Inequality in the Irish Context

John FitzGerald’s ESRI piece has added to the debate on income inequality in the Irish context, with some reaction from TASC’s Cormac Staunton, the Irish Times’ Chris Johns, and some other guy giving the flavour of the exchanges from right and left.

Edit: I think David’s forthcoming ESR piece (.pdf) is a real contribution to the debate and should be noted up here, too.

 

Comments

comments

Author: Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

69 thoughts on “Inequality in the Irish Context”

  1. A few general observations:

    Probably the most remarkable feature of inequality in Ireland (as measured by the Gini coefficient on equivalised disposable income) is its stability. It ranges between about 0.31 and 0.32 for practically all years in the 1994-2012 period (falling below 0.3 in 2009). Given that there is some sampling variation in measuring the Gini, my guess is that it would be difficult to reject the null hypothesis that it is unchanged from year to year (apart from occasional year on year changes such as 2008-2009).

    John Fitz makes the point that disposable income, as measured by surveys like SILC does not take account of changes in house prices during the boom and bust cycle and so may not be an accurate measure of living standards for the 35-50 year age group. I can see the point he is making, but in general when looking at current disposable income we do not adjust for changes in asset prices. Trying to do so opens a Pandora’s box as to which assets should be included, why we should make adjustments for what in some cases may have been investment punts which went wrong etc.

    Another issue to bear in mind is that some of the fiscal adjustment over the period has taken the form of reduction in the quantity (and quality) of various public services e.g. restrictions in medical card availability, cuts to home help hours, cuts in the availability of special needs teachers etc. To the extent that such cuts may not apply uniformly across the income
    distribution, then they will affect the distribution of a broader measure of living standards, although they may not be reflected in changes in income. The same might also be true in terms of cuts in non-pay benefits provided by some employers e.g. health insurance etc.

    Anyway, for those who are interested, here is a piece I did which covers the 2003-2011 period (though I doubt the latest SILC figures for 2012 would affect the conclusions to any appreciable degree). A version of it is due out in the Economic and Social Review soon.

    http://www.ucd.ie/t4cms/WP13_15.pdf

  2. The most interesting aspect of recent developments, when observed from the vantage point of someone without formal training in either economics or banking (i.e. that of the vast majority of the population), is how what might be described as the “statistical approach” is catching up with the everyday reality of the “squeezed middle”.

    It is undeniable that there has been an admirable degree of success in protecting those in receipt of transfer payments, not least because of the fact that most of those in receipt of them vote and politicians believe in giving voters what they want (a universal trait but greatly enhanced by the PR electoral system). This circular process was ably described by Pat Leahy in the SBP this weekend.

    http://tinyurl.com/kfqkk7u

    The elephant in the room is the failure of government – and the academic community – to focus on increasing the size of the cake rather than how, in its diminished form, it is currently divided.

    When the fact that one in five households has no one in gainful employment is considered, this failure of collective eyesight cannot be expected to continue; or can it?

  3. “Maintaining the welfare system largely unchanged, in the face a huge increase in numbers depending on the system, imposed a very big burden on the public finances”

    Job seekers allowance/benifit for 19 year old in 2008 188 per week
    Job seekers allowance/benifit for 19 year old in 2014 100 per week
    I doubt those under 25 would agree its largely unchanged. It was only by changing it dramatically for a largely apathetic minority and increasing the tax burden on the middle that it could be maintained for the rest.

    The number of children and 18-30 at risk of poverty has increased dramatically and the number of those in older age groups at risk of poverty has decreased dramatically over the same period

    “Thus most of the population have suffered a serious decline in living standard but the decline has been most acute for those who lost their jobs.”
    Number of people employed over 30 in the economy is now the same as it was in 2008 even though there are 300k less working. virtually all of the unemployment burden was foisted upon the under 30’s

    The main thrust of the data about the population over all is true.
    All you need to do is ignore the massive age divide and the age of those forced to emigrate, the increse in unpaid internships, Jobsbridge dramatic reduction in starting salaries in the Public Sector and you can say that inequality has not increased.
    In another ESRI study on spending patterns by Petra Garlach an odd thing was noticed. Avg householdSpending had remained constant for those above 45 during the recession but had collapsed for those under 45

    I would like to make a plea to Irish economists to start looking more closely at age demographics when looking at income inequality. Since Ireland is fairly unique in the amount and speed at which its people emigrate what would have been the effect on income inequality if those largely younger people had stayed?

