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

xxviThe Distribution of Income in IrelandForewordxxviiand the gap between rich and poor narrowed through the NAPSstrategy and its targets.Three proposals for consideration in the light of the reviewof NAPS are as follows:• Introduce a relative income poverty reduction target tocomplement and strengthen existing targets. 16• Introduce a NAPS target for reducing income inequality. Themost commonly used measure of income inequality is theGini Coefficient. This study shows that Ireland has a GiniCoefficient above the EU average, and well above thatfound in countries such as Denmark and the Netherlands.• Integrate an income inequality dimension into the povertyproofing process.SOCIAL WELFAREAdequacy and IndexationIn relation to the role of social welfare this research raises twospecific but related issues: establishing an adequate welfarepayment; and determining in a transparent way how rates canbe indexed so as to maintain the relative value of payments.Adequacy and indexation are critical issues that have beenidentified in the PPF to be examined by a working group underthe terms of that agreement. The research highlights the urgencyof doing this.In recent years the Agency has recommended that paymentsbe raised in line with earnings, as fast rising earningsnave outpaced both inflation and the rate of welfare increases,paving those on welfare behind. The failure to link welfarepayments to increases in earnings means that those outside then7n^L m ltad *•* Situation datively disimproved, thuscontributing to the growing gap between rich and poor.16 ,_toti-tonrtTtoJ^llT* !l° nomic M d Social Forum (2000) The National0pUUOnSooalForuL ^" ^No " 8 - Dublin: National Economic andThe Agency recommendation that welfare increases be indexedto rising earnings was predicated on low rates of inflation,which have been a feature of Irish economic recovery.However we have just experienced a sharp rise in price inflation,which is now not only outstripping welfare increases butalso wage increases agreed in the Programme for Prosperityand Fairness (2000). 17Both price inflation and rising earnings contribute to thepattern of consumer norms and expectations and the resulting"standard of living". There is therefore an argument for indexationto be linked to either of these, depending on which ishigher, in order to offer effective protection to the relativevalue of welfare payments. This is certainly a complex issue,which requires immediate attention in the current economicand policy context.Finally, in the absence of an integrated child income supportpolicy, the indexation of welfare rates should also apply tochild dependent allowances.Transitions to WorkThere is a continued need to ease the transition from welfare towork by addressing remaining disincentives for those takingup work. A strengthened Child Benefit, including a "top-up" tocover childcare costs, would play a significant role in this regard.This was a central policy recommendation from theAgency in its recent submission to the Government on the NationalChildren's Strategy. 18A reformed child income policy should incorporate an enhanceduniversal benefit for all children, set at a given proportionof the total costs of raising a child. The Agency suggeststhat this proportion should be in the region of two-thirds of thetotal costs, which is currently the equivalent of £25 per childper week. In addition, the provision of a universal childcareIt is noted that this impact on wages may not follow through completely tonet pay, depending on the nature of tax improvements that complement wageincreases.18 Combat Poverty Agency (2000) A Better Future for Children: EliminatingPoverty, Promoting Equality. Submission to the National children's Strategy.Dublin: Combat Poverty Agency.