Friday, October 28, 2011

Inequality in Ireland is FALLING

The idea that Ireland had become more unequal both during the economic boom years and during the subsequent recession, when wealthy banks were rescued by a government who sought to reduce the minimum wage, seems so widespread as to be a given. I was gobsmacked, then, to stumble across the following data tucked into the heart of the Central Statistics Office's Statistical Yearbook of Ireland 2011:

Gini coefficient
2006: 32.4
2007: 31.7
2008: 30.7
2009: 29.3

Income distribution (income quintile share ratio)
2006: 5.0
2007: 4.9
2008: 4.6
2009: 4.3

The Gini coefficient is a measure of income inequality where 100% is total inequality (one individual has all the income in a population) and 0% is total equality (all individuals earn equal amounts). Between 2006 and 2009, Ireland's Gini coefficient drifted downwards: Ireland's income inequality declined.

The second measure compares the income of the richest 20% with the poorest 20%. This also shows a downward trend, and a relatively steep one over just four years. Ireland became more equal in the late 2000s, both during the boom years and continuing into the austerity years. This covers a period of massive immigration and then net emigration, and happened under the leadership of Fianna Fáil, a centre-right party who were abandoned in the 2011 general election by an electorate who blamed them for the economic problems.

Fianna Fáil had also been criticised for years for failing to address inequality. Just weeks ago general secretary of the Irish Congress of Trade Unions David Begg announced that:
During the property and credit boom all the evidence suggests that Ireland became a more unequal place. And the evidence now is that the austerity drive has aggravated that inequality.
Yet the CSO data shows the opposite trend: Ireland grew less unequal towards the end of the boom and during the early austerity stage. Now let's see how Ireland compares with other countries.

Eurostat puts Ireland's Gini coefficient well below the 2009 EU average of 30.4. (Further afield, Ireland also compares very well against the US, with its Gini coefficient in 2007 of 48.3.) The most unequal EU country in 2009 year was Latvia (37.4) while the least unequal was Slovenia (22.7). An EU map looks like this:
Light yellow countries are the most equal, dark green the most unequal.

Ireland by this measure is more equal than Germany, France or Italy, despite spending considerably less on social protection as a percentage of GDP: Ireland (27.9%), Germany (31.4%), France (33.1%) and Italy (29.8%). This may be related to Ireland's unusually young population, however, compared with the aging populations of the other countries.

Also, Ireland's spending on social protection really did rise during this period. I wrote before about Fianna Fáil's populist spending increases, funded by rising revenue from the housing bubble instead of politically-unpopular tax increases. After the recession hit, GDP decline and mass-unemployment sent social protection costs into a relative spike:
It is interesting, though, to see that Irish inequality was falling even when social protection spending was well below the EU average.

If we look at the other measure of income inequality, the income quintile share ratio, we see similar results. A few highlights:

Latvia: 7.3
UK: 5.2
Italy: 5.2
EU (27): 4.9
Denmark: 4.6
Germany: 4.5
France: 4.4
Ireland: 4.2
Norway: 3.5
Slovenia: 3.2

Ireland's result here is the lowest score (meaning, most equal) for Ireland since the beginning of these records in 2001.

I think the fact that Ireland, by this measure, is more equal than the well-respected social democracies of Germany, France and Denmark is remarkable! Fianna Fáil were derided for being neo-liberal, even while steadily increasing social welfare and governing during a period of consistently declining income inequality.

There are plenty of things to take from this. First, the point that income inequality did not rise during the late 2000s bubble economy, a point remarked upon by the Economic and Social Research Institute in 2009, reflecting on the earlier boom of the 1990s:
Within the Irish labour market as a whole, the level of wage inequality fell markedly over the period but most particularly between 1997 and 2001.
This has wider significance for other countries pondering economic growth and inequality: it seems possible to have rising wealth without rising inequality.

The really grating thing for me, however, is that this refutes loud and insistent claims made over the last few years that Ireland's governments abandoned the poor and that inequality grew worse. Why did I keep hearing this, if the truth was precisely the reverse?

It reminds me of complaints in the US between left and right-wing commentators about mainstream media. Both deride the media, both believe it is biased against their side - never in favour of their side. I wondered sometimes if this was because convincing the public that a group (like a newspaper, a government, a political party) is biased, extreme and unreasonable will make their own extreme alternative appear mainstream and natural.

So maybe we hear these denunciations of modern Irish inequality from the left because they want the present situation to seem like an unacceptable extreme, and want to shift the norm leftwards.


  1. Thank you for writing this. I'm so sick of Irish political statements and media articles that are totally ignorant of reality.


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