  4. @DOCM
    “not least because of the fact that most of those in receipt of them vote”
    Cant believe i am saying this but…
    That is unfair to politicians because lower economic groups are less likely to vote than those in higher economic groups.

  5. @ eamonn moran

    True! But social transfers are not confined to the lower income groups.

    http://www.social-protection.org/gimi/gess/ShowTheme.action;jsessionid=81eafccf5fb9aeba9a3c0aa6a5a69e59308e0d6cb31dd6f47a4a8b7a393a1737.e3aTbhuLbNmSe34MchaRah8Tch90?th.themeId=11

    (What is missing from the ILO coverage, as far as I can see, is an appropriate level of emphasis on affordability).

    The justification for universal benefits, especially in Ireland, is dubious, to put it mildly, especially in relation to child benefit and the various age-related benefits. These add up to a lot of voters!

  6. @ eamonn moran

    I missed your earlier post, with the contents of which I would largely agree. The implementation of public sector cut-backs has been grossly unfair across the generations and in terms of new entrants. What is even worse is that they have taken place behind a facade of pseudo-reform and the search for “accountability”.

    The gap between the top and bottom public sector salaries became too wide. As long as the salaries of politicians are anchored to them, there will be no change in this situation.

  7. @David Madden

    Methinks the Gini started to solidify

    around 1973

    a decade after The Beatles visited town

    and Blind Biddy planted the Fig Tree.

  8. DOCM,
    perhaps you could provide evidence that the gap between the top and bottom of the pay scales became too wide or is that another top of the head non evodence based spoof. You could start by comparing bottom of the pay scale in the public sector and bottom of the pay scale in the private sector and then do that at the top.

  9. John FitzGerald did a useful piece of work.

    Last year Joan Burton issued data that showed 2.3m or 50% of the population were on welfare and today’s Live Register data shows that there are 469,000 in receipt of employment related public payments whether via the LR or activation schemes – 22% of the workforce.

    Inequality has fallen but there are still a lot of people scratching a living.

    It’s striking that Ireland was the only EU country that experienced an actual price decline in 2008-12 and still remains one of the most expensive places in the EU28.

    There are a number of economies in Ireland:

    1) the FDI sector, and it’s supporting eco-system where professional services come at a high cost and the public sector also pays the high cost as a big consumer of services (also protecting the market by not insisting on transparency);

    2) Two-thirds of private sector jobs are in the non-exporting sector; SME pay is poor and pension coverage is low – Ibec and its small firms unit opposes pay rises because wage levels are lower in the UK;

    3) The public sector – benefits of recent entrants have been cut;

    4) Net family farm income increased marginally in 2013 to an average of €25,639 per farm (79,000 farms) according to Teagasc. In 2013 the proportion with holder or spouse with an off-farm job has increased to 51.2%. The number of farmers employed off farm also increased from 28 % in 2012 to 29 % in 2013.

    Direct payments (CAP) comprise on average 75% of total farm income across all farms.

    In France the average price of arable land in 2012 was €6,560 per hectare and in Ireland in 2013 the price was €23,200 / ha.

    Compared with the typical SME worker, the Irish farmer is well-off in asset terms.

    On Eamonn Moran’s point on spending by the 45+, I have often cited a statistic because it’s unusual in Western Europe: over 40% of Irish owner occupiers in 2009 had no mortgage – this may partly reflect high disposable incomes during the bubble.

  10. @Tull

    Surprised at you! Shurely you know by now that rabid fundamentalist ordoliberals do not believe in evidence … the empirical is merely a nuisance; blind faith in their supposed superiority is all. The poor dears …

  11. What is the debate on income inequality?. It seems clear that Ireland has a more unequal distribution than the euro norm in terms of gross income but that the tax and welfare system delivers a post-tax and transfer income distribution which is around the euro norm. If this is too unequal for some it is extraordinary that , as David Madden notes, the Gini coefficient has been remarkably stable for the past twenty years, a period which has seen large moves in marginal and average income tax rates, implying that it is very difficult to shift that coefficient.
    As for wealth, the CSO stats show that in Ireland property accounts for the largest part of household wealth, so a wealth tax would essentially have to be a property tax, which the Irish population seem to abhor, although we already have an implicit tax on wealth held in bank deposits (DIRT) ( implicit in that the tax is on income earned on that wealth)

  12. @Dan McLauglin

    ‘… implying that it is very difficult to shift that coefficient.

