not be let go unchallenged.
For those who are interested it may be worth comparing social welfare rates from 2007 and the rates from 2012. It is a little inconsistent to decry the cuts in social welfare rates that have occurred “since the crisis broke in 2008” while failing to mention the increases to the same rates that were provided in the same period.
We have plenty to be angry about in this country without needing to make things up to give out about.