The Distribution of Income in Ireland (2000) - Combat Poverty Agency

64The Distribution of Income in Irelandincome from self-employment and capital, but earnings dominatethat total. This was not, or not entirely, translated intohigher inequality of disposable incomes because both transfersand taxes off-set its effects, and indeed in most countries theredistributive impact of taxes and transfers increased over theperiod.The declining share of earnings or market income going tolower income groups here refers to total household earnings,with households ranked by equivalised disposable income. Itcould reflect both changes in the distribution of earningsamong earners, and in the distribution of earners across households.The OECD study does not look at the first of these in detail,being focused on households, but does have some interestinginsights on the second element. It shows that the proportionof households of working age with no earner increased inmost countries, and that such households had much lower levelsof income than those with one or two or more earners. Theproportion with two or more earners also increased in abouthalf the countries, so there was a quite widespread tendencytowards polarisation into work-rich and work-poor households.However, decomposition showed that the more important contributorto increasing inequality in household incomes was increasinginequality within fully-employed versus workless versus"mixed" households.Another important pattern common to many of the countriescovered in the study was an increase in the average incomes ofthe elderly towards the overall average. The main gains herewere for those aged between 66 and 74 rather than those aged75 and over, so it was recent retirees who were doing better.Also, inequality within the retirement-age population decreasedin a considerable number of countries, though publicold-age pensions tended to become less rather than moreequally-distributed among that group reflecting the importanceof earnings-related components in many countries. Nonpensiontransfers, on the other hand, tended to become moreequally distributed among the working-age population, generallyreflecting the impact of family cash benefits.IOQ^16 °f^D StUdy C ° VerS *" P eriod onl y U P to the mid-1990s, and thus does not include the period after 1994 when, asIreland's Income Distribution in International Perspective 65we have seen, inequality appears to have risen quite markedlyin Ireland. None the less, it provides an enormously valuablecomparative framework within which the Irish experience canbe set, and helps to bring out some of the factors which meritfurther investigation in the Irish case.5.5 CONCLUSIONSThis chapter has examined in some detail the distribution ofdisposable income in Ireland compared with other EU memberstates in the mid-1990s, using data from the EuropeanCommunity Household Panel survey. Ireland ranked as one ofthe more unequal in the European Union, along with the UKand Greece, though less so than Portugal. In the earlier studyby Atkinson, Rainwater and Smeeding based on data from themid-late 1980s, Ireland ranked among the most unequal in theOECD. The more recent data suggest rather that Ireland is oneof a group of EU countries with relatively high inequality,much higher than for example Denmark. This conclusion holdswhen one adjusts income for differences in household size andcomposition using equivalence scales. The equivalence scaleemployed was seen to make a difference to the level of theGini coefficient in some countries, but not the overall patternin terms of country groupings. In particular, from an Irish perspectiveit does not affect the placing of Ireland in a groupwith the UK, Greece and Spain, having the highest level ofinequality in the EU except for Portugal.As far as international trends in income inequality are concerned,a fairly widespread though not universal trend towardsincreased inequality in the period from the mid-1980sto the mid-1990s is found in a recent OECD comparative study.The most notable common underlying feature noted was thatthe share of earnings going to the lower income groupsamong the working population decreased in all the countriescovered in the study. This was not, or not entirely, translatedmto higher inequality of disposable incomes because bothtransfers and taxes off-set its effects, and indeed in manycountries the redistributive effects of taxes and transfers increasedover the period. The Irish data included in that study