Thursday, 31 December 2015

Forecasting the Future.

Paul Sweeney makes some forecasts for 2016.
No one had forecast that Ireland’s growth rate would hit 7 percent in 2015. No one. So making predictions for 2016 is a mug’s game but like most economists, mine are projections based on previous trends. They do not predict shocks. 

Wednesday, 23 December 2015

Have yourself a casual Christmas: 21st century ‘entrepreneurs’ and bogus self-employment in the Irish construction sector

Alicja Bobek: For the majority of us across Ireland, Christmas means holiday. It is a festive season, providing us with a few days that we can spend with family and friends. Most of us will also be off work while being paid in one form or the other. At the moment, more than 90 per cent of Irish working population is classified as ‘employees’, which means that they have their holiday time guaranteed by law.

Tuesday, 22 December 2015

Neither Boston nor Berlin?

David Jacobsen: The main front page article in last week’s (20/12/2015) Sunday Business Post begins with Enda Kenny’s promise “to cut tax bills for households to bring them in line with ‘lower tax’ countries such as the US and Canada”. The particular target for tax cuts is the high earner bracket, where in Ireland the effective tax rate is 45% while in the US it is 29%.  It seems that we are back to that old dilemma of ‘Boston or Berlin’, with Fine Gael firmly in the Boston camp.

Monday, 21 December 2015

Do we seriously want to make Ireland like the USA?

James Wickham: In a recent speech the Taoiseach stated that he wanted taxes in Ireland to be as low as those in the USA.  Why?  Allegedly this will ensure more jobs are created.  It is in fact quite astonishing that in 2015 the USA can still be held up as a model in this way.

Friday, 18 December 2015

Mortgage arrears crisis remains unresolved with possibility of up to 30,000 repossessions

Rory Hearne: Despite the recent Central Bank figures showing a decline in mortgage arrears there are still 37,000 mortgages for a principal dwelling (home) in arrears for over 720 days. The mortgage arrears crisis remains unresolved and continues to cause a huge amount of suffering to those affected. This blog provides an overview and analysis of the current situation based on the Central Bank figures in order to understand better the extent of the on-going crisis.

Wednesday, 16 December 2015

NAMA Part II: In order to solve housing crisis the government should redirect NAMA to prioritise its social mandate

Rory Hearne: NAMA presents a rare historic opportunity for the Irish people to provide affordable housing on a sustainable, equitable and well-planned basis to meet the needs of its people rather than speculative investors. This post outlines a number of possible ways that NAMA should be redirected to address the housing crisis.

Tuesday, 15 December 2015

NAMA Part 1: The Christmas gift from the Irish taxpayers to the super wealthy and vulture funds

Rory Hearne: Tis the season for 'good will' and 'giving' and all that but NAMA is giving away too much from Irish taxpayers to property vulture funds and speculators. Last week NAMA outlined how it intends to provide 20,000 ‘starter’ homes by 2020 and invest €1.9bn in Dublin’s Docklands.  But these so-called ‘starter’ homes will be sold to the international vulture funds who currently see Irish property as the ‘hottest’ investment in Europe. NAMA actually has the land and finance to provide 50,000 homes over the next decade. The Minister for Finance should order NAMA to move away from speculative office and residential development with global financial investors to focus instead on providing affordable housing.

Monday, 14 December 2015

The Paris Agreement: a major step forward or ‘worthless words’?

Paedar Kirby: Amid the widespread welcome for the Paris Agreement, what is striking is the lack of consensus on just how significant it all is. James Hansen, former head of the NASA Goddard Institute for Space Studies in New York and regarded as one of the world’s most eminent climate scientists, went so far as to call it “a fraud, a fake, worthless words” while Cara Augustenborg, chair of Friends of the Earth Ireland, said in Paris that “the gap between ambition and action in the deal is too big.” So should we welcome or denounce this long-awaited global treaty?

Thursday, 10 December 2015

Lucky to have job? Research highlights bad working conditions in hotels and restaurants

Alicja Bobek: Hospitality has always been an important part of the Irish economy. As the labour market recovers from the recent recession, jobs are growing in the accommodation and food services sector around the country. By the second quarter of 2015 there was a total of 136,700 people working in this sector, 20,000 more than at the lowest point in 2011. While this job creation is obviously to be welcomed, there is a question about the quality of these jobs.

Wednesday, 9 December 2015

Flat tax maths doesn’t stack up

Cormac Staunton: The debate on flat taxes arose again this week with RENUA promoting the idea of a flat income tax model for Ireland. They invited me to speak at a symposium they held in order to discuss the proposed model. While I now have a few more details from them, and it is not quite as regressive as I had initially calculated, nevertheless my assessment remains that this model would dramatically increase inequality in Ireland.

Tuesday, 8 December 2015

Prevention is better than cure – tackling corruption as a health risk to our democracy

Nuala Haughey: In the wake of this week’s RTÉ Investigations Unit programme on standards in public office, there have been renewed calls for a host of legal reforms. These include the establishment of a properly resourced anti-corruption body with full police powers, the appointment of an independent Planning Regulator and the long-overdue overhaul of our toothless ethics ‘watchdog’, the Standards in Public Office Commission.

Monday, 7 December 2015

CoP21: Might Paris begin the long road to a low-carbon society?

Peadar Kirby: The fact that the world’s leaders turned up at the beginning rather than at the end, as happened in Copenhagen in 2009, seems to have galvanised action during the first week of the Paris CoP. Leaders such as Presidents Obama and Holland made plain the gravity of the crisis facing humanity and the urgent need for action, both pledging their countries would be at the forefront. The contrast with the Taoiseach, Enda Kenny’s attempt at special pleading for poor Ireland couldn’t have been sharper. It was a moment for Irish heads to hang in shame.

Friday, 4 December 2015

Inversions as a Tax Strategy - Implications of Ireland

Jim Stewart: The recent announcement by Pfizer that it is taking over Allergan and establishing their joint ‘headquarters’  in Ireland is another illustration of complex corporate tax strategies.  Moving headquarters to a low tax regime in order to minimize tax has become a well known phenomenon. Corporate inversions have a long history as a tax strategy.

Thursday, 3 December 2015

Diversions and Inversions: Some Implications of Corporate Tax Strategies

Jim Stewart: The announced takeover by Pfizer of Allergan and consequent redomicile of Pfizer to Ireland has attracted enormous international media interest. Much of this comment is critical of both Pfizer and Ireland.  This blog considers one aspect of Pfizer and MNE tax strategies, that is switching profits away from or to a tax jurisdiction (Tax Diversion).  A further blog tomorrow will discuss inversions as a tax strategy, and some possible implications of the Pfizer transaction.

Wednesday, 2 December 2015

Troubling levels of inequality within economic recovery

Rory Hearne: There has been much debate in recent months about economic inequality. Last week’s Survey on Income and Living Conditions by the CSO reveals some very worrying trends that show Ireland is a deeply unequal country and that that level of inequality is worsening despite the economic recovery. The share of income going to the top 20 percent in Ireland has increased each year since 2011 and is now back at pre-crisis levels.

Monday, 30 November 2015

CoP21: Holding the fate of humanity

Peadar Kirby: Just three days before the historic climate change summit opens in Paris today, November 30th, Malaysia and Jamaica became the 179th and 180th countries respectively to register their pledges to cut greenhouse gas (GHG) emissions with the secretariat of the UN Framework Convention on Climate Change (UNFCCC) in Bonn.

Wednesday, 25 November 2015

Don’t cut the USC – keep it for universal health care

Rory Hearne: The pre-election promises of tax ‘give-aways’ in future Budgets have begun in earnest with Labour and Fine Gael’s reported proposals to reduce and abolish respectively the USC. But such changes to the USC would be bad economic and social policy decisions. The USC is a progressive tax that provides enough revenue to cover the entire capital spending budget. Reducing and abolishing the USC is likely to have a devastating impact on the provision of funding for much needed public services such as universal childcare, education and healthcare.

Thursday, 19 November 2015

An End to Tax Cuts in the US?

Paul Sweeney: Americans are not in favour of cutting taxes! The American Enterprise Institute, a Right Wing think tank, is saying that it’s the end of the day for Republicans who are seeking tax cuts. They argue that the tax cutters are out of tune with trends. What is happening in the US of A?

Wednesday, 18 November 2015

In the midst of a crisis why are we selling off much needed local authority housing?

Rory Hearne: You just have to wonder do we ever learn? In the midst of an unprecedented housing crisis with over 100,000 households in dire need of social housing new legislation is being   introduced to allow the sale of local authority housing to tenants at discounts of up to 60%. This is likely to replicate the experience of previous purchase schemes that resulted in the privatisation of 240,000 local authority homes and contributed to the state's inability to deal with the growing need for social housing.

