A guest Post from Niall Crowley from Claiming Our Future
CLAIMING OUR FUTURE ‘IDEAS’ – TACKLING INCOME INEQUALITY
The International Monetary Fund says that it is needed to sustain economic growth. Kate Pickett and Richard Wilkinson, authors of the Spirit Level, found that it leads to higher levels of life expectancy and educational attainment and lower levels of imprisonment and violence in society.
A TASC survey reported that 91% of respondents wanted Government action on it. Why then is nothing being done about income equality in Ireland?
Governments, past and present, seem complacent about it. In Ireland the richest ten percent of households earn eleven times more income than the poorest ten percent. A quarter of all income is earned by this richest ten percent.
Not only is nothing being done about this, it’s getting worse. Current policies to deal with the economic crisis are increasing poverty. Adult and child poverty rates have grown over 2008 and 2009 according to CSO data. The rich are getting richer. The World Wealth Report found that Ireland’s ‘high net worth population’ rose by ten percent in 2009. These are people with investable assets of $1million or more.
There is anger at the excessive incomes of some individuals. There is concern at the difficulties encountered by those trying to survive on welfare. However there is little debate about the scale of income inequality and the policies that make this possible, even inevitable. Yet this income inequality is not only an injustice. It is also a causal factor in many of the health and social problems we face and is an impediment to economic recovery.
Claiming our Future aims to change this. On May 28th it is hosting a national discussion on steps to reduce income inequality in NUI Galway. Register now on www.claimingourfuture.ie. The discussion will explore the politics of income equality, tackling high incomes and inequality and tackling low income and poverty. It will also focus on identifying national levers for change and
local action to make income inequality an issue.
Foundations like the Rowntree foundation and some unions have really excellent papers on this in the UK, yet Ireland is way behind in both hard evidence and meaningful exprapolation. For example, its common perception in much of the public service that “low paid” means you earn less than 40k a year. In fact in the semi state where I currently contract, a guy from a tough working class background with no qualifications who otherwise would probably be lucky to have a minimum wage job said he though 45k a year was “low paid.”
Similarly, in a previous job 2 years ago I recall a similarly low skilled worker from Dublin in Cork moaning about his “pitiful” salary. It turned out he was getting 44k (for some of the worst performance I’ve seen in my career) for a job that usually would have commanded 35k pa in that region.
(He has been unemployed for 11 months. Sometimes there is justice in life.)
What is considered to be a “reasonable” income is not really established in Ireland. Take for example the national “averages” for rent as found in various national surveys. As Tony Fahey’s work and others quietly point out, “averages” are freuquently not on a like-for-like basis. In otherwise, the “average” rent is more likely to apply to a 1 bedroom apartment while a national “average” mortgage is more likely to be a 3 bed semi.
Likewise, costs in terms of transport vary hugely between regions. One thing I learned in Cork was the massive differential cost of travelling by public transport by bus compared to train. For example is only costs half as much to get a train from Cork to Midleton as it does to travel by bus – despite the bus service being cheaper. The subsidy bias towards rail not only disproportionately subsidises better off commuters in areas with the privilige of rail services, it also doubly rewards them as they frequently were better off and able to afford housing in rail-serviced areas, or benefited from bigger housing valuation rises (notwithstanding the current collapse, it is still the case that a house on the DART has a value premium that reflects that). So those with bus only or no bus are doubly punished by poorer, more expensive services.
I think the trade unions have a lot to answer for in willingly distorting perceptions of what is “good pay” by campaigns defending the rights of, for example, ESB workers, whose enjoy pay and conditions so far above the norm it would make you weep when you talk to them. They simply do not live in the real world, nor are they willing to allow cuts that would make Ireland a “fairer” place.
Lastly, pay rates don’t always tell the full story. A very well paid worker may be on a fixed term contract without option of renewal. Self employment is a hugely distorted area: UK studies suggest that employment carries an earnings penalty there – 80% of workers are likely to be worse off than they would be in a job.
