Archive for the ‘Inequality’ Category
James Surowiecki has an interesting piece on housing the homeless here.
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.
By David MaddenTuesday, May 27th, 2014
In between grading exam papers I have been wading through the Piketty book. Its a bit like walking through a muddy field. The going is sometimes a bit stodgy, but you eventually get there. There have been many reviews and commentaries on the book – one of the best I think is by Debraj Ray (http://debrajray.blogspot.co.uk/2014/05/nit-piketty.html ), who also wrote what I believe to be the best textbook on Development Economics in 1998, which, alas, I don’t think was ever updated.
Ray is sceptical about Piketty’s “Fundamental Laws of Capitalism”, but believes that the book makes a major contribution in highlighting the concentration of top incomes, arising from both an increasing share of income accruing to capital and also the phenomenon of very high returns to human capital at the top of the wage distribution.
All of this I am sure is very familiar to readers of this blog – Piketty’s must be one of the most reviewed economics books of the last 30 years. But what seems to get less coverage is what has been happening to the approximately 75% of the world population not covered by the Piketty book. A recent World Bank study by Lakner and Milanovic (covered here in Vox http://www.voxeu.org/article/global-income-distribution-1988 ) shows that over the 1988-2008 period, growth for the bottom 75% of the world (with the exception of the very bottom 7% or so) has been well above average, thus contributing to an overall compression of the world income distribution. There have basically been three broad changes in world income distribution over the last 30 years. Yes, the top 1% have seen high growth, while those between about the 75th and 99th percentiles have done relatively poorly – these are the phenomena covered in Piketty. But the vast majority of the bottom 75% have also done relatively well, particularly those just above the median – effectively the Chinese and Indian middle classes are catching up with lower income groups in the OECD countries. The net effect of these three changes is a fall in overall world income inequality. The data stops at 2008 but my guess is that developments since then have probably only accentuated these trends. And further globalisation is likely to have the same effect.
The piece finishes off with some speculation about the political implications of all this, which I am not quite so convinced by. But overall, given that inequality seems to be flavour of the moth these days, it is interesting to get a more global view.
By Seán Ó RiainMonday, May 19th, 2014
On Thurs., 29th of May, a special seminar on Social Investment in Europe will be hosted by the Department of Sociology/ NIRSA, Political Economy and Work Cluster and the New Deals in the New Economy project. The seminar will run from 9.30 to 1.30 and will be followed by the launch of a new MA in Sociology (Work, Labour Markets and Employment) by Minister Joan Burton.
‘Social Investment’ focuses on investing in people’s skills and capacities and supporting them to participate fully in employment and social life (EU Commission). Does ‘social investment’ lead to a renewal or an erosion of the welfare state? Will ‘social investment’ support economic and social recovery?
The event will start at 9.30 with registration and coffee followed by the seminar at 10.00 in the Phoenix building on the North Campus in NUIM keynoted by Prof Anton Hemerijck, VU University Amsterdam and Prof Brian Nolan, UCD, and chaired by Prof. Seán Ó Riain.
Following a break for coffee there will be a roundtable discussion with: Rossella Ciccia (NUIM), Tom Healy (NERI) and Rory O’Donnell (NESC), chaired by Mary Murphy (NUIM).
Please register for seminar by emailing email@example.com before May 26th, 2014
The results from the 2012 wave of the EU-SILC have been published by the CSO.
There had been some difficulties with the statistics estimated from the survey in previous years which may account for the lag in getting the 2012 data published. The data was collected between January 2012 and January 2013.
The main results are summarised in this table.
Of the reported 2012 changes in the poverty and income inequality measures, only the change in the deprivation rate is reported as being statistically significant.
The average weekly net equivalised disposable income for the bottom decile was €118.55 in 2012. Income decile data was not provided in the 2011 release and the 2010 figures were withdrawn. In the 2009 release, the average weekly equivalised net disposable income for the bottom decile was €160.05.
Comparable figures for the top decile are €1,041.71 in 2009 and €958.44 in 2012. It should be noted that possible differences in the composition of the deciles between years make such changes difficult to fully interpret. The income shares by decile are provided in this table.
The first table here shows that average equivalised disposable income for the population fell by 10.5 per cent between 2009 (€23,326) and 2012 (€20,856). The second table shows that the share going to the bottom decile fell by 16.7 per cent between the same years (from 3.6 per cent in 2009 to 3.0 per cent in 2012).
