Ireland’s income inequality will edge closer to United States levels unless changes are made to economic and social policy, including taxation, according to new research.
According to findings of TASC, a think-tank whose core focus is economic equality and democratic accountability, 33% of all income is concentrated in the hands of the top 10% of earners. In 2011 the top 1% of the population’s income was €373,300 ($425,758) compared to earnings of €27,400 ($31,250) for the bottom 90% of the population.
TASC’s report “Cherishing all Equally: Economic Inequality in Ireland” looks beyond income and wealth at a range of other issues including public services, taxation, family composition, people’s capacities and the cost of goods and services.
Research Director and one of the report’s authors Dr Nat O’Connor highlighted some of the key statistics contained in the report:
- According to data from Ireland's tax authorities, the top 1% of income earners in Ireland averaged €373,300 compared to €27,400 for the bottom 90%
- The top 10% hold somewhere between 42% to 58% of Ireland’s wealth compared to 12% for the bottom 50%
- Workers’ share of national income fell from 65% in 1990 to less than 56% in 2009.
O’Connor said that such high levels of economic inequality in Ireland are not inevitable and stressed that the levels of economic inequality are not the same in every country – other European countries have much lower levels of economic inequality compared to Ireland due to different policy choices in relation to taxation and the provision of public services.
“Addressing economic inequality is important because we know that more equal societies perform better on a whole range of indicators such as crime, health and educational attainment. More equal societies are also more stable and have better chances of stronger and sustained economic growth,” said O’Connor.
“High concentrations of wealth and income can lead to disproportionate political power, and so more equal societies are better able to promote democracy and ensure the public interest is safeguarded in public policies.”
O’Connor said that the causes of economic inequality are complex and that wealth and income are not the only factors leading to such inequality – public services and the cost of living are also important.
“A high cost of living makes the economy more unequal. When everyone faces higher basic costs, those who earn less have to spend a higher proportion of their income.
“In Ireland we focus on providing social welfare cash payments, but we have a cost of living that is 20% above the EU average. We also require people to put their hand in their pocket for many services, like GP visits, that might be free-of-charge or subsidized in other countries. This worsens economic inequality.”
Other factors that can have a decisive influence on economic inequality are people’s abilities to develop the skills needed to succeed in the modern economy as well as their availability for work due to disability, illness or care duties.
Co-author Cormac Staunton said that the notion that that economic growth will tackle inequality is a myth.
“The instability of Ireland’s property-based growth in the 2000s and the increasingly unequal distribution of the benefits of our current prosperity show that growth alone will not reduce inequality. We need robust policies that will ensure prosperity is more widely shared across society.”
Indeed, Staunton pointed out that the World Bank has said that nations with economic inequality have difficulty in sustaining economic growth and stability over time. He went on to highlight the importance of a 2014 International Labor Organization (ILO) report on wage-led growth and said that we need a radical shift in economic policy to ensure decent work is available for everyone.
“The ILO’s study proposes an alternative to the unsustainable debt-led and export-led growth model pursued in many countries in favor of a strategy based on wage-led recovery that would reduce household debt and allow for equitable and sustainable growth.”
Staunton also highlighted TASC’s analysis of Ireland’s tax system.
“The low overall levels of tax in Ireland — and especially low social insurance — mean that Ireland cannot provide the same quality of public services that are enjoyed and expected in many European countries."