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

XX11 The Distribution of Income in Irelandgovernance is to redress imbalances through more redistributivetax and welfare policies and investment in quality publicservices. Until the fair distribution of our new-found wealth isaddressed, the "Celtic Tiger" will be an incomplete achieveinment. 10In addition to the national scenario, the shape and directionof government fiscal policy takes place within a European Unionwhich now has a strengthened focus on tackling povertyand other forms of inequality through the Employment ActionPlan and the Social Action Agenda, and within the context of theUN proposals on reducing income inequality which emergedfrom the recent World Summit and were mentioned earlier.This presents a unique opportunity for Ireland to pursue anew model of development based on equitable growth,whereby the pursuit of economic growth and social cohesionare two sides of the one coin, one reinforcing the other.POST-1998 SCENARIOBefore setting out specific policy recommendations it is worthoutlining briefly the kind of trends that have occurred since1997/98, the point to which this research report brings us. Unemploymenthas fallen dramatically and the economy continuesUs remarkably strong rate of growth — although there havebeen recent concerns about rising inflation and containing demandarising from supply constraints, for instance in the labourand housing markets. 11 In particular there are concerns not tooverheat the economy by further fuelling inflationary pres-M Z!?? 1S a fundamental h i* between tackling poverty anddistobu ing income Simulating a continuation of recenttax/welfare policies 12 it was predicted in 1999 that relative in-^ ' ^ ^ ^ - Family Mairs onForewordxx nicome poverty would increase by almost a half between 1994and 2001 at the 40 per cent income poverty line. The redistributiveimpact of Budget 1999, while better than previousones, primarily benefited those on middle incomes (plus 3 percent), and despite being the most generous budget in years,gave those on the lowest incomes minimal gains. Budget 2000,largely due to tax rate reductions, was even less progressive.The result was an upward distribution of resources, with betteroffhouseholds gaining up to four times more than those on lowincomes. The Programme for Prosperity and Fairness, agreed inearly 2000, (while committing considerable resources in the futureto the issue of social inclusion) continued the approach ofpercentage pay increases along the income distribution. It alsoimplemented the introduction of a minimum wage and contamedgeneral commitments on the future shape of income tax policy.Given this fiscal and welfare approach since 1997/98 itwould seem reasonable to assume that no significant changehas been made in relation the extent of income inequality sincethen, certainly not in the direction of greater equality.POLICY RECOMMENDATIONSThere are now enormous resources at the State's disposal tostrategically develop public policy interventions that will controlincome inequalities arising from a growing economy andprevent the continuation of a more divided society as we moveinto the 21st century. To date, public policy has relied tooheavily on job creation alone to solve the problems of inequality,social exclusion and poverty.A more strategic and planned approach is required. Such astrategic approach needs to focus on five broad public policyinterventions.• Firstly, establishing adequate welfare payments and childbenefit rates and ensuring, in a transparent way, that thevalue of those payments are protected.° * 1 3 £ ^ Commentary.Ma^ a'i *MSoXZ^ir n TL*J-^ **»"- « d *"eny itends. Data from the 1997 Living in IrelandlSurvey. Dublin: ESRI, The Department of Social, Community and Family Affairsand the Combat Poverty Agency.