By David MaddenWednesday, March 26th, 2014
Readers of the blog may be interested in a Vox piece by Tony Atkinson and Salvatore Morelli on the Chartbook of Economic Inequality. It provides a summary of changes in inequality for 25 countries (alas not including Ireland) over a 100 year period. If you follow the links you can get the data on an Excel basis or in chart format. The vox link is here http://www.voxeu.org/article/chartbook-economic-inequality.
Here are links to two studies released through the ESRI this week. One chart is taken from each but there is much more detail in both particularly the second.
Here is a report on the Swiss referendum.
John Cassidy of The New Yorker pulls together six charts on income inequality and social mobility in the US in this post.
The third chart offers some international comparisons with reference made to Ireland’s high level of market income inequality and the impact the tax and transfer system has on disposable income inequality.
Alan Taylor sends me to this post: the chart is definitely one for the classroom.
The CSO release is here.
This week the OECD released an update of their income inequality statistics which was covered in an article by Dan O’Brien in yesterday’s Irish Times. For household disposable income Ireland is not unusually unequal.
- Gini co-efficient: Ireland 0.307 versus OECD average of 0.313
- 90/10 income share: Ireland 7.5 versus OECD average of 9.4
Under both measures Ireland is less unequal than the OECD average. Data is for 2010 except for 2009 data from Hungary, Ireland, Japan, New Zealand and Turkey, and 2011 data from Chile.
The OECD dataset also includes a gini-coefficient for direct income (i.e. household income prior to taxes and transfers). Direct income includes employee earnings, employer social insurance contributions, self-employed earnings and other direct income. There is no data for Hungary, Mexico or Turkey. The following chart has the most recent figures (mainly 2010) for this gini coefficient (most equal first).
For the 31 countries shown, Ireland has the highest level of inequality for direct income, and by some distance. The (2009) Irish figure is 0.591 compared to an arithmetic average for the sample of 0.470.
Charts showing the impact each country’s tax and transfer system has on the gini coefficient and the resulting gini coefficients for household disposable income are below the fold.
By David MaddenThursday, February 21st, 2013
Those of you interested in long run trends in income inequality in Ireland might like to take a look at this piece from the magazine “Significance”. It uses the difference between incomes of the top 10% less the incomes of the top 1% as its summary measure for inequality. It takes a pure time series approach and suggests that for the last 40 years or so there is a 12 year cycle in inequality with a very slight upward trend.
Warning: As John McHale might put it, it is “wonkish”!
Last week the latest ESRI Quarterly Economic Commentary was published. It includes 5 research notes including one by myself on the regional dimension of the unemployment crisis.
While there is a lot of discussion about unemployment, the differences across regions have not received much attention. The note shows that the differences are significant. It also shows that things would look a lot worse if it had not been for a drop in labour force participation – in the Border region the unemployment rate could have reached 27%. Not surprisingly a sharp drop in employment is the major cause of the increase in unemployment, but a look at the sectoral breakdown of employment changes gives some interesting results. Firstly, construction employment appears to have contracted quite uniformly across the country. Secondly, employment in education and health actually grew. Thirdly, there are some interesting differences across the regions with respect to other sectors. For example, manufacturing declined much more in Dublin than elsewhere. Most importantly the analysis suggests that the underlying factors that are responsible for the differences in unemployment rates across the regions are very persistent but were hidden during the boom. You can expect some more analysis on this in the near future.
The other notes are:
Tax and Taxable Capacity: Ireland in Comparative Perspective
Comparing Public and Private Sector Pay in Ireland: Size Matters
Trends in Consumption since the Crisis
Revisions to Population, Migration and the Labour Force, 2007-2011
A new report commissioned by the Department of Social Protection and undertaken by the ESRI is available here.
The focus of the report is on the very low work intensity (VLWI) measure of social exclusion with which Ireland is a significant outlier. In Ireland 22.8% of people under 60 live in households with very low work intensity compared to an EU27 average of 10%. The report looks at the trend in this measure over time and the characteristics of households that comprise this group.
By Tim CallanThursday, April 19th, 2012
A conference paper provides evidence relevant to some key choices in the design of a new property tax. While the paper does not recommend a specific blueprint, it draws on evidence from other countries as to “what works” and analyses the impact of different forms of property tax on a nationally representative sample of households.
Ronan Lyons post yesterday contained three main comments on the paper. Because some of these appear to have drawn primarily on an Irish Independent report that contained inaccuracies, rather than on the paper itself, it seemed best to issue this as a new post.
