Opinion versus Reality

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:

  1. It does not show real changes.
  2. It does not reflect earnings.
  3. It does not relate to couples.
  4. 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.

37 replies on “Opinion versus Reality”

Excellent points.

However the fact that the information may be incorrect, factually wrong, selective in its perspective is irrelevant.

The presentation suits the agenda. That is what is important, not reality.

The sooner Atlantic Philantrophies winds up the sooner the air will clear of all this mis information and black propaganda.

As you correctly say…”We have plenty to be angry about in this country without needing to make things up to give out about.”

Excellent piece Seamus. It’s a shame the mob are exposed to such poor analysis in the daily broadsheets.

Using selective, incorrectly presented, wrongly interpreted data in support of a narrative that does not exist should not be let go unchallenged…..exactly what Vincent Browne does in every article. Banging on about the same sub Marxist agenda while he flogs his house for millions and bankrupts every business he’s ever been involved with leaving lots of creditors high and dry. Only in this country would he be given a platform for this drivel.

Seamus, your points about the mis-use of data by journalists and others are well-taken. I would like to add a couple of further comments. I think it is important to ensure that we interpret the Callan et al study properly as well. This study shows the first-round effects of budgetary policy as it impacts across the distribution, and as you say, with the exception of Budget 2012, this has been progressive in relative terms. But there may also be second and further round effects. For example, if budgetary policy contributes to a decline in consumer or investor confidence this may have an impact on output and employment, and those output and employment effects may be progressive/regressive. Government policy in other areas such as banking will also have effects which may impact differently across the distribution.

Ideally we would like to observe a counterfactual whereby overall government policy was in some sense “neutral” since 2008, and I accept that trying to pin down what exactly we mean by neutral is problematic. But if we could do so we could then isolate the government contribution to changes in the income distribution.

Or to put it more simply: In terms of what has happened to the distribution of income, the graph from Callan et al shows the first round impact of a subset of government policies, it does not show the full picture. The CSO graph (if we had it for the complete period) does show a fuller picture, but of course also includes the impact of many factors outside the control of government. Of course it also does not include some factors within the control of government (such as the distributional effect of indirect tax changes which typically hit the poor to a greater extent).

So you are right, these numbers do need to be treated carefully!

If you really want to dig deeply into this area I recommend the following:
http://www.frdb.org/upload/file/report_1_palermo.pdf

This gives a general account of the impact of the “Great Recession” on the distribution of household income with some specific chapters on individual countries, including Ireland. It dates from mid 2011 so very recent developments are not included, but in terms of setting out the issues, it is excellent.

That is an appalling error. It’s a wonder some of these people manage to dress themselves in the morning.

I believe in freedom of speech but there has to be be some control on the dissemination of non-slanderous false and misleading information.

Perhaps if the papers were simply forced to publish a list of previous errors on their front page where same were adjudged clearly factually incorrect (without recourse to matters of opinion or value judgments) then people would be able to see the poor level of reporting for what it is.

The extent to which unemployment has nothing to do with government policy, perhaps your claims are correct. However, I’m not sure you can disaggregate between budgetary policy and unemployment. Even accepting the logic of austerity, different budget adjustments have different employment affects.

This is all over the place

Seamus ‘was not at the presentation so am unclear as to whether the graph was presented’ but carries on to deliver a sermon about a detail of Browne’s article.
It gives the impression that you do not think that the most vulnerable have borne the brunt of the economic collapse.

Instead of telling what is not, you could do more service by saying clearly what is

Barry and Conroys report and Seamus stats regarding social welfare have one thing in common.

They show that it is actually young adults who are taking the brunt of this recession from all directions.
They got social welfare reductions of 45% while pensioners payments were increased.
Barry and Conroys report tries to outline that gender inequality is the untold story of the recession even though every table they use clearly shows that the untold story is not discrimination based on gender but discrimination based on age. The wagon are circling and the young are clearly the outsiders on the very edge.

“His palms are sweaty, knees weak, arms are heavy”
Did Seamus perhaps “lose himself” in the opening sentence or two of the piece.
Jumped up and prepared a diatribe against VB….
The majority of the article is based on the linked report as clearly stated.

Seamus

It is a pity that the authors had used the correct captions on the graphs but that alone does not invalidate the substance of some of the arguments.

The SILC (2012) survey is as clear an exposition of the winners and losers of the Great Recession as one could hope get.
True the individuals making up the deciles may have changed but it is clear that the lucky decile or protected decile or deserving decile, depending on ones point of view, have managed to get or retain a much greater slice of a reducing cake than those in or thrown into the lower decile.

The ESRI graph does show progressive distributional impacts up to 2011 but 2012 is regressive.

The Social Welfare charts referenced cover the budget period (2007-2011), so the increases that were applied, mostly in Jan 2008, are brought into the equation of “since the crisis broke in 2008”.

A further point that need to made, it is some of the loss of jobs, that propelled people into lower and indeed the lowest decile, was Government policy. I refer here to the laying off of temporary and contract workers in the PS, that occurred mostly at the outset of recession. This is also happening at present with the reduction in home help hours.
One could argue that the entire policy of PS layoffs, many at senior level, has contributed to the changing decile composition.
This nonsense policy is due for a further run in the coming year.

