If the retired are not poor, is it right for them to keep all-day free bus passes?

There has been a considerable fuss over a suggestion for a modest scaling-back of the benefits to the retired. It was proposed that ‘free bus travel’ be available only at off-peak travel times. At all other times, free bus travel would continue to apply.

The fuss has been strikingly one-side: the proposal was denounced by politicians, interest groups and journalists. Otherwise, silence; including on this blog.

The case for this change is easily stated – rush hour is busy because of workers travelling to/from work at times they don’t control. So it is a more efficient use of the bus system that people with more discretion over when to travel, notably the retired, would use (free) buses only at other times.  (Of course they could travel as paying passengers at any time.) Nearly one-tenth of passengers on the buses at rush hour use free bus passes. So either we expand the bus system or we move bus-pass holders to (free) travel at another time and release a lot of bus space.

Available information suggests this change would also improve fairness. There is considerable evidence that the retired are not poor, either in income or in wealth terms. Removing a small fraction of the bus subsidy would seem to be fair, especially if it also made the bus service work better.

The CSO’s 2013 Household Finance and Consumption Survey (Table 12) indicates that in households where the head of household was under 35, median net wealth was €4,000. For households headed by a person 65 or older, median net wealth was €348,000. It seems legitimate to conclude that the retired are not poor in terms of their net wealth. (This is hardly surprising; they have had decades more than twenty-somethings in which to save. Grey and wrinkled has a few compensations.)

For incomes, the CSO Survey on Income and Living Conditions (Table 1e) reported that in 2016 median net disposable income (adjusting for household size) was €21,387 for those aged 18-64 and not a very great deal less, €17,956, for those over 65. So for every €100 of net disposable equivalised income of the median member of the first group, the median retired person has an income of €84. The costs of the retired are surely lower than those working (mortgage, children’s education costs)? In any case, according to the report (Table 2) those aged over 65, have a lower risk of poverty (10.2% v. 16.6%) and also a lower rate of deprivation (13.1% v. 20.9%) compared to those of working age.

Given the similarity of incomes, there seems a solid basis to say the over 65s are not poor in income terms either, compared to the working age population.

Yet the older generation have various non-means-tested benefits including free bus passes. They were also essentially exempted from the post-2008 income and benefit reductions. I will leave the inter-generational aspects of the planning laws for another occasion.

Subsidies for the retired was recently raised in the UK which “continue[s] to treat pensioners as though they need free travel, winter fuel allowances and the like, despite the fact they are on average now the best-off demographic group in the country.” In a comment pertinent to the Irish case, the writer argued that amongst the UK groups needing more public funds are children and the mentally ill. If money goes to the over-65s, it will be harder or impossible to finance the other programmes.

The broader setting for this discussion is whether our prevailing redistributive and other policies in fact discriminate against younger rather than older generations. Many of the retired and soon-to-be-retired, benefitted from lower costs of going to college, drastically lower house prices, and much more generous pension schemes that today’s twenty- than thirty-somethings will have. On top of this there are pensions, free bus travel and other benefits; some of this money may have more deserving uses, not excluding healthier public finances.

From this perspective, do we redistribute income on the basis of means or, say, voting propensity? Regarding the latter, a rough calculation (exit poll age data, total turnout, and population less non-nationals) suggests that in the 2016 general election turnout was 41% for voters under 24, and 61% for those over 65. 

How, then, was the bus-policy reform proposal responded to? It did not go down well! Its author was personally vilified and the proposal was drowned in ridiculous hyperbole, while more important aspects of the speaker’s policy recommendations at the conference passed unremarked. One Minister remarked that the civil servant’s suggestion was unprecedented. It’s not hard to see why.

There was the usual claim by a journalist that “free bus pass holders have contributed to the economy for decades” On that principle, shouldn’t everyone have everything free forever? (Where are our free newspapers?)

Senator Buttimer of Fine Gael demanded that the civil servant be fired. The Independent Alliance judged that this change would cause “severe hardship” and could jeopardise the ability of the retired to get to hospital. (Severe hardship? Really? No pensions, no cars, no taxis, no offspring, in Independent Alliance constituencies?)

Even the elusive Minister Ross took to the battlements to declare that the change would happen only over his dead body, although some think the Minister’s body has been alarmingly immobile since he took office. (Missing Minister.)  The Minister added that this modest change was no less than “an extraordinary assault on the rights of older people.” (An extraordinary assault?)

As for the temerity of the civil servant, I believe the department he works for is called Public Expenditure and Reform. His remarks were made at a conference where the OECD recommended that Ireland needs to focus more on evaluation of the impact of public policies. The responses amounted to saying: our supporters like this policy, we are not interested in any evaluation.

This sorry episode is reminiscent of the ‘anti-expert’ commentary of members of the Bertie Ahern governments. Minister Martin Cullen in the mid-2000s dismissed warnings of economic overheating contained in an ESRI mid-term review of the public investment programme, as merely the views of ESRI ‘sandal wearers’. He insisted that the government would press ahead in the face of the advice it had itself commissioned. Ten years on, some current Ministers seem to believe much the same thing.

The retired in the population used to be poor. That’s not been true for a long time. Policy has to catch up. The Government should seek to improve the efficiency of the transport system particularly when it can be achieved at no loss of fairness. In any event, they should give a civil hearing to policy suggestions.