1. The first comment is that “there should be no exemptions from a property tax, only deferrals”. The SWITCH model is set up to analyse policy choices. As I see it, the level of an income exemption limit is a choice variable, and in this context, zero would be Ronan’s preferred option. Our research found a range of positive values in evidence in many countries. For example, the UK Council Tax Benefit effectively exempts those with incomes close to minimum social security levels. In Northern Ireland, they have set a higher income limit than in the rest of the UK. In our analysis we report income distribution impacts for the zero case, and also for levels at the State Contributory Pension and State Pension+25%. Our work points out the implications of the different choices. Making such a choice is a matter for public debate and government decision. Our paper aims to inform that choice.
2. The second comment is that “a property tax should most certainly not be related back to income”. I’m not sure what he has in mind here but it is important not to misunderstand our analysis. Apart from income exemption limits and some marginal relief above this (necessary to prevent 100%+ tax rates), the property tax bill we consider is simply a flat percentage of market value. We analyse what the outcome is in terms of how the burden is spread across the income distribution – this depends on how, in practice, property values and incomes are related, as well as on the effects of exemption limit provisions. These are questions of legitimate interest for research and policy.
3. Thirdly, it is stated that our paper asserts that Ireland has “no database on site values”: This is not what we said – it reflects an inaccuracy in the Irish Independent’s report. What we said is that “to our knowledge, there is no data source which combines information on site characteristics (location and size) and household incomes, so that it is not possible to provide a clear picture of how a Site Value Tax relates to ability to pay or its impact on the distribution of income”. If there is such a source, we would be glad to hear of it.
The CSO have now released the full results of the 2010 EU-SILC. The report gives lots of detail on income and poverty in Ireland. One graph immediately stood out.
Care has to be taken when interpreting this as different households are surveyed each year and the composition of the households in each decile will also change. Detailed tables can be seen in the report which can be compared to those in the 2009 release.
When looking at the annual change by household composition the following can be seen.
The largest drops are seen for households with one adult aged under 65 and no children under 18, and “other households with children”. Drops are also recorded for other categories.
Average weekly expenditure is estimated to be €810 per week or around €42,000 per year. The release contains lots of detailed information by income decile, region, location and household tenure.
By Aedín DorisWednesday, February 8th, 2012
Stephen Collins reports that ‘project champions’ and their teams will be given large tax breaks to incentivize them to come to Ireland to set up projects that entail ‘new product development’.
Is this a good idea? Anyone know of any empirical evidence on the effectiveness of these types of tax breaks (assuming that they exist elsewhere)?
By Aidan KaneMonday, June 27th, 2011
My invitation to the above event at the week-end being unaccountably delayed, it’s interesting to see the Irish Times relaying the views of colleague Professor Terrence McDonough (IT do note correct spelling please.) here.
“He said the country should default on its debt, leave the euro, build a single public bank, provide a jobs guarantee for all workers and nationalise the Corrib gas field.”
One of the most disgraceful decisions of the last government was its U-turn on Assistant Secretaries’ pay. Personally, I wouldn’t blame any low-paid public servant from digging in their heels on pay and conditions when people at the top benefit from this kind of special consideration.
Guess what? They’ve gotten away with it again.
By Liam DelaneyTuesday, December 7th, 2010
While we are on the subject of what really matters for human welfare, many people expressed approval of the government’s decision to not allow class sizes to increase further. Kevin Denny has been talking about this issue for several years and basically arguing that the evidence on class sizes is mixed at best and that it is more of a teacher workload issue than a pupil welfare and performance issue. He has just put out a paper with colleague Veruska Oppedisano testing the effect of classsizes on pupil performance. According to his results, bigger class sizes are associated with better performance in the PISA data, even controlling for a wide range of controls and using different estimation techniques. I think Kevin would be the first to say that you should be careful about overinterpreting any individual data analysis but it certainly points away from any simplistic assertions about the effects of class-sizes.
By Liam DelaneyTuesday, December 7th, 2010
For obvious reasons, Ireland has been a prominent feature of the Marginal Revolution blog, one of the best and most widely-read economics websites in the world. Tyler Cowen offers the following summary of Chapter 5 of Fintan O’Toole’s new book.
From Marginal Revolution:
“How Rich Was Ireland Really?