Tuesday, 17 November 2015

Transport policy and social equality

James Wickham: The National Transport Authority (NTA) has just closed the consultation period for its draft transport strategy for the Greater Dublin Area.  Consultation on the Dublin City Development Plan closes on 11 December 2015.  Both consultations are an opportunity to discuss the relationship between transport issues and social equality.  Here is an abbreviated and amended version of my submission to the NTA.

Thursday, 12 November 2015

Budget decisions would benefit from stronger role for Houses of Oireachtas

Nuala Haughey: The revelation a few years ago that German parliamentarians were privy to vital Budget information withheld from our own lawmakers caused uproar on the opposition benches and beyond.

Since that episode in 2011, there have been changes to key aspects of how the annual budgetary process works in Ireland.

Wednesday, 11 November 2015

Universal health care most important factor in Irish Happiness

Rory Hearne: It is an important time for thinking about the type of Ireland we would like to see developing through the recovery and into the future. What type of economy and society should we pursue?

The crash, bailouts and austerity have been harsh lessons for many people in the downsides of free-market, de-regulation, low tax and neoliberal policies. There is new evidence of a growing support for alternative policies and values that seek to protect people from the market through state provision in areas such as housing and health.

Tuesday, 10 November 2015

Why Ireland Needs a Plan B for Brexit

David Begg: The publication of a report by the ESRI suggesting that a fifth of Anglo-Irish trade could be at risk in the event of a ‘Brexit’ presents a major challenge for public policy. Apart from hoping that it won’t happen we need to start thinking about an alternative strategy in case it does.

The Department of Finance says it does not necessarily agree with all the findings of the ESRI concerning the implications of a British withdrawal from the European Union. Nevertheless there is widespread acceptance that the economic challenges would be very significant. This indeed was the consensus of a seminar on ‘Brexit’ organised by the Charter Group in Dublin a couple of weeks ago.

There is justifiable concern that we could sleepwalk into a major crisis and in that respect publication of the ESRI report is timely.

Monday, 9 November 2015

Unequal recovery shows the changing fortunes in Ireland

Cormac Staunton: If incomes are a reliable indicator of the health the Irish economy since the financial crisis, then there has been a significant turnaround in the last five years. However, to fully understand what’s happening in this recovery, we need to look at who has benefited.  This is particularly important in the context of the discussions around the impact of changes introduced in the Budget.

Thursday, 29 October 2015

Why Brexit might be good for Europe – and for social equality

James Wickham: As the Brexit referendum draws closer, progressive Europeans might start asking: do we really want them anyway?  Arguably a Brexit would strengthen that amorphous thing, the ‘European project’, not least because it could begin to restore Europe’s progressive dimension.

Wednesday, 28 October 2015

EU ruling will bring realistic approach to "Tax Wars"

Paul Sweeney: “I like to pay taxes. With them, I buy civilization.” said Oliver Wendel Holmes Jr, a US judge in 1927.

Today many major companies see tax minimisation as a core business strategy. And governments, until recently let them away with it. The EU rulings on Starbucks and Fiat will be welcomed by citizens. They should also be welcomed by governments which are cash strapped and cannot pay for much needed and often basic public services.

However, it is likely that the Irish government will be somewhat ambiguous in its response because it may think that the Apple case may impact on future foreign investment. But it could also bring in a lot of much needed tax. The judgement may help bring a more realistic approach to “Tax Wars” between states where the only winners are multinational tax avoiders.

Saturday, 24 October 2015

The State must intervene in housing market

Rory Hearne: The Irish housing system is in an unprecedented crisis. This is visible in escalating rents, ‘economic’ evictions, mortgage arrears, repossessions, waiting lists, substandard accommodation and the growing numbers of those unable to buy a home.

It is a national emergency and without a significant shift in policy the crisis will only worsen. At the current rate of families becoming homeless there will be more than 6,000 children in emergency accommodation by 2017. This is deeply traumatic for children and their families. It is arguably a breach of the UN Convention on the Rights of the Child.

Friday, 23 October 2015

The Commission and Illegal State Aid Rules

Jim Stewart: The EU has been investigating five cases of potential illegal granting of State aid via favourable tax rulings. The Commission means by favorable tax rulings “letters issued by tax authorities  to give a company clarity on  how its corporate tax will be calculated or in the use of special provisions” (Commission Press Statement, 21, Oct. 2015)

The Commission’s recent decision  confirms earlier preliminary findings in the case of two firms Starbucks and Fiat Finance and Trade.  Three cases remain to be decided one of which is Amazon and a case that is very important for Ireland, Apple.

Thursday, 22 October 2015

The problem with animals

David Begg: A few weeks ago I happened upon an RTÉ radio programme in which the author John Banville was talking about the genre of the Scandinavian crime novel. He noted that mostly these novels begin with a horrific crime scene with blood all over the place. Questioned by the interviewer about the attraction of extreme violence to readers he suggested that we have an inbuilt disposition to violence. He argued that this is what motivates young men to join ISIS, for example.

By coincidence there was an article by George Monbiot in the Guardian the following day arguing the direct opposite, i.e. that people are basically good. This is an argument that has divided philosophers – like Thomas Hobbes and Jean-Jacques Rousseau – down through the centuries.

Whichever side of the argument you prefer it is at least obvious that human beings are more complex and nuanced in their motivations than is allowed for in much of the theorising that underpins orthodox economic policy.

Wednesday, 21 October 2015

Independent Review of Ireland’s PPP Experience is Essential

Eoin Reeves: A largely unnoticed feature of the government’s new €27 billion capital investment plan – Building on Recovery -is the decision place a ten per cent cap on the total annual exchequer capital spending on Public Private Partnerships (PPPs).  This marks a significant shift in government policy on PPPs as it recognises the mounting annual spending commitments on existing PPPs.

Tuesday, 13 October 2015

Budget 2016: Budget ‘sweet-spot’ of €70,000 means the Top 10% is the big winner… again.

Cormac Staunton: In our analysis of last years ‘triple effect’ of changes to tax bands, tax rates and USC rates we found that Budget 2015 gave the biggest cash return – in absolute and relative terms – to those earning €70,000: which we dubbed the Budget ‘Sweet Spot’.

Revenue’s analysis of income tax cases showed that a gross income of €75,000 puts someone in the Top 10% of earners in Ireland - which highlights the regressive nature of tax changes that give the greatest benefit so high up the income distribution.  Simply put: these tax cuts were not ‘targeted at lower and middle income earners’.  Looking at the changes to USC and tax introduced in Budget 2016 we see the same principle applied … with the same outcome.

Cash gains in Budget 2016

Budget 2016: Opportunity missed to address social crisis, particularly housing, as chronic under-investment in infrastructure continued

Rory Hearne: So what do the expenditure measures announced in today’s Budget 2016 do to address Ireland’s worsening social and economic inequality? And note the CSO figures show that deprivation rates have increased from 24.5% in 2011 to 30.5% in 2013 while the Gini-Coefficient increased from 31.1% to 31.3%. Firstly, it is to be welcomed that, rather than further austerity, the government has decided to increase public spending and investment, particularly in the area of childcare, education and the extension of free GP care.

However, the increase in spending is insufficient to address the various social crises and austerity related under-investment and the indication is that this is just a once off ‘stimulus’ in an election year with government estimates showing no similar expenditure increases in coming years. The increase in spending in this Budget of €750 million should also be put in the context of the €21bn reduction in expenditure over the period of 2008 to 2014. The increase in Budget 2015 is just 1/30th (just under 4%) of the austerity cuts to spending. And that doesn’t take into account the increased demand and requirement for investment due to changing demographics and people’s needs.

Tuesday, 6 October 2015

Flat Tax benefits Top 25% of earners and reduces services for everyone

Cormac Staunton: When trying to understand the impact of changes to the income tax system there are two vital bits of information that are needed: how much do people earn, and how much do they currently pay in tax.

This is especially important if we are to understand the impact of a radical change such as RENUA’s proposal for a flat tax system. Looking at RENUA’s Q&A on their “flat tax” proposal it seems that a number of myths surrounding these two important questions continue to hold sway. 

Here I will show that because people earn less and pay less tax than we think they do, the proposal by RENUA will lead to tax cuts for the Top 25% of earners, higher taxes for the bottom 75% and fewer public services for everyone. 

Can Corbyn win? - A Look at the Stats

Oisin Gilmore: For over the last 100 years or so progressive politics in Western Europe has been dominated by a small number of major parties. Some of them such as the Sozialdemokratische Partei in Germany, the Labour Party in the UK and the Parti Socialiste in France continue to play this leading role, while others are now just history such as the Parti Communiste Francais, which has shrunk to insignificance, and Partito Comunista Italiano, which has transformed into the Democratic Party. Therefore, the development of these parties has not been merely of domestic interest, but rather it has been of interest for the left across Europe.

It mattered for everyone when the Mitterand government failed in 1983, it mattered for everyone when Lafontaine resigned from the SPD and it mattered for everyone when the Blairite’s launched the ‘Blair Revolution’.

