Thinking a little about indexation

The Minister for Social Protection wants to index many social protection payments to a cost of living index as an anti-poverty measure. This makes sense on the face of it, as long as that cost of living index is going up, and as long as the level of benefits fall when the cost of living falls. It’s also worth thinking about the virtues of indexation, as this was one of the main criticisms IFAC had of the fiscal space calculations during the last election.

Let’s say you index benefits to the consumer price measure of inflation.

Here’s what happened to that reading over the longer run.

Screen Shot 2016-07-22 at 11.29.28Just messing about with the idea a little more, imagine we ‘begin’ the Irish economy in year 1 with a CPI reading of 100, and grant benefits of €100. Then we can add in (say) the last 20 years of real CPI data from 1995 to 2015 to get a sense of what would have happened to benefits in a year-on-year basis as a result.

The line is the increase in benefits as a result of the indexation, and the bars are the changes in euros to the benefits as a result of the cost of living increase or decrease, measured on the right hand axis. The excel sheet I used to knock this up is here.

Picture1

Hopefully you can see two things. First, the measure is highly pro cyclical. Precisely when we want benefits to decrease a bit, because the economy is growing strongly, they go up, and when we want benefits to increase a bit to cover the cost of living during a crash, they go down. Second, in recent years inflation has either stagnated, or fallen, so you wouldn’t see a huge increase or decrease in benefits either way. Now you could smooth out some of these effects out with a moving average of, say, 3 years, but this little exercise shows, I think, that it’s worth looking carefully at indexation proposals.

(Updated with thanks to commenter Tony_Eire.)

Call for papers: annual conference of the Economic and Social History Society of Ireland

The 2015 annual conference of the Economic and Social History Society of Ireland will take place on Friday 27 and Saturday 28 November 2015 at Mary Immaculate College, University of Limerick.

Submissions can be on any areas of business, economic, financial and social history, but submissions addressing the conference theme ‘Exploring Everyday Lives’ are particularly encouraged.

Submission deadline is 15 October 2015.

Download the call for papers here.

 

The society’s web site is www.eshsi.org

Garret FitzGerald Lecture and Autumn School

UCD College of Social Sciences and Law will host the Garret FitzGerald Lecture and Autumn School on Monday 19th October, in the UCD Sutherland School of Law. The daytime School (from midday) will focus on the significance of the social sciences. The evening Lecture will be delivered by Professor Cass R Sunstein,Harvard Law School, on the theme ‘Is Behavioural Science Compatible with Democracy?’. More details and bookings here.

Symposium at NUI Maynooth: “Can Social Investment Save Social Europe?”

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).

See more at: http://www.nuim.ie/sociology/news/can-social-investment-save-social-europe

Please register for seminar by emailing newdeals@nuim.ie before May 26th, 2014

Survey on Income and Living Conditions

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). 

There is more detail in the full publication.  The Department of Social Protection have issued this press release.