WHAT IMPACT HAVE the four Fine Gael and Labour budgets had on economic inequality? Has the gap between rich and poor narrowed as a result of having a party in power for whom tackling inequality is part of their raison d’etre?
Contrary to the misleading claims of Labour TD Joanna Tuffy in this week’s Irish Times, economic inequality in increasing. And it is increasing because of the policies she and her party colleagues vote for.
The standard measure of income inequality is the Gini Coefficient, which looks at the distribution of income across society.
Figures from Eurostat show that income inequality slowly declined from 2002 through to 2009. For much of this period wage and social welfare increases were the primary reason. However from 2008 the impact of the recession on very high incomes accelerated the trend.
However, since 2009 income inequality as measured by the Gini Coefficient is on the rise again.
The gap between the rich and the poor is widening
Unemployment, regressive changes to the tax system and social welfare cuts combined with the slow recovery of incomes at the top mean that the gap between the rich and the poor is widening.
Deputy Tuffy references an ESRI research paper by Professor John FitzGerald to suggest that decisions made by her government have resulted in a fairer distribution of disposable income. She claims that Labours protection of the social welfare budget was a ‘unique response’ when compared to other Eurozone crisis countries.
Her reading of the ESRI paper is inaccurate and her claim about the social welfare budget is untrue.
What Professor FitzGerald actually says is that income inequality in the period before the crash was higher than it is now. Crucially his paper also shows that since 2009 income inequality has been rising.
Why is income inequality rising?
There are a number of reasons for this increase – including the impact of Government budgets.
Each year after the budget is passed the ESRI conducts a distributional analysis of the impact of the budget on household income.
The overall impact of budgets since the start of the recession has resulted in higher income households losing a larger share of their income.
However every single one of the Fine Gael and Labour’s budgets has been to hit lower income families hardest.
According to the ESRI Budget 2012 took three and a half times more from the bottom 40% of households than it did from the top 30%. A similar, if less pronounced pattern was found by the ESRI in Budget 2013 and Budget 2014.
Budget 2015 resulted in income losses for the bottom 60% of households and income gains for the top 40%. Worse still the top 10% of earners were the only ones to gain significantly, while the bottom 30% of households lose the most.
When the Gini Coefficient figures are released for 2014 and 2015 there is no doubt that the cumulative impact of Fine Gael and Labours deeply unfair budgets will result in an even greater increase in income inequality.
This is not simply about disposable income
Unfortunately this is only part of the story. Economy inequality is about much more than disposable income. As the recently published TASC report Cherishing All Equally, Economic Inequality in Ireland demonstrates lower income households are more dependent on public services.
Fine Gael and Labour have continued to cut funding for vital frontline services including employment, youth and drugs projects that deprived communities depend on. They have also increased the cost of other services which again hit low income families hardest.
The TASC report also highlights the importance of income adequacy for tackling economic inequality, particularly in a society with weak universal public service provision and expensive private provision.
Deputy Tuffy is right to highlight the role of job creation in tackling inequality. However this only applies if the jobs pay decent wages and provide employees with enough hours to earn a living wage.
Unfortunately too many of the jobs created under the current government are low paid and insecure.
A growing pool of badly-paid, precarious jobs
Research by Rory O’Farrell of the Nevin Institute of Economic Research suggests a hollowing out of middle income jobs and a dangerous trend towards a small number of well-paid secure jobs and a growing pool of badly-paid, precarious jobs.
This polarising trend if left unchecked will simply deepen inequality in our society.
It is clear from her article that Deputy Tuffy is deeply uncomfortable with the debate on economic inequality provoked by the recent TASC report. And so she should be .Ever year on budget day she and her Labour Party colleagues troop into the Dáil and vote for measures that are making our society less and less fair.
And if this was not bad enough she has the gall to defend the indefensible with an article that is factually misleading in the extreme. Now that’s what I call politically repugnant.
Eoin Ó Broin is a Sinn Féin councillor on South Dublin County Council.
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