    Not necessarily. Had there been significant political efforts to shift the coefficient then a conclusion of ‘difficulty’ would be plausible …

    There has been NO such effort.

  13. 3) The public sector – benefits of recent entrants have been cut;

    Newsflash: the benefits of every person working in the public sector have been cut.

  14. For the ordinary layman, David McWiliams does better job in my view at explaining wealth inequality in Ireland:

    http://www.davidmcwilliams.ie/2014/06/03/property-here-we-go-again

    Stats showing redistribution of earnings in Ireland simply do not catch the bigger picture…..Property /land has always been the big distinguishing factor in Ireland.

    Even David’s article doesn’t deal with farmland for instance and how it has always been treated (left untouched, farmers subsidized, etc) in Ireland.

  15. Even the informed layman gets it….why not “stats obsessed” Irish economists?

    http://www.independent.ie/opinion/comment/the-now-generation-should-enjoy-the-races-because-weve-left-them-our-debts-30472881.html

    As we have said here many times before, economic models are very limited at best.
    I agree with David McWilliams when he says that fiscal deficit measures /accounting /fiscal pact constructs and the like are not economic drivers.

    “Amazingly, Irish politicians and the civil service have manoeuvred themselves into a position where the acid test for success or failure is whether the budget deficit goes up or down.
    However, the budget deficit is an accounting residual – it has very little to do with economics. It is a figure that falls out of national accounting models. It is the end point, not the starting point.
    As such, it tells you very little about what is going on. ”

    Which is why ‘experts’ such as John McHale, but in fact most mainstream Irish economists, should be taken with a pinch of salt when they obsess about their economic models /fiscal compacts, etc.

  16. Just before someone says that I have unfairly mentioned JMcH by name, he is after all the head of Ireland’s FC. In relation to stats but Gini Coefficient in particular, I must also mention my fellow Corkman, Seamus Coffey (who I admire)….has a particular thing for Gini’s

    I note too the informed Irish layman (Ivan Yates) picking up on the obvious rush by Elite Ireland to entrench themselves in advance of a possible “challenge” from SF in particular. Best laid plans and all that. Again, the political tone has been incredibly different since the European & Local Elections……

  17. JFG’s claim that “the big fall in numbers of high earners meant that more of the burden of income tax had to be carried by those on middle incomes” may be somewhat misleading.

    Based on the same Revenue Commissioners’ data which he cites, those earning less than €100,000 saw their average income tax rate shoot up from 9.9% to 10.4% and their total tax bill fall from €6.6bn to €6.2bn between 2007 and 2011….

    Of course the major redistributive impact was the introduction of the USC (which is not included in the Revenue’s income tax numbers), which was designed to be far less progressive than the income tax – with a top rate kicking in at €16,016.

  18. @ fravo

    Wow that was one of the best attempts at using stats to mislead ive seen in a while.
    “those earning less than €100,000 saw their average income tax rate shoot up from 9.9% to 10.4% and their total tax bill fall from €6.6bn to €6.2bn between 2007 and 2011”

    Those under 100,000 = 95% of the workforce. Their number went from about 2 million to about 1.65 million over that time.

    What was the total income earned in 2007 for those under 100,000 v 2011?. A hell of a lot less as most people wages either went down or for about 350,000 people they lost their jobs.

    Let me guess. You are one of those over 100k?

    @ Ernie Ball

    Dont try to pretend that PS workers employed over 10 years have had cuts anything like the new entrants.
    The crisis began in 2007 but pay rises continued in the PS till 2009. The cuts brought PS workers back to the 2007 levels. The massive rises between 2000-2009 were built on sand (property taxes) and completely unafordable.