After 30 or so years of shifts to the right in each of these parties, this summer saw a distinctive leftward shift in the UK Labour Party.  Against all odds, Jeremy Corbyn, a rank outsider, won the leadership election. How Corbyn came from the miniscule Socialist Campaign Group (which prior to his election contained 9 of the 252 Labour MPs) to win the leadership election is a story for elsewhere. The fact is that he won. What he can do with that victory is today a more pressing question. And what he can do with his victory depends ultimately on two issues: the policies he proposes and his ability to get those policies implemented.

Here I want to look at this latter question, and I want to focus on it in a very restricted way by looking solely at his ability to get elected.

Friday, 2 October 2015

Making Dublin the capital of Ireland

James Wickham: Two opportunities are about to be lost for dramatic improvements to Dublin. There seems to be considerable push-back against Dublin City Council’s plan to turn Trinity Traffic Junction (officially still known as College Green) into a civic space worthy of a capital city.

Meanwhile the proposed DART Underground project has been deferred again.  Although both issues may appear to be just about transport, they also involve fundamental questions about social inclusion and social cohesion.  In this post I look at the first of these.

Tuesday, 29 September 2015

Complexity of inequality means we must move beyond single indicators

Cormac Staunton: Yogi Berra, the great American Baseball player who died last week at the age of 90, is credited with the immortal line: “It’s like déjà vu all over again”. In the wake of “Ireland’s Great Wealth Divide” on RTE last week, the recurring debate around inequality statistics in Ireland continues.

Part of the problem is complexity. While there have been many efforts to create single indicators that summarise economic inequality (such as the Gini coefficient), these have in turn only led to more discussion around how best to measure the distribution of economic resources.

Here I just want to address some of the issues that have arisen in response to my own take on this.

Monday, 28 September 2015

Ireland's Great Inequality Debate

Cormac Staunton: Irish people know that the world is an unequal place. The exact scale of this divide was brought home to viewers who watched David McWilliams’ documentary, Ireland’s Great Wealth Divide on RTE 1 this week.

It showed that people believe that the Top 20% in Ireland have more than 60% of all wealth. In fact they have 72% of all wealth – that’s 1 in 5 people owning almost three quarters of the value of all the land, housing and financial assets in the State.

In Ireland as elsewhere, the issue of inequality goes to the heart of most discussions in economics and indeed politics. It is, after all, the age-old question of who gets what, when and how. It’s about how we allocate resources which are, ultimately, scarce.

Wednesday, 23 September 2015

What about the PAYE Worker?

Paul Sweeney: For decades there used to be a refrain heard endlessly on taxation. It was “What about the PAYE worker?” Will we hear it more often soon if some get their way.

There has been a strong lobby by the self-employed and their lobbyist/advisors to get special income tax reductions for them in the forthcoming Budget on 13th October. They argue, correctly that the very high-earning self-employed pay a higher USC than PAYE workers and they don’t get the PAYE allowance - unless they are also employees (which they can be).

There is a surcharge of 3% on individuals who have non-PAYE income that exceeds €100,000 in a year. This surcharge applies to the non-PAYE income only. The PAYE credit is €1,650 a year for employees only. So do the Schedule D taxpayers or self-employed have a case for “similar treatment” with PAYE workers through special income tax reductions?

No, because their tax treatment is designed to give the PAYE worker approximately the same taxation. 

Thursday, 17 September 2015

A Very British Coup

David Begg: About twenty years ago a television serial entitled ‘A Very British Coup’ was screened by the BBC. It featured Ray McAnally in the role of a left wing Labour leader elected to power in a landslide General Election.

From the beginning the Labour Government was opposed overtly by the media and covertly by the civil service and business establishment. It incurred the wrath of the US President by demanding the removal of nuclear bases in Britain.

Tuesday, 8 September 2015

Time to Curb Income Tax Privileges for Artists, Sports Stars and the Corporate Elite?

Paul Sweeney: Did you know that certain people enjoy special income tax privileges in Ireland? Some of them earn far more than the rest of us, but the government has decided that because they are deemed to have special talents, they should pay far less income tax than we do.
There are three groups who enjoy special income tax privileges.
1. artists
2. top executives of multinationals
3. sports people

Thursday, 3 September 2015

More jobs, but a growing gap between good and bad jobs

Paul Sweeney: An important EU institution, which is based in in South Dublin and does valuable work, is Eurofound. It has just released “The European Jobs Monitor 2015” , an interesting report on the type of jobs which are being created. In spite of the recovery, the news is not all good.

Tuesday, 1 September 2015

Tax Breaks Won't Solve Homelessness

Nat O'Connor: Some campaigners have called for tax breaks to help provide more housing for people who are homeless. The homelessness crisis is serious and requires urgent responses. But tax breaks have all sorts of negative consequences compared to alternative options, not least the option of tax-and-spend to address the crisis.

What follows is a quick sketch of the problem and the scale of the solution required, followed by some observations on tax breaks.

Friday, 28 August 2015

Ireland's real dependency culture

Cormac Staunton: A well-balanced article about the challenges faced of our public finances by Davy Economist Conall MacCoille finished with a question as to whether ‘Ireland’s disproportionately high working-age benefit payments [can] be sustained and do they foster a dependency culture?’ 

This issue of a ‘dependency culture’ is common in the UK media and is used by the government as a reason to cut welfare spending. There seems to be little evidence that such a culture exists and the main effect of these policies seems to be that one million people in the UK are now reliant on food banks.

Is there any evidence of a ‘dependency culture’ in Ireland?

Thursday, 20 August 2015

Does anyone have the vision to lead a housing revolution?

Nat O'Connor: While there is wide agreement that Ireland needs more housing supply, action is needed to encourage the right kind of supply based on a vision of the residential areas people are going to call home for the rest of this century.

The lack of supply stems from the bust in Ireland’s housing market which killed lending for new developments and caused the demise of many construction firms.

More people are now renting, while people on lowest incomes are squeezed out of the relatively small rental market and are at greater risk of homelessness.

Friday, 31 July 2015

Podcast on Working Conditions Research

The latest installment of the TASC podcast features an interview with Prof James Wickham about his research for TASC on working conditions in Ireland.

Wednesday, 29 July 2015

Lessons from the Greece Debacle

Guest Post Ronald Janssen: There is no point in denying reality. By crushing a rebellious Greek government and disciplining its voters, the ‘Masters of Austerity’ have won a great victory. Implications extend far beyond Greece itself. What is now being inflicted upon Greece rams home the message that the dismal results of austerity policy are preferable compared to the disaster the ‘institutions’ will unleash if a government dares to step outside the orthodox framework.  

Here are two lessons from the Greek debacle the Left in Europe needs to reflect upon seriously.

Tuesday, 28 July 2015

Inequality: The gap between space travel and food banks

David Begg: It is quite interesting that the British Tory Party, which originally opposed the introduction of a minimum wage, has committed itself to bringing in ‘A living wage of £9.35/hr by 2020'. This is all part of George Osborne’s scheme to reinvent himself as a modern day one nation Disraeli. But if the idea of the Tories as ‘The Workers Party’ stretches credulity – he did also make massive welfare cuts after all, and is bent on emasculating the trade unions – perhaps it is a recognition that inequality is becoming a major issue.

In fact there is a growing awareness that inequality undermines economic performance. Even Christine Lagarde of the IMF has said ‘Recent IMF research tells us that less inequality is associated with greater macroeconomic stability and more sustainable growth’¹.

Monday, 20 July 2015

What do the OECD health statistics tell us about Ireland?

Paul Sweeney: The OECD has recently published its “Health at a Glance: Europe 2014”. This is very useful even though I am critical of this organisation for purveying some extreme liberal ideology on economics, taxation and other matters.

For example, OECD rarely uses the word “taxation” without attaching the ideologically-loaded word “burden” to it. Thus tax is always a “burden” to these tax-funded civil servants and they rarely describe it as it is – as a charge or payment.

The OECD’s data is based on national statistics and is very useful for comparisons. So if you ignore many of its economic recommendations, the data is useful in most cases and this international comparative health data/information is helpful. This is a flavour of what is in the report.

Friday, 17 July 2015

Fact-checking the National Economic Dialogue Factual Guides on Tax and Equity

Cormac Staunton: The National Economic Dialogue concludes today. The Department of Finance have published guiding documents for each of the breakout sessions.  They state that they should “not be seen as prescriptive but rather seeks to set out the current factual situation and to suggest some of the key questions which participants may wish to consider”.

Here are a few comments on the ‘factual situation’ as presented in document for the Economic Growth and Equity in Tax Policy group.

Tuesday, 14 July 2015

Survey results show Ireland wants a "Social Recovery"

Cormac Staunton: New research carried out by ‘Behaviour and Attitudes’ on behalf of TASC shows that there is strong support for investing in public services over tax cuts in the next budget.  It also shows that the vast majority of the Irish public are in favour of a rise in the minimum wage and that more than three-quarters believe that the minimum wage should be a ‘living wage’. 

