Wednesday, 24 August 2016

Despite recovery, Ireland remains a hugely unequal society

Rory Hearne: The fact that the number of homeless children in the capital exceeds 2,000 for the first time since current records began is further evidence Ireland is a deeply unequal country. Economic inequality is worsening despite the recovery and, for those experiencing inequality, particularly children, Ireland is a very harsh place.

Economic inequality has become a defining global issue since the 2008 crash. The rise in wealth of the super ­rich while the majority suffer austerity, debt and stagnant wages has led to intense political and economic attention. Here in Ireland we have experienced similar trends.

The share of gross income going to the top 1 per cent of earners increased from 34 per cent in 2011 to 39 per cent this year. And over half of the increase in total income (€21 billion) over the last five years has gone to the top 10 per cent of earners. The bottom 50 per cent of earners received just 6 per cent of that increased income. This highlights an inequality in employment and wage growth in the recovery, with a more polarised work force, an rise in low­ paid jobs, low­ hours employment and precarious work. The minimum wage, for example, remains 20 per cent lower than the living wage of €11.50 per hour.

Ireland’s progressive income tax and social protection spending does reduce this “gross” income inequality (the highest in the EU) and results in a net income inequality at the EU average. However, Ireland’s net income inequality has also risen in recent years, and an accurate assessment of economic inequality requires inclusion of other measures (such as wealth, poverty, public services,
taxation, cost of living) which TASC provides in our recent report Cherishing All Equally 2016.

In relation to the distribution of wealth, Ireland has also become much more unequal. Over the last three decades, the top 10 per cent have increased their proportion of net wealth from 42 per cent to 54 per cent, while the share of net wealth held by the bottom 50 per cent has halved (from 12 per cent to 5 per cent).

Austerity period

The recession and austerity period resulted in a dramatic increase in poverty and, despite the recovery, these levels remain very high. At 36 per cent, child deprivation is double the 2007 rate, while 58 per cent of lone parents suffer deprivation, up from 35 per cent in 2007. This means more than one­third of Irish children live in households experiencing two or more types of material deprivation such as being unable to afford to heat their homes, buy new clothes, have sufficient food or socialise with friends and family.

Economic inequality has a profoundly damaging impact on children’s educational development and wellbeing. At age nine months, the level of household income a child is born into has no correlation with their inherent cognitive potential. However, by just three years of age, children in higher­income families perform better with a 1 per cent increase in household income predicted to lead to a 5.1 per cent increase in educational test scores. By nine, there is a strong negative correlation between children’s self­image and their social class background, as children from more disadvantaged
backgrounds are more anxious, less happy and report poorer behaviour.

By 13, children have internalised their inequality by reducing their expectations. Only 36 per cent of children aged 13 from the bottom­ income decile expect to achieve a third ­level education in contrast to 65 per cent from the top ­income decile. Children growing up in disadvantaged areas face multiple inequalities while inequalities in relation to health and housing are also significant.

Women in Ireland are also disproportionately affected by inequality, with a concentration of women in low­paid, part­time work and unpaid care work. Gender inequalities result in women being underrepresented in more senior positions. Another important factor is the inadequate provision of quality and affordable public services and infrastructure in housing, childcare, transport, healthcare and education. Ireland’s government expenditure as a percentage of gross domestic product
is now the joint­lowest (with Lithuania) in the EU.

Ireland’s high level of economic inequality results from structural issues shaped by the type of economic policies pursued in recent decades. We have followed a variety of capitalism that is deregulated, neo-liberal and free­ market in orientation. In contrast, the Nordic countries have pursued a more regulated social economy model resulting in greater equality and lower poverty.

Policy shift required

To reduce inequality in Ireland, particularly child poverty, requires a significant shift in policy and political decisions that prioritise equality. Proofing budgetary measures for their impact on economic inequality is essential. Would reducing inheritance tax, abolishing a progressive tax such as the
universal social charge, failing to raise the minimum wage or the lack of a wealth tax pass such a proofing?

Policymakers should remember the message from the public in the general election: investment in quality public services (health, housing) should be prioritised before tax cuts. This centenary year should give the economic equality dimension of  the 1916 Proclamation, which declared “equal rights and equal opportunities” to all citizens, the required political and policy attention it merits.

Dr Rory Hearne is a senior policy analyst with TASC and lead author of Cherishing All Equally 2016, Economic Inequality in Ireland.

This blog first appeared in the Irish Times on 24th August 2016

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