    The few Young people now entering the PS (the other method used to maintain salaries was to reduce staffing to dangerously low levels) are on contracts 35% less than those entering a few years previous. Their unions now issue crocodile tears. The same unions could have called a strike at any time to protest at the lack of equal treatment for new entrants. It used to be called solidarity. It was supposed to be what unions were about.
    But the unions abandoned solidarity in order so that those older and more senior fared a lot better than the next generation. The older union leaders actually stabbed not just young people in general but young people working in their own unions in the back as well.
    What a privileged generation you are in. The first generation that learned there is a lot more than one way (national debt) to live completely beyond their means and pass the bill to their kids and who cry crocodile tears when another generation is forced out of their country so that your salary can remain intact. Sometimes its their own kids but still they would rather look after number one than admit its their greed that is forcing young people out.
    Shameless and in complete denial.

  19. @ eamonn moran

    Bravo!

    Those involved know the score. It will take much more than the usual Irish talent for obfuscation to hide from history what has transpired (and is continuing).

  20. I suggest it is overlooked that people were much more mobile between income deciles in the period under review and that much unhappiness derives from the many cases where the mobility was sharply downwards.

  21. @eamonn

    1) I did not say that PS workers employed over 10 years have had cuts comparable to the new entrants. However, at the time those cuts on new entrants were put in place, by definition those “new entrants” did not yet exist. Nobody forced them to take the job. Or am I the only capitalist on this board?

    2) Every statement in your next paragraph is either false or misleading. It is not the case that “pay rises” continued until 2009. Pay was cut. Some people still got increments but their numbers continued to shrink as they hit the (now reduced) top of the scales. The cuts did not bring PS workers back to 2007 levels. That makes absolutely no sense. Think about it: 2007 was a peak of sorts. Most PS workers have been brought back quite a bit further than that with no end in sight. Add in inflation and they are getting real pay cuts every year while the private sector is getting pay rises and in many cases acting as if nothing happened. Finally, the increases from 2000-2008 (in 2009 we had cuts) were built on the same sand that private-sector wages were built on. Yet private sector wages have remained “sticky.” In any case, the reliance on property taxes was only necessary because FF was busy buying elections by pandering to the private sector through repeated imprudent cuts in income taxes that people like you never want to talk about. See: low income tax and a starved public sector are the natural order of things.

    3) It is a bit disingenuous of you to decry the failure of unions to strike. But I agree with you that solidarity was thrown out the window by the likes of Jack O’Connor and David Begg.

    4) As for my salary “remaining intact”: you haven’t a clue what you’re talking about. It’s down about 26% nominally and a great deal more in real terms since 2008.

    I’d say “shameless” is as good a term as any for someone who resorts to misinformation and outright lies just to fuel his own outrage.

  22. And just one further point on tax and PS pay cuts. It is revealing of how this all works that a 3rd round of PS pay cuts was rammed through (thanks to some timely blackmail on the part of the gov’t) in 2013 with claims that the “national budgetary emergency” required the savings of €300 million. In 2014, with an election looming, the gov’t now wants to give that €300 million away in tax cuts (some things never change) because things are going “so well.” So the PS are, once again, bled so that the private sector can continue to party in the style to which they’ve become accustomed (fuelling a nice little property bubble in the process).

  23. @ TMD

    I missed your comment. Maybe you could explain to me why salaries in the public sector should be based on those in the private sector? And why the public sector as it exists at present should be considered as a fixed star in the firmament?

    You may wish to cast your mind back to the moment in time when the penny dropped that there is no necessary connection.

    http://www.theguardian.com/business/ireland-business-blog-with-lisa-ocarroll/2010/dec/06/ireland-public-sector-fat-cats

  24. @DOCM

    You cannot at once claim that PS salaries are (wrongly, to your mind) based on those in the private sector and also that the public sector is somehow the “fixed star” in the firmament. The former claim implies that PS salaries will vary with those in the private sector via the benchmarking exercises that you deplore (but only, I gather, when they are used to increase PS pay). The latter claim implies that the arrangements of the public sector are, rather, the benchmarks that should be used for everyone else (which you also deplore). In short, you’re so busily deploring everything that one might find deplorable about the public sector, that you’ve contradicted yourself. Freud called this sort of argument a “kettle argument” in which a man accused of returning a borrowed kettle in a damaged state claims in three separate arguments that: 1) the kettle was damaged when he borrowed it; 2) that he had returned it undamaged; 3) that he never borrowed it.

    P.S. I stopped reading your Guardian blog link from 2010 at the subhead which includes this bald-faced lie: “Ireland where public salaries have remained untouched even with the arrival of the IMF.”