@Seamus

So what if the data refers to households instead of “couples” (whatever that meas) or to disposable income as opposed to earnings. And it is irrelevant that a great chunck of the loss of disposable income is as a result of unemployment rather than budgetery forces.

“Suffice to say, it says close to nothing about the impact of budgetary changes on household income. ”
Again, so what? Isn’t the point of VB’s article about end results, about how the depression has effected the bottom line in households?

The basic message of VB’s article remains valid. If you are unhappy with the data used for comparison, and can think other sets of data concerning disposable income that would be better, then go do the comparison.

It is specious to juxtapose the graph on disposable income with the graph on budgetery impact. So what if the impact on the top decile was 12% between 2008 and 2012 – this is the cohort that disproportionately benefited from the bubble.

All the last two graphs tell me, when taken together, is that even more of the adjustment should have been borne by the top decile. If the top decile could grow their “equivalised disposable income” in 2010, then they could easily have shouldered more of the burden.

@Seaumus Coffey

Useful addition. In fairness to our Icelandic visitor this was a single slide in a presentation on gender in/equality.

In the previous thread [“previously” link in main post] I also provided a link to a useful analysis by Michael Taft:

@From the ‘dodgy’ specifics to the ‘general’.

Browne states: Irish solution has been to make most vulnerable pay.

On balance, I humbly suggest that the assertion has merit.

@all

May I humbly suggest that all Irish analysis based on Irish data carry the health warning “dodgy” and to be treated with “care”.

I sense another magnum opus coming on: The Dodgy State of the Nation as a follow on to the best selling The Greatest Bank Hoist in World History and the pot-boiler How the Financial System Stole Half the Irish GNP (without a single shot being fired) and the one-pager Suck It Up Dummies!

Blind Biddy is back in Bahrain with the one-eyed Sheik after her brief sojourn in Iran.

@ DoD

“Browne states: Irish solution has been to make most vulnerable pay.”

Well, in fairness, i”d reword that as “make the most vulnerable receive less”. Did anyone read the “Measuring Ireland’s Performance” paper by the CSO, which shows great like-for-like comparisons vs our EU peers? For some reason, which perhaps someone else can explain, we spend, by quite some distance, the most amount of money on sickness & disability and family/children as a % of GDP as any other country (granted, 2009).

@BEB

As you well know, that is a result of Bertie’s socialism. But as the great man himself might say, “we are where we are”. With household indebtedness as high as it is, what would you do? Which do you think would have the lesser impact on the domestic economy, reducing social benefits or taxing wealth/household equity?

@BEB

As you know I’m not a glass half empty analyst – on many areas we do OK. Irish welfare state is a ‘middle class construct’ and its origin differs from other west EU states which had a labour/social democratic origin. Purpose for lower classes is containment and pacification while childer of the middle take the better life chances in public sector, education etc i.e. most welfare goes to the middle and the upper-echelon remain largely untouched …

Classic example this week [of most vulnerable receive less] where the Irish Gov supports retention of present divvy of 1.2 billion CAP to the wealthy farmers rather than by productive acreage which would benefit weaker farmers in north and west …. with markets opening up in a few yrs. I’m amazed there is not more discussion on this ….

Agree there are some serious anomalies in welfare – and I believe Minister Burton is serious in addressing them but record of change for this admin to date does not inspire confidence … percentages across states do not take account of social infrastructure such as cheap affordable child care and a well run care for the elderly – the Harney/McDowell PD legacy of privatisation and the gov legacy of leave it to the religious and the charities remains in a state of unmanageable chassis … and the penchant for universals rather than ‘need’ ….

You see Eoin, we have never been Modern and we have certainly never been Social Democratic!

@Bond

Well, he’s not just talking about “the most vulnerable RECEIVE less”, he’s also discussing the levels of taxation/charges on those on the low-end of the pay scale; which is a more important issue…

Also, remember the cost of living is high in Ireland; particularly in terms of basic living expenses.

Re sickness & disability: you can thank a disastrous healthcare system, riddled with incompetency and negligence…

“Opinion versus Reality
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…
I was not at the presentation so am unclear…”

This is ehm “reality” and there was I thinking after her fantastic performance on VB other evening,that this “opinion” piece was based on Ursala Barry’s paper,conveniently completely ignored in the above.
A giveaway may have been the last line in the article.

But thanks for that reality check…it may be possible to still catch that VB show,or read the paper,anyway back to well reasoned,informed “opinions”.

“Economic policy has been dominated by the single priority of reducing public expenditure, with little evidence of a gender-informed strategy to combat unemployment, tackle poverty or address inequality. Employment policy has shifted from a ‘pre-recession’ emphasis on increasing the supply of labour (through a higher women’s employment rate and net in-migration) to a focus on registered long-term unemployment leading to a definite gender-bias and penalising a specific category of women: lone parents in receipt of welfare payments.” Link above.