As the National Economic Dialogue convenes this week, and as the Low Pay Commission prepares its report, what signals does this give to government in the run up to the Budget and indeed the next election?

Wednesday, 8 July 2015

European integration should not come at the cost of humiliating an entire people

David Begg: The Greek situation looks difficult. The economy is in danger of seizing up if the current standoff between the Greek Government and the rest of Europe cannot be resolved. Earlier reports that the parties were within €60m of a settlement had not been convincingly denied.

So we can assume that there is more at stake here than money. Given the failure of the austerity programme over the last seven years and the unsustainable level of its debt, Greece has a strong case for debt relief. It has a strong case for shifting the emphasis away from austerity and towards economic growth. The European establishment wanted regime change in Greece.

They didn’t get it and the result is that the legitimacy of EMU is now challenged in a way that goes beyond money. There is much media concern about the absence of trust between the eighteen prime ministers and Tsipras, but that cuts both ways.

Tuesday, 7 July 2015

How to Pay for a Living Wage?

Nat O'Connor: A single person working full-time needs to earn €11.50 per hour to afford a minimum decent standard of living. This is a rise in the cost of living of 5 cent since this time last year.

Full details of this year's figure are available on In brief, while some costs have gone down, and the USC changes have reduced taxes on lower earners, the large increase in rents has pushed up the average cost of living for low income workers.

Many commentators and analysts agree that anyone working full-time (39 hours/week) should be able to afford to meet their basic set of needs, but the question arises: how can we afford it? In particular, how can struggling small businesses afford it?

Friday, 3 July 2015

The Greek Crisis: Lessons from Ireland

Jim Stewart: The Greek crisis and tragedy is a seminal moment for the Eurozone and the EU.

The Taoiseach has stated “For Greece there is a lesson from Ireland” (CNN news March 4th 2015). There are certainly lessons for Greece from Ireland, but the improved Irish economy is not one.

The deep recession in Ireland was largely of our own making, but Troika policies exacerbated and prolonged the recession. An important part of economic improvement has been due to the devaluation of the Euro against the Dollar and especially the Euro devaluation against Sterling, given the unique influence of the UK in the Irish economy.

At the same time the US and UK experienced robust recoveries. In contrast the Greek economy has not been able to benefit from Euro devaluation. Valuable lessons may be learned by Greece from Irish interactions with the Troika, especially the ECB. No doubt Greece has also much to share with other Eurozone citizens.

Testimony by Kevin Cardiff (former Secretary General at the Department of Finance, available at to the Committee of Inquiry into the Banking crisis illustrates much of Greek Government complaints about the anti-democratic nature of the Troika programme, its irrationality and self defeating nature in terms of hindering economic growth and the stabilisation of public finances.  Some examples:-

Wednesday, 1 July 2015

Call to Europe on Greece: The European Progressive Movement must and will play a crucial role

Prof. Stephany Griffith-Jones, Ernst Stetter and Vassilis Ntousas: There is still time to reach a fair and equitable deal with Greece, a deal that ensures the country’s fiscal, financial and debt sustainability and that offers a clear pathway out of the crisis.

At the same time, the lessons learnt from the Greek crisis should lead the Eurozone to greater institutional convergence.

The underlying assumption of this convergence, which would comprise of concrete steps towards stronger governance, enhanced common fiscal and investment instruments, debt mutualisation, and more shared sovereignty, is the sense of common responsibility that must be gradually strengthened amongst the Eurozone’s member states in how they address future challenges in the global economic and financial arena.

Monday, 29 June 2015

What the Danish Election tells us

David Begg: The extraordinary success of the populist, anti - immigration, anti EU, Danish People’s Party (DPP) last week continues a trend in Scandinavia. The Progress Party in Norway and the Finns party in Finland have all upset the established political order and, it would seem at first sight, delivered a body blow to social democracy in a region famed for its combination of economic efficiency and social cohesion.

Friday, 26 June 2015

Solving the Greek crisis – by making inequality worse?

James Wickham: It seems the Eurozone finance ministers - and behind them the IMF – are rejecting the last proposals from the Greek government. These proposals attempt to reverse the trend of the last years where the crisis has exacerbated inequality – and the poorest are asked to solve the crisis by accepting even further cuts in living standards.

In Greece the crisis has meant growing inequality in terms of disposable incomes.  

Thursday, 25 June 2015

Do we want the fewest public services in Europe?

Cormac Staunton: One of the key indicators in TASC's analysis of economic inequality is the level of taxation and government expenditure.  We have argued that Ireland is trapped in a 'low-tax triangle' with low taxes leading to lower public service provision, leading to a higher cost of living, leading to calls for tax cuts. This is a downward spiral that ultimately exacerbates economic inequality.

Recent data confirm that there is no plan to reverse this and that Ireland will continue to have a low-tax, low public service economy. Indeed by 2019 we could end up with the lowest government expenditure in the EU.
Chart 1: Expenditure as a % of GDP in Europe (2014). Source: NERI 

Tuesday, 23 June 2015

UN Committee Response to Ireland on Economic, Social and Cultural Rights

Cormac Staunton: The UN’s Committee on Economic Social and Cultural Rights, in its concluding observations on Ireland’s third periodic report, makes a number of very interesting points. The report of the Committee is based a number of written and oral responses by both the State and Civil Society groups to questions raised by the Committee.

The Committee welcomes a number of recent developments in Ireland including: The establishment of the Low Pay Commission in 2015; The Adoption of the Irish Human Rights and Equality Act and the establishment of the Irish Human Rights and Equality Commission in 2014.

In the area of economic inequality, as well as welcoming some key recent developments, there are a number of 'subjects of concern' and recommendations. Here I quote some of the observations that relate to the issue of economic inequality with some additional comments.

Monday, 22 June 2015

No inflation due to low wage rises

Paul Sweeney: There has been no rise in overall prices in seven years! In fact, prices today are a little lower than they were at the peak - which was in June 2008. That was the year of the crash and prices fell substantially then – by almost 8% in a period.  Then prices rose a little they have stabilised over the past three years and are still lower than when the Crash occurred, as the graph shows.

A major reason why there has been no rise in inflation is the low or no rises in wages. Workers will now demand a share in the rising economic growth. Irish growth is very strong and the fastest in Europe. Most of the benefit is going to the owners of capital.

Wednesday, 17 June 2015

Lets start a race to the top: IMF on Inequality

Cormac Staunton: The IMF have released another staff paper on inequality with some very important findings for our understanding of both the causes and consequences of economic inequality.  It also contains some suggestions of policies to reduce inequality.

Most strikingly the research shows that economic growth declines if the share of income held by the top 20% increases.  On the other hand, a growth in the share of income at the bottom 20% leads to higher economic growth. The research also provides further insight into why inequality affects growth.

Tuesday, 16 June 2015

There are no jobs on a dead planet

David Begg: German Chancellor, Angela Merkel, appears to have achieved something of a victory in persuading the G7 group of leading industrial nations to embrace a serious initiative on climate change last week.

They agreed to back the recommendations of the IPCC, the United Nations’ Climate Change Panel, to reduce global greenhouse gas emissions at the upper end of a range of 40 % to 70 % by 2050, using 2010 as a baseline, by phasing out the use of fossil fuels by the end of the century.

This is an important development in the lead in to the crucial UN summit in Paris in December 2015. If followed through this could presage a green industrial revolution. What does this mean?

Thursday, 11 June 2015

Pensions Research Conference

The Pension Policy Research Group Annual Conference will be held on Wednesday 17th June 2015 in the School of Business Trinity College Dublin.

The conference aims to promote discussion on current pension policy issues. It is intended for pension providers, regulators, trustees, advisors, academics and members of pension schemes.

Wednesday, 10 June 2015

The American Nightmare

Book Review of Our Kids: The American Dream in Crisis, by Robert D Putnam.

James Wickham: Some social changes come with trumpets blaring, promoted by self-serving entrepreneurs, hyped by snake-oil gurus and official pundits: think for example of the claims that we now live in the “knowledge society” of a connected digital world. Others come more slowly, advancing almost imperceptibly until we suddenly realise that the world has changed, changed utterly. So it is with the transformation of the United States of America into a society more divided by social class than any other Western democracy.

Monday, 8 June 2015

Tsipras may still have a card to play

David Begg: In a joint article published in a number of European newspapers last week a German and a French politician set out an audacious plan for completion of the European Integration Project. Sigmar Gabriel, Leader of the German Social Democratic Party, and the French Economic Minister, Emanuel Macron, proposed a Eurozone treasury with its own finance chief, single budget, tax raising powers, pooled debt liabilities, a common monetary fund, and separate organisation and representation within the European Parliament.