  25. Ernie
    PS pensions are not taken into account here either……A huge gap in your argument(s), and in this inequality debate. PS workers are only recently funding a very small part of their future pensions, while those in the private sector who have funded theirs (probably inadequately) have had the Govt pilfer them every year for the last few years, irrespective of whether they are adequate or not for future pension purposes.

  26. back to the global [of course Chris Johns would not agree with Picketty ….
    To understand the forces at work, consider a passage from Chapter 7 (page 324) of Tragedy and Hope, an unusual book written by Georgetown professor named Carroll Quigley back in the 1960s:

    “The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert by secret agreements arrived at in frequent private meetings and conferences”

    With the dissolution of the Soviet Union, western elites largely did away with a countervailing ideological alternative and were one step closer to realizing their goal of corporate state capture. The pieces on Brzezinski’s grand chessboard were rearranged. The interests behind the imperial brain trust, the team that conducted the CFR’s War and Peace Studies, saw their opening. Karl Rove aptly crystallized the prevailing mindset[15]:

    “We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality—judiciously, as you will—we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors…and you, all of you, will be left to just study what we do”

    The empire has its sights on expansion. Despite promises made to Gorbachev decades ago by then Secretary of State James Baker that NATO wouldn’t expand into former Soviet countries, that’s exactly what’s been underway[16]. Putin can see this happening and if he’s meddling in the Ukraine it’s only because he’s following the CIA’s lead.

    http://www.counterpunch.org/2014/07/30/the-media-ignores-the-cia-in-ukraine/

    Welcome to the desert of the real!

    p.s. I hear that plans for the ‘fresh air tax’ are proceeding swimmingly – c’mon the financial system needs the dosh … the neu-purpose of the humanoids, as Blind Biddy put it to a Federation Summer School on one of the Rings of Saturn lately, is to feed the financial system.

  27. @ DO’D: “the neu-purpose of the humanoids, … …, is to feed the financial system.”

    Quite so, and proper order! Now I suppose She has modeled the econometric solution as to how us pesky humanoids will feed ourselves – you know, with food, water and energy, and all? Just asking, you know.

    And for the love of JC do not tell me that we will have to borrow our basic level feedstock from the Financials prior to us purchasing our secondary level necessaries. Will we?

    What was that song that had a line in it about the ‘Company Store’?

  28. Paul W
    Most private sector workers arent paying for their pension either. The state pension deficit is rather large. Or is that an inconvenience to your argument

  29. @ DOCM

    “Those involved know the score. It will take much more than the usual Irish talent for obfuscation to hide from history what has transpired”
    Have to disagree with you on that score. History is written by the victors. By far the biggest reason that young people have not been more enraged is because the older generation have won the PR battle. The facts can take a hike.

  30. @Sam
    What’s the difference between an unfunded or underfunded or deficit PS pension and private sector pension?……Be honest now.

    Plus nobody is pilfering PS underfunded /deficit pension funds.

    Also, simply not correct to say “Most private sector workers aren’t paying for their pension either”. True, many private sector workers have no pension provision at all and will be relying on their personal funds plus state pension (if entitled) when they are old. Compare that to the PS situation…Be honest now.

  31. @Paul w

    “Plus nobody is pilfering PS underfunded /deficit pension funds.”

    Really? Where does the high 3-figure sum that I pay in a so-called “pensions-related levy” every month go? Be honest now.

  32. @ eamonn moran

    In normal circumstances, I would agree with you. But the current circumstances of Ireland are not normal having never previously occurred and past experience is, therefore, not necessarily a good guide.

    Past experience has shown that the vessels of the fleet Hibernia are driven with monotonous repetition on the rocks by a political culture which is, frankly, incapable not only of running a sovereign state but of recognising what such a state means. The first requirement, which its founders well understood, is that it remain solvent. Their successors, incapable of even polishing their predecessors’ shoes, blew it!

    Favourable external economic circumstances floated the various vessels, many undeserving, off the rocks in the past. As Paul W outlines, these circumstances are not about re-occur.

    @ Sam Maguire et al

    The one element of the famous, or infamous as you will, benchmarking report that has the published data to back it up, as far as I know, is that on the cost of public service unfunded – i.e. paid from current tax revenue without any investment element – pensions.

    Link repeated here!

    http://benchmarking.gov.ie/Documents/Benchmarking%2007.pdf

  33. @Brian Woods Snr.