Lastly factors such as housing ownership and tenure in Ireland greatly distort real wealth. A friend of mine considers herself very badly off on about 35k a year. But she has a housing association tenancy which limits her rent to less than 50% of the market rent for her accomodation (which in real terms means she pays 400 a month – a true bargain for a 2 bed city apartment with secure parking). Were she in private accomodation its likely she would be paying 50% more.
Thats why we need more studies. And I really do have to ask why they don’t exist and why the little that is there tends to be produced by very biased groups such as trade unions or interest groups? Just a thought.
I agree with Laura’s point about the need for more research on income inequality in Ireland. It is a big gap here especially at the higher end of the income spectrum. TASC have done really good work with their publication on Hierarcy of Earnings, Attributes and Privilege Analysis and their survey work published as The Solidarity Factor. However we need to know more about what lies behind attitudes that support income inequality and what is happening around high wages.
The Fabian Society in Britain published an interesting survey ‘Is Equality Fair’. This found that nearly all participants placed themselves in the middle of the income spectrum despite coming from the full range of socio-economic groups and they then interpreted the income gap as the gap between this supposed middle and the super-rich.
They also found a strong commitment to ‘deserved inequality’ with high incomes thought to be justified on the basis of ability, effort, performance or social contribution. However they did note an emerging tendency to question whether high salaries were really deserved due to the crisis.
Another finding was strong judgemental attitudes towards people on out of work benefits based on belief about the ready availability of opportunity.
These are all barriers to taking action on income equality. We need to know more about such attitudes in Ireland as they will shape how most effectively to bring forward the case for income equality.
Niall – I was actually trying to find that article but couldn’t – you are correct that there is both a conception that some inequality is deserved but also that most are more concerned about differentials at the middle of the scale.
This is why I am extremely suspicious of this campaign: ICTU and others have failed badly in similar situations where firms have large numbers of very well paid workers (mostly in public sector) but tend to ignore the plight of workers in either non-union companies or those not in permanent positions. You may be aware that one of the unions in one of the 3rd level instituions in Dublin until recently refused membership to potential new members who had a case. This appalling. Why should the benefits of union membership only apply to groups already enjoying considerably better levels of protection? Also there is some evidence that workers in public sector jobs may be already receiving a premium rate well above normal private sector rates. How then can their representatives look for “equality” if their membership are determined to preserve the privilige over other members of society.
We ALL must share, not just senior executives.
Lastly, some of the higher executive staff in ICTU and other groups enjoy salary levels that are hardly commensurate with equality and more typical of the very executive private sector rates which they (correctly) describe as unequal and unfair.
A useful and accessible overview of the sources of income inequality is to be found in a recently published book chapter by Andrew Jackson and Rory O’Farrell entitled “Narrowing income inequality”. It is in pages 159 to 168 of Exiting from the crisis: towards a model of more equitable and sustainable growth, Edited by
David Coats, and published by the European Trade Union Institute. It is available online for free at http://www.etui.org/research/content/download/7901/37294/file/Exiting%20from%20the%20crisis%20Web%2014.4.2011.pdf
Feel complicity from politicians more interested in posture and ego than really solving issues has enabled and worsened the problem.
IMHO Ireland also has a lingering historical mixture of begrudging the rich, whilst still forelock tugging to them and wanting to be seen to be associates of them. It doesn’t help.
Actually, the Jackson–O’Farrell chapter does have a significant weakness. They do not discuss reducing the original spread of incomes in firms, referring simply to taxes on high incomes.
Progressive taxation is the only truly fair way to reduce inequality – as long as it extends to ALL forms of wealth and income including pension pots, property, investments, savings etc.
Its deeply infair I think, that somebody who has enormous savings pays DIRT at a rate well below their marginal tax rate. Thats simply not progressive. You should pay all of your tax at the rate appropriate to your overall income.
Laura, I agree that all forms of wealth and income should be taxed.
However, I disagree with your first statement. Taxation is not the only fair way to reduce inequality. If we do not examine the economic and governance mechanisms that are used to distribute the available income in the first place, and concentrate only on re-distributing it, then we have not done a proper job.