Wednesday, 3 June 2015

I'm a poor, poor farmer...

Cormac O'Grada: The website that is causing the IFA so much grief is both interesting and, from an equity standpoint, very disturbing.  Analysing the data properly would take some time, but here are a few extracts.

Single Payments in 2014: Numbers and Amounts

Tuesday, 2 June 2015

Critique of Knowledge Development Box

David Jacobson and Jim Stewart: The idea of the Knowledge Development Box (KDB) is to provide tax incentives to firms to locate their R&D activities in Ireland. In a recent submission to the Government on the KDB, we argued that it is just a substitute for the “double Irish” tax loophole, which is in the process of being removed following EU and OECD pressure.

We also argued that although encouragement of innovation is indeed an important part of a rounded industrial policy, the KDB proposal is not an appropriate way of encouraging innovation.

Thursday, 28 May 2015

Equality for All - Really?

David Begg: The high turnout and the active involvement of so many campaigning groups, especially the engagement of young people, in the referendum on gay marriage conveys a strong impression of active citizenship and undoubtedly enhances Ireland’s image as a modern progressive democracy. By coincidence this theme of citizenship and how it measures up to the ideals of 1916 featured at a conference organised by the Wheel, an NGO support organisation, in the week before the referendum.

TASC exists to challenge inequality and to promote the concept of a flourishing society. This is the context in which any discussion of what citizenship is about needs to be located.

Wednesday, 27 May 2015

Good News on Jobs

Paul Sweeney: There is good news on the jobs front. But we should never have had such a collapse in the economy and jobs. The job of economists and policymakers should be to make economic performance boring.

Employment should match population changes, economic development should meet our material and social needs and provide equitable taxation to fund great public services.

There should never be the rapid rises and falls in growth, in unemployment and in taxation and consequently in public services.

Tuesday, 26 May 2015

TTIP is not a conventional free trade agreement

David Begg: Since the collapse of the DOHA round of multilateral trade negotiations the focus of global trade policy has shifted towards regional or 'plurilateral' agreements involving groups of countries.

The United States is the main driving force behind this initiative with the aim of being at the centre of an integrated trade zone, covering nearly two-thirds of the global economy and almost 65 per cent of US goods trade, according to the US Council of Economic Advisors (Wolf, 2015).

Tuesday, 19 May 2015

Employers' Social Contributions in Ireland

Paul Sweeney: Here on Progressive Economy, we have been examining the evidence for tax reform in recent months. In my last Blog I looked at employees’ social insurance and here I examine employers’ social insurnace.

Is Ireland “the best little country in which to do business”? It has the lowest corporation taxes in the EU, no corporation taxes for some multinationals who chose to use aggressive tax planning and very low social charges on employers.  And we had very low average income tax rates though they were increased – but only to the OECD average since the Crash of 2008.

Social Contributions in EU as % of GDP (source Eurostat) from Cherishing All Equally

Wednesday, 13 May 2015

Capital Markets Union – The Risk of Short-Termism

David Begg: The European Commission believes that European Capital Markets are underdeveloped. It considers that this is an aspect of the single market which needs deepening and more integration. Commissioner Katainen said recently that the goal of policy would be to create a Capital Markets Union in which the flow of capital will increase allowing business to expand and providing more options for people to save for their old age, and strengthen financial stability. With a still fragile banking system carrying €900 billion of uncertain debt this makes perfect sense, or does it?

Friday, 8 May 2015

A Polanyian double movement in Europe? Too early to say

David Begg: On Tuesday 5th May Professor Eduardo Silva, from Tulane University, New Orleans, delivered a lecture in Maynooth University on the topic ‘Learning from Latin America: Lessons from the periphery in a time of austerity’. Professor Silva was in Ireland as part of the University’s distinguished visiting scholar’s programme. The core message from the lecture was that neoliberalism and austerity, if pushed beyond certain limits, can lead to social mobilisation and the rise of the left. This is the message from Latin America and Professor Silva challenged his audience to reflect on whether this could happen in Europe, or is Europe different?

Wednesday, 6 May 2015

USC cuts will still benefit higher earners

Cormac Staunton: The Government today signalled that instead of changing income tax rates and bands in Budget 2016, they are likely to reduce the 7% ‘middle rate’ of USC for those between €17,500 and €70,000 to 6%.

TASC has developed a model to measure the effect of such changes on net incomes and effective tax rates (USC, PRSI and income tax) for a single person on any given gross income level. Here I use this model to show the impact of a reduction in the middle USC rate from 7% to 6% and assume all other rates and bands are left the same. We can then see who the winners are in this scenario.

Tuesday, 5 May 2015

Why May 7th is crucial for Ireland

David Begg:  There has always been a paradox of sorts affecting Ireland’s engagement with the prospect of European Integration. With few honourable exceptions Ireland’s elite was never much concerned with a big vision of Europe. Economic considerations and the assertion of our independence tended to dominate. But herein lies the paradox.

While we might have seen the EEC initially, and subsequently the EU, as a means of consolidating our independence from Britain, it was equally seen as vital to our interests to have Britain also engaged in Europe. We had to sit on the sidelines with Britain for a year in the early 1970’s when its application to join the EEC was initially turned down. Likewise our joining the single currency was predicated on a belief that Britain too would ultimately join.

It is this interdependence with Britain which makes the General Election of the 7th May of such interest to Ireland.

Thursday, 30 April 2015

The Danger of the Share-Buyback Epidemic

Paul Sweeney: The news that US companies will buy back over one Trillion dollars – that is $1,000,000,000,000 - worth of their own shares in 2015 is a warning of possible bad times.

When companies buy back their own shares instead of investing their money in the future, in jobs in plant and machinery, it means lower future growth for the company but also for the economy, especially when so many of them are doing it together.

Wednesday, 29 April 2015

Planned tax cuts likely to increase inequality

Cormac Staunton:  The Government's Spring Statement, announced yesterday, was seen by some as a bit of a damp squib, with very little detail about economic policy. However, drilling down into what the two Ministers said, we see that there is a clear intention being laid out.

Ireland's income tax rates compared to other OECD countries 

Tuesday, 28 April 2015

Five Alternatives to Tax Cuts

The Spring Statement will be announced today and the expectation is that there will be a heavy reliance on tax cuts for higher earners. Last week, Cormac Staunton wrote this Opinion Piece in the Irish Times, outlining five alternatives that would reduce economic inequality and help people far more than tax cuts could.

Wednesday, 22 April 2015

More on Income Taxes and Social Charges – Proposals for Reform

Paul Sweeney: According to economists Thomas Piketty and Emanual Saez 

The job of economists should be to make a top rate tax level of 80% at least "thinkable" again.”

Not long ago, Ireland had top tax rates - on high incomes - of over 60 and 65% - plus social charges.  In a recent blog, I showed that today’s top rate of income tax is at is lowest rate everLast year TASC sought modestly to just retain the 41% rate, but it was reduced to 40%. Oisin Gilmore demonstrated the lack of evidence for 'disincentive effects' of higher taxes on high incomes in this Blog.

Why is a higher top rate of tax unthinkable for many policy leaders in Ireland today?

Monday, 20 April 2015

No 'real responses' to changes in higher tax rates

Oisín Gilmore: Last week on Morning Ireland, IBEC’s chief economist Fergal O’Brien issued some warnings about the impact of taxes in Ireland on high income earners. He stipulated that Ireland’s taxes were so high that they were leading to shortages in the supply of high-skilled labour and in particular he implied that Ireland’s supposedly high tax rates would lead to high-skilled mobile labour leaving the country. And he argued that the focus on workers earning below €70,000 was misplaced.
The Laffer Curve 

In their Quarterly Economic Outlook IBEC state rather definitively that: “High marginal rates of tax disincentivise people from  taking on extra work, from increasing their skills and from working in Ireland at all.” (p.9)

This would appear to be a case of Econ101. It appears intuitive that an increase in the tax rate means lower net pay, which should lead to workers working less. However, the empirical evidence on this is much less clear.

Tuesday, 14 April 2015

Shining a light on alternatives

Cormac Staunton: Two important recent announcements by Government signal moves towards addressing some of the causes of economic inequality in Ireland: free GP care for under 6’s and over 70’s and the introduction of 12 months paid parental leave (to be split between couples).

These initiatives signal an approach towards more universal public services in Ireland. On their own they do not fully address the problems. In fact in some ways they may raise more inequalities. It’s as if we are moving the country from driving on the left to driving on the right, but are doing so in a phased manner – trucks first, then a few weeks later bikes ... then eventually we’ll get to cars.

But if these moves are first steps and an indicator of the direction of public policy, then they are very welcome. At the very least, more discussion of initiatives like this should show the madness of calls for income tax cuts as a way to solve social problems and reduce rising economic inequality.

