POINTERS FOR ECONOMIC EQUALITY
1. Jobs and long-term Unemployment
The recovery in jobs is an important contribution to addressing recent, recession induced, levels of economic inequality. However, it is not the only contribution required of the labour market. The key labour market, and perhaps key public policy, issue for the next decade will be long-term unemployment and the need for resourced and strategic interventions to assist large numbers of people getting back to work. The boom proved that most of these people will happily work. However, without active support, little of which is currently being provided, these people are likely to be trapped in long-term unemployment.
2. Fair Pay Fair pay is usually seen as a low-pay issue. However, there are fair-pay problems at both ends of the earnings distribution. With one in five workers living on less than the living wage, the challenge for many workers to make ends meet remains difficult. At the other end of the labour market high pay has become more and more disconnected from the reality of decent pay, average earnings, living costs and the appropriate rewards employees should get for their service. Policy aimed at addressing, and reducing, economic inequality will need to focus on pay at both ends of this distribution and pursue strategies to narrow the overall distribution.
3. Welfare The welfare system is the core mechanism for economic equality. Social-protection payments provide a safety net for almost all families and directly support the living standards of a large proportion of our population. The system dramatically alters the shape of our income distribution and enhances equality via child benefit, illness and disability payments, unemployment supports and old age pensions, among others. As the recovery unfolds, there is a danger that welfare will be deprioritised as the policy focus shifts elsewhere. The experience of the last Irish recovery, in the late 1990s is telling. In a few short years the poverty rates of welfare-dependent households sky-rocketed with, for example, pensioner poverty increasing from 5.9% in 1994 to 44.1% in 2001. Earnings increases and income tax reductions flowed to others and those dependent on welfare slipped further and further behind. It took some significant welfare increases in the early 2000s to address the legacy of these decisions. It is important for economic inequality to maintain the relative value of welfare payments and increase them in line with living costs and changes in earnings elsewhere in society.
4. Taxation There is an issue regarding the appropriateness and adequacy of current Government plans for the scale of the overall tax take, as set out in the Spring Statement and Budget 2016. While one can argue about how much or how little tax needs to be collected to run the country, the realistic range sits somewhere between 31% and 35% of GDP. However, current plans are for a tax take of around 29% of GDP; a figure that is unrealistic and puts unnecessary pressure on the appropriate provision of public services across the state. Where these services are under-delivered, it is those who are most disadvantaged in society who suffer most. There are economic-equality issues related to the nature of public spending and taxation changes that are planned. Taxation changes focused on income, whether through USC changes/abolition or changes to bands, rates and credits, will by definition benefit those with taxable income; people who are predominantly located in the top half of the income distribution. From the perspective of tackling, rather than enhancing, economic inequality, fairness in any structural reform of the taxation system, or offsetting accompanying measures is crucial.
5. Women On average women are better educated, brighter, and longer-lived yet are paid less and are more disadvantaged than men. This points towards structural problems that we need
aggressively to address. The gender-specific nature of these inequalities is reinforced by the fact that they spread right across the income distribution.
6. Children One in five children live in a household with an income below the poverty line. The longterm implications and costs of childhood disadvantage are very high: multiples of the costs associated with addressing these issues now. The return on investing in addressing these issues now is many times the return available elsewhere; or indeed any benefit-cost ratio threshold. Early Childhood Care and Education programmes providing a free year of care and education for children of pre-school age, school meals in disadvantaged areas, adequate and affordable childcare facilities and targeted library services for children are just some of the options available.
Dr Micheál Collins is Senior Research Officer at the Nevin Economic Research Institute (NERI) and an adjunct Professor of Economics at Trinity College Dublin.