    Looks like the ‘Vulture Funds’ Company Store’

    Yves here. It is surprising that it is only now that the idea of water as a scarce resource is getting the attention it deserves in advanced economies. It was when I was in Australia, between 2002 and 2004, that I first heard forecasts of resource constraints that depicted potable water as the one at most risk, with global supplies in serious trouble by 2050. A related issue, which this post addresses to a degree, is that dealing with water, energy, and food supply limits are an integrated problem, yet are typically handled as isolated issues. We see, for instance, the use of corn-based ethanol placing strains on global cereal supplies (the amount of corn used to make ethanol in the US in 2009 contained enough calories to feed 330 million people for a year at average daily intake levels).

    Similarly, as Americans are learning, fracking uses large amounts of water and often damages aquifers, putting pressure on water resources. But many processes that produce potable water from otherwise unsafe water, like desalination, require significant amounts of energy. So while articles like this are an important step forward in bringing attention to the fact that these issues are interconnected, they still fall short of discussing its larger dimensions.

    Humanity May Face Choice By 2040: Conventional Energy or Drinking Water

    Posted: 31 Jul 2014 11:01 PM PDT

    http://www.nakedcapitalism.com/2014/08/humanity-may-face-choice-2040-conventional-energy-drinking-water.html

    Of course, with the vultures as outliers, the Global Gini will look wonderful …

  34. On Vultures & Ukraine Gini

    ‘the EU agreement now in place has a little clause that seems to have snuck by environmental watchdogs. Ukraine does not allow the use of genetically modified organisms (GMOs) in agriculture, but article 404 of the EU agreement commits both parties to cooperate to “extend the use of biotechnologies”.

    There is no doubt that this provision meets the expectations of the agribusiness industry. As observed by Michael Cox, Research Director at the investment bank Piper Jaffray, “Ukraine and, to a wider extent, Eastern Europe, are among the most promising growth markets for farm-equipment giant Deere, as well as seed producers Monsanto and DuPont.”


    the Philippines, whose country is hailed as a top ten reformer in the Doing Business rankings. As a result of the changes made to acquire this honour, the Philippines has become the third most popular destination for foreign acquisition of land in the world, with 5.2 million hectares sold off since 2006. Or the people of Liberia, another top ten reformer in the eyes of the World Bank. In Liberia, giant palm oil and rubber producers have bought up more than 600,000 hectares of land, leaving communities without essential resources to sustain their livelihoods. The same story can be told in Nicaragua, Honduras, Guatemala, Senegal, Sri Lanka, Ethiopia, Mali and now, it seems, Ukraine.

    http://commondreams.org/views/2014/08/01/hidden-hands-behind-east-west-tug-war-ukraine

  35. @ David Madden

    Can’t follow your formula for PEGR. The text describes a denominator purely in terms of P(t-1) and yet it contains a P(t) term. Should the denominator not have both terms in P(t-1) but with their positions reversed?

  36. Brian Woods, let me check that – errors in subscripts etc can creep through. On first glance, you may be right, the denominator should be expressed in terms of P(t-1) only, since we are looking at what the change in poverty would have been if all incomes in period t-1 had been scaled up by the average growth rate.

  37. @ DM

    I think the denominator should read P(t-1)(z mu(t-1)/mu(t))-P(t-1)(z).

    Thus I think the poverty line z should be reduced by the growth factor which is broadly similar to keeping it the same but increasing the income levels by the growth factor.

    For positive growth the denominator will be a negative number but so too will be the numerator.

    I think, but maybe not.

  38. Brian Woods. Thanks for this. Without having sat down with pen and paper to look at this, what you say sounds plausible. I’ll check it out. Note that the results in the paper should still be correct as they were carried out using the DASP package. An error in the text was my typo.

  39. Paul W says:

    “PS workers are only recently funding a very small part of their future pensions……”

    This statement is incorrect.

    Public servants have paid 6.5% pension contribution for decades.

    They now also pay the PRD pension levy, which is 10.5%. So their pension contribution is now 17% of wages.

  40. @ DM

    Yes, I realised it must be a typo as the actual results all look pretty plausible. Interesting stuff and I suppose the graphs more or less answer the questions raised by the ESRI. The fact is that it is a bit of an oversimplification to measure trends in income distribution by single measures such as the GINI.