Friday, 10 April 2015

Keep Aer Lingus Local

Paul Sweeney has added a new TASC think piece arguing against the sale of Aer Lingus. You can read the full text here  

A short summary blog appears here:

Monday, 30 March 2015

The Value of Nothing

Cormac Staunton: A serious suggestion doing the rounds at the moment is that we should have an independent body that costs political party manifestos so that politicians can’t mislead voters with unrealistic promises of tax cuts or spending increases. This is important, but if we are to do it, we need to do it right.

Planning permissions show how little we've learnt

Paul Sweeney: This Infographic on planning permissions, published by the CSO last week, tells a lot about the Irish economy and Irish people.

Source: Central Statistics Office 

On the top left we can see that there were fewer than 2,000 applications granted for new houses in the last quarter of last year compared to a staggering 10,000 in the end of the boom year 2008. We can safely bet that most of those granted were never built as the crash happened in 2008.

Friday, 27 March 2015

Economic Inequality: Frequently Asked Questions

Cormac Staunton: Since launching our report Cherishing All Equally: Economic Inequality in Ireland we have received a number of questions from a wide range of people interested in the subject. We are encouraged by the level of debate the report has generated and look forward to continuing to discuss this important topic. 

In the meantime, here are our answers to some of the most common questions. 

Monday, 23 March 2015

The Top Income Tax is at its Lowest Rate

Paul Sweeney: This year, Ireland’s top tax is at its lowest rate for many years. Yet inequality is now recognised as the biggest economic challenge of the 21st Century and progressive tax is one of the key instruments in reducing it. Income tax is probably the most effective progressive tax. Why is the top rate being reduced?

Wednesday, 18 March 2015

Incarceration and Equality

Oisín Gilmore: Last month the Oscars got some press attention for the unusually politicized nature of many of the acceptance speeches. While Patricia Arquette’s call for gender wage equality got perhaps the most attention, here I want to look at some recent research relating to an issue raised when the award for best song was given to the movie Selma.

Friday, 13 March 2015

Data on Wealth in Ireland

Paul Sweeney: There has been no study of the distribution of wealth in Ireland by any government body until recently. Now the CSO has undertaken such a study which examines net and gross wealth and its distribution. It can be found here

There was substantial wealth destruction in the Crash of 2008, and this impacts on current levels of wealth today and will do so for some time because the debts incurred by some subtracts from overall net wealth.

This perhaps is the most interesting lesson from the CSO study. It is that had we not had the seven bubble years from 2001 to the crash in 2008, Ireland and a lot of our people would be a lot better off. This is best illustrated by negative equity, the person in a home for which they paid a great deal more than its present value. The debts built up in that period greatly reduced the net assets accumulated in the good years.

Monday, 9 March 2015

Arguments for a gendered investment plan

Paula Clancy: As a consequence of austerity policies the programme for gender equality in Ireland has been hard hit.  Ursula Barry’s recent TASC paper ‘Gender Equality and Economic Crisis: Ireland and EU’ highlights how gender equality in Ireland has been marginalised as an employment policy objective. This is similar to what is happening in Europe more generally, exemplified by the absence of a gender equality guidelines in the most recent 2010-2020 European Employment Strategy (EES).

Since the crisis women have been more exposed to pay freezes, job cuts and reduced pension entitlements.  Women have been more affected by cuts to public services since they are the more likely to depend on these services and women are also more likely to assume the extra unpaid work resulting from cuts to public services (European Commission, 2012).

Don’t sell, buy: Paul Sweeney on Aer Lingus in Irish Times

Paul Sweeney, Chair of TASC's Economists' Network, wrote a strong opinion piece on Aer Lingus in The Irish Times on Friday, 6th of March 2015.

You can read it here (behind a paywall)

Friday, 6 March 2015

Mathematically Progressive or Socially Progressive?

Cormac Staunton: You don’t measure how peaceful an area is by counting the number of peacekeepers. If anything, the presence of peacekeepers is an indicator of war, not peace.

We have heard lately from various sources that Ireland has “the most progressive tax and transfer system in the OECD”. This measure refers to Ireland’s income inequality before and after taxes and transfers are taken into account.

But is this a measure of peace or of peacekeepers?

Wednesday, 25 February 2015

Aer Lingus Watch #5

Paul Sweeney: I began Aer Lingus Watch 3 by saying that the government will not sell its stake in Aer Lingus. The Taoiseach had said that he wanted “a cast-iron guarantee” on the slots from IAG. That will not be forthcoming, I said. Cast-iron means no, if it is plain English because such a guarantee can't be given and enforced. And I thought the case was closed. For a time it appeared as if it might be opened again when a few key players in positions wavered. But the government has now sensibly rejected this bid.

That is not to say another won't materialize.

Tuesday, 24 February 2015

Why ‘gross’ income inequality matters

Cormac Staunton: Cherishing All Equally has prompted a discussion of economic inequality in Ireland. In a previous post I discussed why looking only at incomes is insufficient, and why we also need to look at public services and the cost of living.

In this post I want to show that when talking about income in the context of economic inequality it is important to look at gross income inequality (before taxes and social welfare), not just net income inequality (after taxes and welfare).

Friday, 20 February 2015

Five Progressive Views on Greece

Nat O'Connor: Queries: The European Progressive Magazine circulated five articles about the Greek crisis, all of which are relevant to Ireland.

More on Ireland's Low Taxation and Income Tax Progressivity

Nat O'Connor: The OECD provides a table of its member states showing total tax revenue as a percentage of GDP. In 2012, Ireland's total tax revenue was 28.3% of GDP. The lowest in the OECD was Chile on 20.8%. The highest was Denmark on 48%. Of all EU members of the OECD, Ireland has the lowest total tax revenue.

Ireland's low overall taxation is mostly due to very low social insurance charged on people's incomes. As shown in the three charts below, people on low and average incomes in Ireland pay much lower taxes than what they would pay in other countries. People on above average incomes pay less tax than they would pay in European countries, but slightly more than they would pay in English-speaking countries (including the UK).

Thursday, 19 February 2015

Aer Lingus Watch #4: Did Privatisation Make Aer Lingus Profitable?

Paul Sweeney: A number of commentators have claimed that privatisation was the best way for Aer Lingus and that it was the making of the company because it became more profitable. The facts demonstrate that this is patently not true.

Timmy Dooley of Fianna Fail defended that party’s un-strategic decision to privatise Ireland’s strategic aviation bridge to the rest of the world, claiming that the company had performed poorly before it was sold off and he claimed that it has done better since their mistake of privatisation.

Wednesday, 18 February 2015

Getting Beneath the Surface of Gross versus Net Income Inequality

Nat O'Connor: TASC's new report, Cherishing All Equally: Economic Inequality in Ireland, is designed to provoke deeper debate about what is and is not working in Irish economic and social policy.

The report points to the international debate on the problematic growth of income and wealth inequality to show that the issue is important and needs to be talked about in a different manner. Part of the problem in Ireland is that any mention of inequality is treated as left-right politics as opposed to a description of a major social or economic problem that merits serious analysis by everyone in the political spectrum. (An 'inconvenient truth' about our economy perhaps?)

Super rich or super angry: where are you on Ireland’s income pyramid?

Paul Sweeney: Many of us did not care how much others earned during the Celtic Tiger and bubble years. But now we are rightly angered about growing inequality.

How do your earnings compare to others? For the 1.9 million people at work last year, average annual earnings were €35,600. But it’s a bit more complex. This Central Statistics Office (CSO) data does not include many of the highest paid, e.g. many sole practitioners, doctors, accountants or solicitors in partnerships, nor the incomes – including gains made – of the very wealthy.

Tuesday, 17 February 2015

IAG: Predator or Saviour?

An Lámh Eile: Once again the full privatization of a state company is on the agenda.

Much is being made of connectivity. Connectivity is an issue for two key segments, tourism and business. But will connectivity be affected by an IAG takeover? There is substance in the comments that argue that if the demand is there for connectivity, the market will provide it. And if that is true, the IAG takeover of Aer Lingus is immaterial to connectivity. Private airlines decide on the basis of the bottom line in initiating a new route or further development of an existing one. In the short-term, the bottom line rules in the market. But are there cases where loss-making connectivity should be sustained for some long-term broader reasons than short-term profit?

Monday, 16 February 2015

Ireland's 'Progressive' Income Tax System

Nat O'Connor: Some commentators keep referring to the progressivity of Ireland's income tax system, as if it was the silver bullet that makes economic inequality in Ireland OK, or at least as good as it can get. This is vastly over-simplified.

Focusing in on the effect of income tax, USC and PRSI, the progressivity in Ireland's income tax system is real - but it is NOT due to taxing high incomes more than in other EU countries.

Response to Dan O'Brien's 'Bunkum' Article

Nat O'Connor: Dan O'Brien writes that "claims about great inequality in Ireland are just bunkum". Having had a look at the arguments in support of this position, there is much data Dan O'Brien is ignoring.