Complete inflexibility from the retired may leave them with few sympathisers should the large deficits in the public pension scheme require real fiscal surgery in the future.

November 13-14 2017 European Aviation Conference in DCU

Preliminary programme now available.

Booking and hotels here: www.eac-conference.com

EAC17 programme

Speaking Truth to Power(lessness)

One of the more remarkable episodes in the recent French presidential election, and with wider lessons, was a heated debate in Amiens between Emmanuel Macron and workers at a Whirlpool factory under threat of closure.

While Macron was holding talks with city and union leaders in the chamber of commerce, Madame Le Pen arrived unexpectedly outside the factory gates, took a number of selfies with workers, promised unspecified special measures to save the factory, denounced Macron and was driven off in her election bus.

After his meetings, Macron arrived at the same factory gates to face booing and jeering and cries of ‘Le Pen for President’. After explaining why he had met the leaders ahead of the workers (because, he said, leaders of a trade union that behaves responsibly should be engaged with), he promised to answer all questions, and he did for an hour. The following is my attempt to summarise the subsequent questions and answers; it involves some rearranging.

Q: Why don’t you close the French border, for instance to imports from Poland where wages were low.
A: I won’t close the borders or roll back globalisation because it will cost French workers thousand of jobs if they work for firms that need to be able to export.

Q: There no work, it’s too late for us to find other work, we are unemployable.
A: Absolutely not true. There is work but it is different work and it requires retraining.

Q: Why are companies allowed to pay dividends at the same time as they are closing factories?
A: Stopping dividends, or banning factory closures is not possible. It would end foreign investment into France, and all the jobs those investments bring.

Q: Our factory needs special measures.
A: It is the responsibility of the workers and managers to make a success of the business. It’s not the responsibility of the Finance Minister, who should firmly and even-handedly apply policies and laws that support long-term economic development. Even with the best policies and laws, unfortunately some factories will still close.

Macron’s reaction to almost every single thing said to him is an impassioned ‘Non, non, non.’ It is difficult to think of other examples, anywhere, of a politician, during an election, in front of the television cameras, telling voters he would not do what they asked because it would not be in their interests, but would instead support the policies the voters blamed for their difficulties. I won’t do things that won’t work, he says at one point. That’s not the policy I support, he says at another.

45 minutes of the discussion is to be found on the last video link on this page of the En Marche! party website. The first 9 minutes is an argument over why Macron went first to the chamber of commerce, and why he waited until the second round of the election to visit factories such as Whirlpool’s; the policy debate begins after that. In parts of the recording, Macron plunges into the crowd and the exchanges can’t be heard very clearly.

In praise of being unable to pronounce Aer Rianta

Writing about the shortcomings in the Gardaí’s treatment of whistleblowers, yesterday’s Irish edition of The Times commented:

The problem with the organisation as it is currently configured is that all senior posts are filled by members who have spent their entire careers in the force. Under that system, there is very little opportunity for critical self-examination. It is about time this changed.

In fact, this same ‘closedness’ is widespread throughout the Irish public sector – in the civil service, the semi-states, the regulatory agencies and so forth. While these bodies may not be quite as sealed as the Gardaí are, true outsiders are rarely found.

One result is what Dan O’Brien calls the ‘decent skin’ problem – excess sympathy for under-performers. A given manager/CEO is acknowledged to do their job poorly, but as they are a decent skin on a human level, there is reluctance to judge them too harshly.

A second result is ‘capture’, in its many manifestations. Concerning the regulatory aspect, recruiting a proportion of high-quality foreign staff is a substantial barrier to capture generally as well as, in my experience at least, adding to what The Times called a culture of ‘critical self-examination’ in an agency. Even if the persons concerned struggle to pronounce some phrases (e.g. Aer Rianta, An Bórd Pleanála).

A tiny society, where practically everyone is someone’s cousin, on a tiny island, where practically everyone is someone’s neighbour, is at risk of a culture where the indigenous flinch from holding failures to account.

One way to compensate for the costs of smallness, capable of reasonably rapid application, would be to aim to have a minimum proportion of senior managers in key organisations recruited from abroad. Outside the central bank it is hard to think of examples where this has happened.

European Aviation Conference coming to Dublin on 13-14 November 2017

Many aspects of air travel now taken for granted derive from the obscurely named ‘Third Aviation Package’ of air travel liberalisation measures that took effect on 1 January 1993, nearly 25 years ago.

The impact of these measures – areas of success and failure, and areas still needing resolute action – will be the broad theme of the European Aviation Conference to be held in Dublin (for the first time in Ireland) in November. The conference will be hosted by DCU, home of the Dublin Aviation Institute and of undergraduate and postgraduate degrees in aviation management, on Monday and Tuesday November 13-14 November. Updates will be available as arrangements advance here.

On the following two days, DCU Business School will host a COST meeting on air transport and regional development (ATARD). The COST webpage here will provide additional information in due course.

The third package liberalised two main areas. Airlines were allowed to fully determine their own ticket prices and obtained an unrestricted right to offer air services to other EU states. The package replaced the arcane ‘bilateral air service agreements’ that preceded it – but that still dominate international air travel.

Academics and others with an interest in these events can contact me in DCU should you wish.