    What all these measures seem to implicitly assume is that we are broadly talking about the same people (as individuals) when we compare say the 25th centile in 2003 and 2011. What they do not reflect is the significant mobility. For example a lot of people on good incomes in 2003 were unemployed in 2011. I am not an economist but presumably there are studies on mobility as well as static distribution.

  41. BW. Yes. Inequality measures typically assume anonymity. They don’t concern themselves with who was at the 25th quantile in 2003 versus 2011. A study of mobility would require panel data and would be very interesting. There is panel data in SILC, though I have never used it.

  42. ‘… over a longer period (1994 to 2009) which includes the strong growth of the Celtic Tiger era, Nolan et al. (2012) show that the Gini coefficient remains in the range 0.31 to 0.32 for almost all years. [Callan, Nolan & pals 2014]

    http://www.izajoels.com/content/3/1/9

    Anyone got a longer time scale on Gini 40 yrs? 50 yrs?

  43. I’ve scouted around …..

    Methinks Johnny Fitzgerald’s conclusions demand a few qualifiers ….. ‘significant’ reduction in Gini in past five years, imho, not supported

    IMHO, Callan, Nolan et al more plausible & much more informative

    @David Madden

    ‘… my guess is that it would be difficult to reject the null hypothesis that it is unchanged from year to year …

    +1

  44. @ Eddie Hobbs

    In case you are watching Eddie. I read your column in the Sindo, which I generally agree with. But one line provoked the statistics proof reader in me. You say that the ESRI report states that the risk of poverty, i.e. being below 60% of the median, has jumped from 40% to 50%; not possible since 50% are by definition at or above the median.

    However, I checked your source. What the ESRI did say is that if social transfers were withdrawn 50% would be at risk of poverty. This is still a bit of an oxymoron if one continued to measure that risk as 60% of the new median.

    Statistics lesson aside, it is still a fascinating fact and underpins how distributive our social economy is. And Joan Burton takes a lot of the credit, if credit is the right word. So why is Labour getting such a drubbing in the polls? Simple. SW recipients either don’t vote or vote for rejectionist parties (understandably). They don’t feel particularly grateful for their benefits being maintained especially if they are new recipients.

    Labour’s real constituency is the middle income and especially the great mid to upper swathe of the public service. And these as a class feel that they have borne the greatest burden of the adjustment.

  45. @ Ernie Ball

    10s of thousands of Irish migrants/unemployed would probably disagree with you.

  46. @ EB
    They are right for sure. When the bottom fell out of the construction fuelled revenue the government were faced with two horrific expense problems. They had increased social protection rates and public service remuneration to near the highest in the world and the money weren’t there. Something had to give and Labour insisted it would not be social protection. Morally. highly commendable. Electorally suicidal.

  47. @Brian Woods II

    “near the highest level in the world”: I call BS. Prove it.

    But notice the ideology at work: all adjustment must be on the spending side. Because the taxation rates are simply the natural order of things, written into the fabric of the (Irish part of the) cosmos, readjustment of the system of taxation isn’t even worth a mention. Never mention that the reliance on construction-related taxation [b]also[/b] allowed FF governments to drop taxation rates (in order to buy elections). This naturalised view of the income side is why: 1) income taxation rates have not been adjusted and remain what they were as if the crisis never happened; 2) no third rate of tax for very high earners has been contemplated, resulting in a system that is progressive until about €85,000 or so and then flatlines after that; 3) property and wealth taxation has been half-hearted and derisory; 4) the corporate tax rate has remained at a scandalously low level; 5) what taxes have increased (VAT, USC) are overwhelmingly regressive (since the poor vote in lower numbers).

    The electoral calculation was simple:

    1) Do not piss off the very wealthy people that we in government represent.
    2) To raise taxes on the merely well-to-do will see us crucified in the Independent and the next election.
    3) Since 75% of the electorate do not work in the public sector, make the 25% who do work in the PS bear almost the entirety of the adjustment (among those who aren’t simply forced to leave: I take you’re point, That’s legal?!).

    And Labour wonders why it’s headed to oblivion.

