Riveted by the Greece versus Germany standoff over the past week, some may have been distracted from the release of important data on inequality in Ireland. Rather like buses in Dublin, you wait ages for one and then three come along together. So it was with reports on inequality over the last week.
The most significant among them is the TASC report entitled Cherishing All Equally: Economic Inequality in Ireland by Nat O’Connor and Cormac Staunton. Introduced as ‘TASC’s inaugural annual report on income inequality’, it is the most comprehensive ever done on economic inequality in Ireland covering not just income – which is the normal way in which economic inequality has been measured in Ireland over recent decades – but also wealth, public services, tax, capacities, family composition and the costs of goods and services. And all is placed in an international context, showing how badly we compare to other countries.
As well as measuring inequality, it seeks to understand the processes and policies that cause it, in order more successfully to reduce it. It therefore deserves careful assessment and wide readership, not least among political leaders and policy makers, rather than the glib dismissal given it by Irish Times correspondent, Chris Johns, in that newspaper on February 18th, to which I will return below.
What is most striking about this report, and what generated media headlines last week, is the evidence it presents of the growth in the incomes of the top 10% and top 1% of income earners, in comparison to the other 90%. As shown in the charts reproduced here, the clear tendency since 1975 has been for the share of the very top earners (most strikingly the top 1%) to gain an ever greater share of gross income while the share of the rest has fallen. The result is that Ireland now has the highest level of inequality of gross income (that is income before redistribution through taxes and welfare payments) in the OECD, even higher than Chile which has been widely regarded as an extreme example of gross income inequality since the military dictatorship from 1973-90.
That tax and welfare succeed in reducing this income to a more average rate of inequality shouldn’t distract from the significance of what is happening. For it shows that we have permitted the income of the highest earners to grow to obscene levels even as that of average earners is declining. This is the US model but, paradoxically, with results even worse than in that country.
Another way of looking at this is that the market has been allowed in Ireland to distribute incomes even more unequally than anywhere else in the developed world; it is then up to the state then to put measures in place through taxation and welfare to try to redistribute some of this. But, if left unchecked, the fundamental tendency is towards ever greater levels of income inequality.
As the evidence of our well-known ‘tax exiles’ shows only too clearly, when such an obscene level of inequality is allowed to become embedded, those at the top of the income divide tend to lose a sense of moral belonging to a national community and feel justified in avoiding sharing their income with those less well off. In other words, taxation and welfare systems come to be undermined, as is all too evident in the widespread calls for tax cuts at the moment.
Even more important than income inequality is inequality in the distribution of wealth like land, property or other assets such as shares. All of these provide further income over and above that from employment but, as highlighted by Thomas Piketty in his book Capital in the 21st Century (Harvard University Press, 2014), wealth also leads to an exponential growth in inequality as it can be passed on from generation to generation, thus reinforcing inequality over time.
This report also estimates that the share of wealth owned by the top 10% grew from 42% in 1987 to 58.5% in 2014 while that of the top 1% grew from 10.4% to 27.3% over the same period. This is indeed a huge growth in inequality over a short period, even if places Ireland around the middle of the range among developed countries.
So does this really matter at all? Is concern about growing economic inequality due to envy, as some claim? Chris Johns of The Irish Times thinks the evidence is exaggerated and that a return to full employment is going to ‘have a huge impact on Irish inequality levels’. Indeed, his main concern is levying additional taxes on the top earners. This shows that he has failed to understand the central finding of this report, namely that incomes from employment are one of the principal causes of growing inequality in Ireland.
And, to emphasise just how much these realities impact on the lives of ordinary people, we had two other reports over the past 10 days that make salutary reading. The annual CSO Measuring Ireland’s Progress showed somewhat divergent trends in poverty between 2012 and 2013 with the rate of those at risk of poverty (living on incomes below 60% of the median) falling from 16.5% to 15.2% but with consistent poverty growing from 7.7% to 8.2%. The latter combines income levels with a measure of being deprived of essential goods so its growth shows a deepening of poverty among the poorest.
The final report was a study of 11 to 15 year olds in North America and Europe. Of the countries studied, Ireland was found to have the third worst life satisfaction among the young. Add this to the fact that, according to the CSO report, the risk of poverty among those up to 17 years old was 17.9% in 2013, worse than the wider population, and we see evidence of problems accumulating among the young that will affect their overall life chances and their integration into society.
Often it is not the left but the churches that best capture the destructive effects of poverty and inequality on society. Last week the Church of England bishops issued what they called guidance notes to voters for the forthcoming UK election in which they criticised a society that ‘celebrates equality’ but ‘treats the poor and vulnerable as unwanted, unvalued and unnoticed’. But it was Pope Frances who put it most strongly and unequivocally in his document entitled The Joy of the Gospel (2014) in which he says ‘Inequality is the root of social ills’ (160). This is why we neglect the evidence of these reports at our peril.