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

XXThe Distribution of Income in IrelandForewordxxiamong the most unequal in the OECD countries. As notedearlier, this cluster of countries with high levels of incomeinequality is the same cluster that shows relatively high levelsof child poverty.Older households moved down while younger onesmoved up. The period 1994-1997 saw younger householdsmoving up the income distribution towards the top whileolder ones moved down. Households headed by someoneaged between 35 and 65 were fairly evenly spread throughoutthe income ladder. However those headed by someoneunder 35 were more concentrated in the top quintile by1997 while for older households the proportion at the topdeclined and the numbers at the bottom rose markedly.Larger families concentrated at the bottom of the incomeladder. Households with one adult with children werevery heavily concentrated right at the bottom of the distribution,though less so in 1997 than in 1994. While coupleswith one or two children were towards the top of the distributionin both years, it is striking that those with four ormore children on the other hand were very heavily concentratedat the bottom.The equalising effects of social welfare transfers hasdiminished. Social welfare transfers, though having anequalising effect in both 1994 and 1997 had less impact inthe latter year - mainly because the numbers of householdsdependent on such payments declined.^creasing numbers of women at work did not significantlyaffect income inequality. Rapid increases in femalelabour force participation in the 1987-94 period have notbecausf^^ mPaCX ° n inC ° me ^q^ity- This is largelytaPid lnCreaSes inSn wo m ^ 2wome *'* Participaof^otlhoT 'nT" 9 " Stm 0nly accounted fo * 15 Per centde S of Z!, mC ° me * 1994 - e s ? *"* ^ thebecl.e a ^TT " ^ ^ "* mdicates ** they mayZ*Z: g lT * "*"*"faCt ° r * -^standing Z• Overall income inequality has fallen since 1973. Lookingback over a longer period, from 1973-1987 inequality in thedistribution of household income fell markedly, with theshare of the top decile down by 1.4 per cent of total incomeand that of the bottom quintile up by 0.9 per cent. This reflectsthe increasingly redistributive impact of income taxand a substantial increase in the average tax rate. From 1987to 1994 this continued at a much slower rate. However withinthis overall statistic, between 1987 and 1994 wage inequalityin Ireland increased substantially, even though centralisedwage agreements were reintroduced in 1987 and have hada significant impact on improving the economic landscape.UNDERSTANDING THE FINDINGSThe wider economic context for this report is one in which ourwealth is clearly rising, with more people at work, an increasein the real incomes of the poor and a drop in long-term or consistentpoverty and child poverty. However, relative incomepoverty has increased, the depth of poverty is greater, the riskof poverty for some groups is increasing and a quarter of childrenlive in poor households.The key lesson from this research report is that in a fastgrowing economy, a rising tide does not lift all boats equally.While more people are employed now than before, those at thetop of the income ladder have benefited at a faster pace thanthose at the bottom. It is also clear that internationally Irelandfares badly on the income inequality front, and that despite undoubtedadvances in our general prosperity and availability ofemployment, we are still lagging well behind the levels of incomeequality that have been achieved in other moderneconomies in Europe or other industrialised OECD countries.All of this raises questions about how progressive fiscal andwelfare policies can be developed to ensure that this period ofresource buoyancy does not lead to a more divided and moreunequal society. The Combat Poverty Agency believes that it isthe responsibility of government to ensure that the inequalitiesarising from wealth creation are controlled and amelioratedthrough public pohcy interventions. The challenge of good