DOB: "it has always been clear from the available data that the gap in Irish incomes between the richest and the poorest at any given time has been in line with averages in peer countries."

We have data on the Gini coefficient of overall income inequality, which shows us that it is slightly lower than the EU average. But this statistic doesn't give us fine detail about the mix of high, low and and middle incomes across society. Different countries can share the same overall level of income inequality, but have different combinations of high and low income.

Inequality: a Real and Growing Threat to the Irish Economy

Nat O'Connor and Cormac Staunton: Economics has always been about the study of who gets what, when and how. This issue has come into sharp focus due to the problems that growing economic inequality is causing. International bodies like the OECD, World Bank, IMF and World Economic Forum have all stressed the challenges and risks posed to developed economies by economic inequality. Economists and leaders across the spectrum have called economic inequality ‘dangerous’ (free market advocate Alan Greenspan), ‘the most important problem we are facing today’ (Nobel laureate Robert Shiller), and ‘the root of social ills’ (Pope Francis).

TASC’s first annual report on economic inequality, Cherishing All Equally, shows that this global phenomenon is a very real threat for Ireland too.

Friday, 13 February 2015

The “Two Irelands”

Cormac Staunton: Christian Aid hosted a conference in Dublin yesterday on the “Human Rights Impact of Tax and Fiscal Policy”. There were a number of interesting speakers and contributors on issues of global tax policy and how it links with human rights, sustainable development and equality.

In this post I want to focus on a discussion between two panelists that I found particularly interesting. To many of those present it might not even have been the most interesting discussion in that session. But to me it spoke volumes about the central importance of inequality.

Wednesday, 11 February 2015

Economic Inequality: More than Incomes and Wealth

Cormac Staunton: When discussing economic inequality, there is a tendency to focus on income inequality (or sometimes wealth inequality). This is because there is more data on incomes, and income inequality can be (over) simplified with measures like the Gini Coefficient.

However, economic inequality is about more than just incomes and wealth. TASC’s forthcoming report, Cherishing All Equally, is the first study to take an overall view of economic inequality in Ireland. To get a full picture of economic inequality we need to look at a range of other factors, a few of which are discussed here.

Tuesday, 10 February 2015

Immigration: wishful thinking by well-meaning people (4 of 4)

James Wickham: Here the argument is brought to a conclusion, with a full list of references. [Part 1 of these four posts is here]

4. The moral case for immigration
Today in most European countries large scale immigration in its current form probably increases social inequality.

The fiscal arguments for continued large-scale immigration involve enormous social change and heavy resource pressure for at best marginal benefits. Not all European countries face population decline, so in these cases (UK, France, Scandinavia) the demographic arguments are grossly exaggerated.

Monday, 9 February 2015

Immigration: wishful thinking by well-meaning people (3 of 4)

James Wickham: The focus in this post is the debate about the benefits of diversity. [Part 1 of these four posts is here]

Problem #8 Not all kinds of diversity create innovation
In his paper, FitzGerald repeats the mantra that immigration creates diversity and so stimulates innovation. He explicitly states that one cause of London’s economic dynamism is its cultural and ethnic diversity, the result of recent immigration. Since ‘innovation’ is seen as fundamental to economic growth, here we have a new and separate economic rationale for immigration.

What is astonishing about this argument is that it is taken as self-evident by commentators, yet the actual empirical evidence is very limited. Since economic growth generates in-migration, there is an obvious possibility that diversity may be a consequence of innovation, not its cause. One detailed analysis of the impact of immigration on the London economy could find no evidence for the claim that the resulting diversity has increased innovation (Gordon et al 2007: 59); a more recent study using firm level data reports a small but significant ‘diversity bonus’ across all types of firms in London (Nathan and Lee 2014).

Certainly, the contribution of specific immigrant groups to innovation is well known historically, from the Huguenot refugees of the 17th century (in Ireland, England and Prussia) to the East African Asians of the 1970s in Britain; the contemporary contribution of Chinese and especially Indian migrants to innovation in Silicon Valley is also well documented (e.g. Saxanian 2006).

In the UK in particular the contribution of so-called ethnic entrepreneurship has been discussed for some time. We can also recall cities of the past such as Alexandria, Salonica or Odessa, known for economic dynamism and for their polyglot and ethnically diverse populations – and now of course homogenised by nationalism and/or religious fundamentalism [1].

However, neither the specific contributions of specific groups nor the peculiar features of entrepôt cities prove that diversity in itself heightens innovation. The next section shows that there are equally plausible arguments that diversity lowers social capital, and given that trust is often seen as crucial for innovation, it could even be argued that immigration is bad for innovation [2].

3. Quite apart from some rather more fundamental sociological problems
The economic ‘benefits of diversity’ thesis is interwoven with the more general if much vaguer belief that diversity is anyway a Good Thing. Nobody now wants to be against ‘diversity’. Recently however this comfortable assumption has been challenged.

Since World War II, European nation states became welfare states. Whereas in the past (male) citizens were defined by their obligation to fight for the state (‘Aux armes citoyens’ in the Marseillaise, ‘The Soldier’s Song’ for Ireland) now they are defined by their involvement in the systems of mutual support (education, health, social welfare…).

And the welfare state actually makes greater demands of its citizens, because it asks them to pay for each other, to look after each other, and to contribute towards the next generation. Although the welfare state involves some ‘vertical’ redistribution (from the rich to the poor), it also involves massive ‘horizontal’ redistribution, from those at work to those either too young or too old to work. The welfare state therefore makes enormous demands on all its members. It is plausible that the more diverse – the more not like me fellow citizens are – then the greater this unwillingness.

Furthermore, where integration occurs through the recognition of difference (‘multi-culturalism’ [3]) rather than through assimilation, this will further weaken this readiness to fund one’s fellow citizens now and in the future.

Such arguments are supported by historical research and by work in political economy. Thus a landmark study of American distinctiveness argues that in the USA, where ethnic or ‘racial’ divisions are strong and politicised, welfare is seen as transferring resources to ‘them’ and has little political support; conversely, the most advanced welfare states in Europe, those of Scandinavia, were built when these societies were remarkably homogenous in terms of religion and ethnicity (Alessina and Glaser 2004).

This general argument was reinforced in a much cited paper by Robert Putnam (2007). Putnam argued that diversity (measured in terms of ethnic origin) leads to what he termed ‘hunkering down’: in diverse areas social trust is lower, not just between the different groups but also within them.

Putnam was careful to stress that new identities can be created from diversity, so that diversity can diminish and trust rise – but this of course is the opposite of the Diversity is Good For You argument. It is after all worth noting that the integration of America’s European ethnic minorities occurred from the 1920s through to the 1960s – the period when there was an effective ban on mass immigration. There is also strong evidence that the combination of multicultural policy and easy access to generous welfare provision works to marginalise ethnic minorities, as measured by low labour force participation and over-representation within the prison population (Koopmans 2008).

Such views are not accepted by all researchers. Others have argued that a strong social democratic tradition can insulate European societies against these fissiparous tendencies (Tayor Gooby 2005).

All of these issues are the subject of extensive debate, but there is now enough historical and social science evidence to suggest that at very minimum diversity, social cohesion and social solidarity are uneasy bedfellows. Probably progressives face a stark choice:

This is America versus Sweden. You can have a Swedish welfare state if you are a homogenous society with intensely shared values…In the US you have a very diverse, individualistic society where people feel fewer obligations to fellow citizens. Progressives want diversity but they thereby undermine part of the moral consensus on which a large welfare state rests (David Willetts in 1998 quoted in Goodhart 2013).

On this basis it’s hardly surprising that the most explicit advocates of continued extensive mass immigration are on the one hand, the lobbyists for multi-cultural policies and on the other hand, advocates of the deregulated free market [4].

[1]The ethnic purification of Salonika (contemporary Thessaloniki) is the theme of the masterful account by Mazowerer (2005). Arab nationalism and now Islamism have largely homogenised Alexandria; the holocaust and Stalin’s ethnic sorting after World War II achieved similar results for Odessa.
[2] Consider here the experience of the ‘third Italy’ based on the innovative small businesses of Emilia-Romagna and Tuscany. Immigration has changed the workforce and undermined one basis for innovation (Andall 2007).
[3] ‘Multiculturalism’ can mean many different things. In everyday parlance in the English-speaking world it now usually just means tolerance. However, multiculturalism as policy means far more than this. It means the acceptance of different communities and their institutions as part of public policy; it will be supportive for example of different education for different minorities and recognition of other languages than the national language. For key early discussion of the problems of multi-culturalism as policy see Joppke (1999).
[4] As exemplified by Philip Legrain’s polemic Immigrants: Your country needs them (2007).