Not as rich as they thought. I’ve been reading Fintan O’Toole’s excellent Enough is Enough: How to Build a New Republic. Mostly it is an expose of Ireland’s crony capitalism and bad political institutions. On economic issues, chapter five offers up the following:
1. During the boom years, property accounted for 72 percent of all assets.
2. For infrastructure, Ireland ranked 26 out of 28 OECD countries.
3. Ireland had a higher share of slow fixed internet connections than in any other comparable country.
4. In terms of R&D or patents, Ireland was well below the OECD average in per capita terms.
5. In the OECD “human and income poverty” rankings, Ireland was 23 out of 25 countries, sandwiched between the United States and Mexico.
6. The country’s health care and educational systems are considered subpar.”
The overreliance on property is now something even the government takes as given but it is worth debating whether our health and education systems are really subpar in the sense mentioned and, in general, whether the whole Celtic Tiger was an illusion or not. There are plenty of things wrong with our education system in Ireland but is it really “subpar” in the sense of being worse than comparable countries? In terms of the health system, I will let commentors weigh in with opinions.
It is worth keeping in mind the substantial gains in life expectancy that occurred even during the late Celtic Tiger period. Life expectancy for people over 65 was the same in 1986 as it was at the foundation of the state and increased dramatically through the 90s and 2000s. We do not have precise evidence on what exactly drove these increases but it would be wrong, in my opinion, to say that we did not make health gains during this time. And this is not to excuse political decisions that saw vital vaccines and treatment of people with cystic fibrosis given lower prominence than the breeding of race horses. But it is worth having an open debate about where the country stands from a developmental perspective as well as a fiscal/monetary perspective. I released a paper recently called “From Angela’s Ashes to the Celtic Tiger: Early Life Conditions and Adult Health in Ireland“. Everytime I have presented it, someone says something like “it should be the other way around” or “you should add “and back again””. I find it hard to think of the broad progress in human development in Ireland in the last 50 years and not have some sense of belief in the potential of the country and some degree of pride of where it has come, even in the face of the current mess. If you look at the health of Irish migrants to the UK over the last 50 years you see huge improvements there also with recent migrants performing as well as or, to a large extent, outperforming natives compared to the 1950s and 1960s migrants who, as an average, are in far worse physical and mental health. It is worth beginning to ask whether what we are facing is a large fiscal and monetary blip with a forseeable exit point or a genuine developmental structural break where the real and profound gains in human welfare seen in Ireland are in danger of being reversed.
The CSO has just released the 2009 results of its annual Survey of Income and Living Conditions. SILC is the official source of data on household and individual income and also provides a number of key national poverty indicators, such as the at risk of poverty rate, the consistent poverty rate and rates of enforced deprivation. The accompanying press release highlights a number of the key findings.
By Richard TolTuesday, October 12th, 2010
Ireland comes 6th out of 134 countries. That is great.
The build-up is peculiar, though. Ireland tops the bill on equality in educational attainment, although bonus points seem to be given for absent men at third level.
Ireland could do better on wage equality for similar work, on labour participation, and on senior jobs — but does rather well on uncorrected wage equality and on female professionals.
I guess that the data are somewhat older, and Ireland is getting points in gender equality because young men left school to be builders.
Ireland does well in political representation, primarily because of Mary Robinson and Mary McAleese. I would think that the largely ceremonial presidency should be discounted. Ireland does rather more poorly on female parliamentarians and ministers.
It gets strange on “health and survival”. Ireland ranks 89th. One subindex is female to male life expectancy. Irish women do not live long enough compared to men.The other subindex is male to female births — 106 boys for 100 boys, but surely not because of selective abortion or infanticide. [THIS PARAGRAPH WAS CORRECTED]
Not sure what to make of this. Ireland’s rank is too high and too low at the same time.
By Liam DelaneyMonday, October 4th, 2010
The BBC report on the UK Chancellor’s decision to axe child benefits from top-rate taxpayers. Rates in Ireland are approximately 150 per child per month (but vary with family size) and are paid universally regardless of family income for each child aged under 16 or under 18 and in full-time education. Like any universal payment of this nature, there is the obvious question as to why people on higher incomes should be receiving a transfer payment from the state. A less obvious question is what we mean by higher incomes and where the threshold should be set. Expenditure on this scheme is approximately 2.3 billion euro in Ireland. Those arguing to keep the benefit as it stands might question why we will end up subsidising John Terry’s wages (see Karl’s post below) while cutting benefits from mothers and children. I am not sure I have an answer to that one either. If we do have to cut, then I would rather it be from people like me with above average salaries and for schemes like child benefit that don’t have an obvious reason to be universal rather than from well-targeted schemes.