  48. Of course, the fair way to make the adjustment, as Seamus Coffey has pointed out, would be to use the progressive taxation system once that system was made more equitable. If it turned out that PS workers were highly paid, the progressive taxation system would make sure that their contribution was higher than those who were lower paid. But, and this would be its defect from the perspective of the real elites (who are not in the public sector no matter what you may have read in the Independent) it would also require those bidding up property in SCD and tooling around in 142 BMWs to shoulder a proportionate share of the burden as well.

  49. Without govie transfers 50% of the Irish pop would be at risk of poverty. That is the natural economic order. You may not like it Ernie, but blame your chosen deity.

    After transfers the percentage at rop falls dramatically to 16%. Hardly convincing support for a thesis that we have government of, by and for the fat cats.

  50. So you’re now stating as fact what yesterday you called “a bit of an oxymoron”[sic]?

    The second paragraph is nothing but a hasty conclusion ungrounded in much of anything. For would it not make sense for the hegemonic elites to keep the pitchforks at bay through social transfers? Consider the alternatives.

    By the way, that Marxist firebrand Karl Deeter makes some of my points about propertied elites in today’s Irish Times.

  51. Okay, Ernie, let me re-paraphrase Abe.

    “We have government of the people by the fat cats for the people but only so they (the people) won’t pitchfork the fat cats.”

    I’ll actually buy that up to a point but I have long ceased delving too much into the motivations behind good outcomes. Most “good” deeds would not withstand that sort of scrutiny. Think Marshall Plan.

    There are no contradictions between what I said today and what I said yesterday. Read again.

    I think you really could benefit from reading the Indo (sic). It opens the mind, you know.

  52. @ All

    Essential reading!

    http://www.independent.ie/opinion/columnists/colm-mccarthy/coalition-must-ignore-polls-and-stick-to-2bn-in-cuts-30479295.html

    @ BWII

    I agree with the analysis you make of the political miscalculation made by Labour. It was compounded by the insistence of giving the job of controlling expenditure to one of their number. I saw recently a reference to the “two ministers for finance”. But only one is in charge of the good news, if any.

    Remedying this miscalculation will be viewed as making it necessary to do the opposite of what Colm McCarthy recommends i.e. sticking to the budgetary cuts target.

    I would add, however, that he does not draw attention to the difference between our most recent crash and those that went before; the country went broke. Or to the mechanism that may kick in if we do not grasp that this time it is really different i.e. a strike by the bond markets with regard to further increases in Irish government debt.

  53. DOCM,
    The problem with the great economist analysis is that following it will result in a) the defeat of the current half responsible govt & b) it’s replace by a coalition led by SF cultists who believe in the magic money tree. Ergo, there is no possibility of secular budget surpluses for a generation. The choice is between modest primary surpluses or large primary deficits. No country in Europe is going to run Primary surpluses of the order of 5-10% of GDP for a generation.

  54. DOCM,
    That alleged failure to recognise that debt service should be prioritised above all else would not be unique to Ireland. As the literature seems to say, absent growth, reducing debt from current levels in the EZ will require restructuring, inflation, default, monetisation, financial repression or a cocktail of all of the foregoing.
    If that is the path we are going down then whatever EZ sinecure you have going may disappear.

  55. @ Tull: ” …absent growth*, reducing debt from current levels in the EZ will require restructuring, inflation, default, monetisation, financial repression or a cocktail of all of the foregoing.”

    Sounds about right.

    * I would like to see economic commentators replace this bald and misleading term, which I interpret as dY, with its mathematically correct economic version; ie. ‘Rate-of-Growth’ (meaning dY/dt, annualized and compounding on a percentage basis) which by the way, needs to be both +ve and > 2.5%, but looks like it might be dY/dt -> zero!

  56. Gini coefficients are not a particularly useful indicator to capture the complexity of inequality. Inequality is a multi-dimensional phenomena and cannot be captured using a uni-dimensional indicator. It conflates inequality of income arising from labour, inequality of income arising from owning capital, and the interaction between the two. We know that one has to climb into the top 0.1% of the income distribution before income from capital exceeds income from labour. We also know that the top decile of the income distribution is composed of two very different worlds: the top 9% and the top 1%. Gini coefficients simply do not capture the dynamics of what is really happening at the top of the income and wealth distribution. Distribution tables are much more revealing. But to use this the economics profession has to mature itself as a social science discipline, engage in conversation with the political scientists and sociologists and get rid of its tenure fear of using terms such as “social class”.

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