Click here for Part 4

Friday, 6 February 2015

Immigration: wishful thinking by well-meaning people (2 of 4)

James Wickham: To continue the analysis, looking at broader demographic and labour market issues. [Part 1 of these four posts is here]

Problem #4 The small demographic benefits of immigration depend on massive population change
It is frequently argued that Europe needs immigration because the European populations are ageing and without immigration the population will actually decline. In fact this is only half-true: some European countries do face population decline, but not all. Furthermore, the most serious declines are not in Western Europe, but in some countries of the former Soviet bloc where the ‘transition’ to a market economy has had disastrous consequences for living standards of ordinary people. In Western Europe, the UK and France in particular do not depend on immigration to maintain their population size, the issue is most important in Germany and above all Italy.

In the UK, immigration is now the major cause of population growth. For the ‘aging population’ argument the crucial figure is the dependency ratio (the number aged over 65 per 100 aged 16-64). Recent ONS projections assume an annual net migration to the UK of 165,000 [1]. This would result in the population rising from 63.7m in 2012 to 73.3m in 2037 and to fully 86.5m in 2087. In this population the dependency ratio would rise from 26.5 in 2012 to 41.9 in 2037 and to 51.5 in 2087.

Similar projections have been made for the hypothetical situation of zero net annual migration, in which population change is purely the result of births and deaths. In this situation the total population would stay roughly stable (67.5m in 2037 falling down 40 63.8m in 2087). Nonetheless the dependency ratio would rise to 46.2 in 2037 and 61.2 in 2087. Under ‘low’ net migration (100,000 p.a.) the population would still reach 71.6m in 2037 and 80.1m in 2087; under ‘high’ net migration (225,000 p.a.) population would be 75.0m in 2037 and fully 92.9m in 2087, with corresponding dependency ratios of 40.8 and 50.5 (Rowthorn 2014: 32).

Such projections show three crucial points. Firstly, slowing the rise in the dependency ratio requires continued inflows of new migrants and consequently a significant increase in total population. Secondly, reducing the dependency ratio back to anything near its current level cannot be achieved even by completely unprecedented levels of immigration. Finally, continued high levels of immigration would accelerate the ongoing ethnic transformation of the UK and it is difficult to imagine that this will be politically acceptable (Coleman 2010).

All of this assumes that the fertility will remain well below replacement level. However, it is clear that most women in Europe already have fewer children than they would like to have – the so-called ‘child gap’ (Bernardi 2005). There are rather well known policies that can facilitate child-rearing, the most obvious being (a) flexible employment that allows women – and men – to combine parenting with paid labour and (b) adequately funded and publicly available childcare (see Castles 2003). Through such measures the Nordic welfare states have ensured that fertility rates are at approximately replacement level (e.g. Ellingsaeter 2011). Conversely, it is clear that unemployment and employment insecurity make people less likely to want to become parents (Pailhé and Solaz 2012; Vignoli et al 2012).

Finally, there are some obvious reasons to reject the conventional wisdom that the population of European countries needs to grow (Coleman and Rowthorn 2011). Growing populations impose high environmental costs, especially if the population is also affluent. Indeed, there are strong ecological arguments in favour of some reduction of population size over time. There is evidence that growing population is already experienced by some Europeans as damaging their quality of life: population pressure on the environment (‘overcrowding’) is now one reason Europeans give for emigrating (Van Dalen and Henekens 2013) [2].

Problem # 5 Immigration reduces need for training
In the UK there is a growing suspicion that the immigration of skilled labour has reduced the pressure for effective education and training (House of Lords 2008: 31; Ruhs and Anderson 2010: 313). A ready supply of skilled immigrants may make employers less concerned to retain existing skilled employees.

Skilled immigration is a policy option for both employers and governments, a choice to ‘buy not make’. This is a counter-factual argument and difficult to actually prove. However, scholars working within the ‘Varieties of Capitalism’ tradition stress that one feature of Liberal Market Economies, such as the UK and the USA, is that they invest relatively little in occupational training: these countries are also those most prone to facilitate the importation of skilled labour (Devitt 2011).

Despite all the rhetoric of the knowledge society, countries such as the USA, the UK and even Ireland can become dependent on the importation of skilled labour in the IT sector (Wickham and Bruff 2008; Salzman et al 2013; Wickham 2015). Even more problematic is the dependence of the health systems of such societies on the importation of expensively trained medical professionals from poorer countries [3].

Problem #6 Mass immigration can substitute for inclusive labour market policies
Mass immigration may well also function to reduce the pressure for inclusive labour market policies. Most European countries have faced the paradox of high unemployment, especially youth unemployment, and mass immigration into low paid jobs. One review of the literature concludes that there is quite strong evidence that immigration discourages workless natives from entering or remaining in the labour market; comparing Europe and the USA it concludes that effect on wages is larger in the USA, whereas the effect on employment is bigger in Europe (Longhi et al 2008 as cited Rowthorn 2014: 21). What exactly could be involved in this ‘employment effect’ needs further discussion.

Here the experience of the recent ‘Celtic Tiger’ boom in Ireland is relevant. The boom involved a significant expansion of employment within the existing population and a sensational inflow of immigrants, largely from the New Member States of the EU. I have described this as a ‘goldrush’ or ‘bubble’ labour market’ (Wickham 2015). The employment rate also increased for groups with traditionally relatively low employment, namely older people and above all for women.

However, this ignores that at the same time unemployment blackspots continued: unemployment remained high in areas of the North West but also in areas of booming Dublin. Many women continued to leave the labour market after their first or especially their second child, so that labour force participation amongst ‘native’ women only reached moderate European levels. All of this is hardly surprising, for Irish labour market policy was essentially one of benign neglect combined with cash handouts.

On the one hand, cash benefit levels were generous by European standards (and significantly higher than the UK) and universally accessible. On the other hand, labour market activation measures (counselling, repeat interviews, job search support) were almost non-existent (Grubb et al 2009). Even more importantly, there were almost no measures to support groups who traditionally have been most likely to become detached from the labour market – the disabled, the less educated, etc. And after literally decades of debate, nothing was done about Ireland’s childcare provision.

The NESF report ‘Creating a more inclusive labour market’ (NESF 2006) documented all this – and was ignored. Against this background, it is possible to see that labour immigration was the easy option – just bring in work-ready people, instead of developing universal childcare and supportive labour market activation [4].

Problem #7 Mass immigration can lead to settled ethnic minorities with low labour force participation
New immigrants usually have a higher labour force participation than locals (see earlier re fiscal benefits), but this is unlikely to last. In a recession new immigrants will usually be the first to lose their jobs, simply because they were the most recently hired and/or they have taken jobs that were less protected; there may be straightforward discrimination [5]. If they and their families stay, they become an ethnic minority and the ‘second generation’ is likely to have a higher level of unemployment than the native population.

Especially important here is the issue of female labour force participation. In some ethnic minorities women are significantly less likely to enter the formal labour force than native women. It is important to stress that this is by no means universal. Thus as long ago as 1991 UK census data showed that Afro-Caribbean women were significantly more likely to be economically active and in full-time employment than white women, even after controlling for household structure (Holdsworth and Dale 1997). By contrast, women from Muslim ethnic groups (in the UK Pakistani and Bangladeshi) do continue to have low labour force participation.

To this must be added the ‘left behind’ problem. Newly arrived immigrants go to where the work is. However, if the work dries up, they and their descendants are often less likely to move – the reasons presumably range from fear of discrimination to a reluctance to leave the supportive community they have established. Sections of Europe’s established ethnic minorities are concentrated in decaying industrial areas which they once serviced - most obviously the mill towns of the Northern England, but also the erstwhile coal mining areas of the Ruhr and even the manufacturing towns of France.

This makes clear that it is only new immigrants who will be kind enough to provide the flexible labour force desired by employers and governments. Furthermore, discussing labour force participation highlights that ‘immigrants’ are not homogenous, and even the division between low skill and high skill is inadequate. This becomes especially clear when we consider the alleged economic benefits of diversity.

[1] This may be a gross under-estimate. The most recent ONS release (27 November 2014) reports total net migration to the UK in year-ending June 2014 to be fully 260,000. Annual net migration to the UK peaked in 2005 at 320,000 for year ending June 2005.
[2] A bizarre feature of current work on migration is the extent to which the emigration of Europeans is almost completely unresearched. This despite the fact that emigration from the UK exceeded immigration for much of the post World War II period; since 1970 emigration has usually been in excess of 200,000 per annum; the current excess of immigration over emigration only dates from 1994 (ONS).
[3] There is an emerging consensus that in general skilled labour migration from poor to rich countries is a win/win, benefiting both sending and destination countries (skilled emigrants send remittances, transmit new knowledge etc.). The net benefits however are more dubious in the case of medical professionals.
[4] Obviously childcare and labour market activation cost money. However, they also require an inclusive national ideology and effective state institutions. Arguably during the boom these were weakened in Ireland.
[5] All these factors have combined to ensure that in Ireland NMS immigrants are now more likely to be unemployed than indigenous Irish workers.

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