Nat O'Connor: Most people want Ireland to be more equal, and they want this to be achieved through boosting the minimum wage, capping high pay, raising taxes and providing a wider range of quality public services. Will 2015 be the year when Irish public policy rediscovers inequality?
According to a recent survey – commissioned by TASC and carried out by research company Behaviour & Attitudes – the vast majority of people (83%) feel that income in Ireland is unfairly distributed, with close to half of them (46%) believing it is ‘very unfairly distributed’. This is when asked the question out of context. When informed that the incomes of the top 10% are seven and a half times greater than the lowest incomes, 88% felt income was unfairly distributed.
This sentiment is close to the pulse, as Ireland is the most unequal among all members of the Organisation for Economic Cooperation and Development (OECD) when it comes to incomes from work and investments. However, taxes and social transfers reduce income inequality in Ireland to lower than EU average levels, and public services like health and education reduce other aspects of economic inequality, which shows the importance of maintaining both tax levels and public services.
Economics has always been about who gets what, when and how, and there is now persuasive evidence that our well-being as a society is determined by the extent of inequality. More equal countries do better on a whole range of social issues, with lower crime rates, better health outcomes and more cohesive societies.
Now, in the aftermath of the global economic crisis, inequality has become an important focus for understanding how economies can do better. The World Bank, the IMF, the OECD, and major financial institutions are becoming increasingly concerned that the concentration of income and wealth is damaging countries’ economic potential.
Yet measures to reduce inequality – such as progressive taxation, minimum wages and strong public services – have been under attack across the developed world for many years. As a result, the share of income and wealth held by the top 10%, and particularly the top 1%, has been rising in most developed countries, including Ireland. This is not only damaging to our economy and our society but goes against the tide of public sentiment as revealed in this survey.
People in Ireland strongly believe that the Government should take active steps to address economic inequality. More than 90% are in favour of either increasing the statutory minimum wage, establishing a ‘maximum wage’ or both, with only seven per cent opting for neither of these measures. Compared to 2010, when the same question was asked, there was a rise in support for increasing the minimum wage from 65% to 84% in favour.
This may reflect the fact that the €8.65 minimum wage is no longer linked to average wages, and remains at the same level as 2006. It might also indicate a growing awareness that the minimum wage is not the same as a living wage. In Ireland a Living Wage, to allow a single person to live a minimum but decent standard of living based on full-time work, has been calculated as €11.45 an hour for a 39-hour week. The problems faced by many workers on the current minimum wage are made worse by the reality that many of them are not given full-time hours on a regular basis yet are not always eligible for State income supports.
Another key finding in our recent survey is that the majority of people (55%) support the establishment of a maximum wage to cap the amount of money earned by high earners. The idea of a maximum wage is gaining serious attention elsewhere. For example, Switzerland passed a referendum last year – with 68% of voters in favour – that imposes some of the world’s strictest rules on executive pay, such as giving shareholders a veto over salaries and forbidding ‘golden handshake’ payments to departing managers. Shareholders in Switzerland and elsewhere have been frustrated by extremely high pay, especially to those who played a lead role in the global financial crash of 2008.
In relation to tax, nearly two-thirds of Irish people (63%) are in favour of a top tax rate of 60% (combining income tax, USC and social insurance) on that part of income in excess of €100,000 per year. This finding reflects similar sentiments elsewhere.
Sceptics will point out that of course people want the government to intervene to reduce inequality, and provide better services, as long as it doesn’t affect them. The focus on tax cuts in the recent Budget and the vocal opposition to water charges are presented as evidence of this.
But, the survey finds that people are willing to contribute to making Ireland a more equal country. Half of respondents indicated that they would be in favour of ‘paying more taxes’ themselves, if guaranteed high quality public services or new or additional services such as pre-school education or social housing. This is a significant increase on the 35% who were willing to pay more taxes in 2010.
What all of this demonstrates is that there is a strong constituency in favour of a more balanced economic model for Ireland, not just one based on tax cuts and reduced solidarity, but one based on the provision of quality public services for all.
A version of this opinion piece was published in The Irish Times on Monday 15th December 2014.
The full survey data is available here.
TASC's first report on economic inequality in Ireland will be released in early February.