Thursday, October 11, 2012
IMF Suddenly Decides It Might be OK to Loosen Austerity Tourniquets Now that Gangrene is Setting In

While deathbed conversions might earn you a spot in heaven in some religions, they don’t carry you very far here on Planet Earth.

Christine Lagrade has taken too small a step in the right direction far too late to do much good. At the current IMF annual meeting in Tokyo, she’s made dramatic-sounding pronouncements consistent with the rather embarrassing admission in the Fund’s latest quarterly report that austerity is working less well than voodoo (I’ve never tried it myself, but some correspondents give it high marks).

As we stressed, the IMF has admitted what observers have already reported on, at some length, by looking at economic outcomes in Latvia, Greece, Ireland, Portugal, and Spain: its tender ministrations are leaving its patient worse off. Cuts in fiscal deficits (ex in special circumstances, such as being able to trash your currency at a time when your trade partners have good levels of growth) lead to even greater falls in GDP levels, resulting in higher debt to GDP ratios, the exact opposite of what this exercise was intended to accomplish. The bureaucratese is “fiscal multipliers.” When fiscal multipliers are greater than 1 deficit cutting makes matters worse. The IMF’s ‘fessing up to a problem without releasing country by country data suggests it is showing fiscal multiplies greater than 1 in pretty much all of the countries now wearing the austerity hairshirt.

http://www.nakedcapitalism.com/2012/10/imf-suddenly-decides-it-might-be-ok-to-loosen-austerity-tourniquets-now-that-gangrene-is-setting-in.html

@David enjoyed the exchange,all best,this forum probably not for me.
Given the last few posts,I shall retire to more a more refined environment,tks.

“The efficient market theory and trickle down economics are what the Brits like to call ‘bollocks.’ If you wish to take from the weak and the poor and the elderly and and give it to those who have the most already, just say it, proudly. ”

Golem IX.

@eamonn moran
“The wagon are circling and the young are clearly the outsiders on the very edge.”
Yeah, but they don’t work as hard as we did, they never had it so good, they don’t know they’re born, they don’t show no respect, being forced out of the country is an adventure for them, our music in the ‘sixties was better, blah, blah, effing, blah.

No, but…

@Seamus Coffey
“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.”
My understanding of the budgetary process is that the rise in welfare rates happens in March/April following the budget. So, in fact, the rate at the end of 2007 would pertain at the start of 2008? In this case, should the rates used for a 2008-2012 comparison not be the starting rate of 2008 (i.e. the ending rate for 2007) to the ending rate of 2012…

http://www.welfare.ie/EN/Press/PressReleases/2008/Pages/pa120208.aspx
http://www.welfare.ie/EN/Press/PressReleases/2008/Pages/pr140208.aspx

So Seamus,
when are you next on the Tonight with VB show?
I predict a “For the last time, will you please answer the question heh heh?…” episode
😉

@Sarah Carey
re: Szekely
What an extraordinary load of arrant nonsense.

“Mr Szekely quoted statistics which showed the highest earners have lost far more in Ireland through the fiscal consolidation than lower earners. According to the economist, who leads the EC’s mission in Ireland as part of the state bailout, average income among the richest 10pc has fallen by about 11pc, while the lower half of earners have seen their wealth curbed by between 4pc and 6pc.”

Ireland’s ‘highest earners’ were rewarding themselves with mega riches in one of the largest property ponzi schemes known to history. The fact is that these people kicked and screamed to hold onto their ponzi era. The consultants are still kicking and screaming and ‘doing surveys’. The only way to get anything from them was to fiscally consolidate them; they in turn having bankrupted the rest of the State.

Does Mr Szekely believe that equity demands a similar fiscal percentage adjustment from a person earning €25,000pa and struggling to survive as it demands from a medical consultant earning €500,000pa?

Is that the philosophy of the EU Commission? If so, it is a matter that should be aired at the European parliament.

@Joseph Ryan

Does Mr Szekely believe that equity demands a similar fiscal percentage adjustment from a person earning €25,000pa and struggling to survive as it demands from a medical consultant earning €500,000pa?

Is that the philosophy of the EU Commission?

Of course it is, and it represents the consensus position among the “very serious people” cohort of the Irish economics profession as well.

Do you imagine that either Szekely, ECB boot boy Klaus Mausch or fugitive from European public opinion Lorenzo Bini Smaghi have ever used the words “inequality”, “justice” or “redistribution” in other than a dismissive tone? It smacks of market distortion you know and the dogs in the street know that what is really required is the making of “difficult choices” (privatizations, social welfare and health cuts), supply side reforms (reduced job security, wage repression) and labour mobility (the reserve army of the unemployed will be obliged to travel to where capital can make the best use of them).

The European right has sociopathic tendencies which it was a serious error to ignore and they now dominate economic policy making at every level in the EU. I see no escape from the noxious cocktail of austerity (and never mind the multiplier) and financial sector coddling within EMU.

Sadly our government are too craven and short sighted to begin planning an escape, the main tactic as Matt Cooper memorably puts it of “lapdog diplomacy” is guaranteed to fail.

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