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

18 The Distribution of Income in IrelandFigure 3.1: Decile Shares in Equivalised Disposable Incomefor Irish Households, 1994 and 1997 LII Surveys*3 4 5 6 7 8 9 10* See Table A2.1 in Appendix 2 for data.• LII 1994QUI 1997A comparison with Table 3.1 shows that equivalisation producesa more equal distribution in each year. The share of thetop decile is lower than before equivalisation, and the shares ofthe bottom two deciles are higher by what is, in proportion totheir unadjusted share, a very substantial amount.This reflects the fact that larger households have, on average,higher incomes than smaller households. Many of thehouseholds towards the bottom of the unadjusted distribution,for example, comprise single (often elderly) adults or couples.Comparing 1994 and 1997 we observe a similar pattern to thatshown in Table 3.1 for unadjusted income. The bottom and topof the distribution lose share and deciles 5, 6, 7 and 8 all gain,the net result being little change in overall inequality as reflectedin the summary measures.Given the extent of uncertainty about the most appropriateway to adjust income for such differences, we need to test howsensitive these results are to alternative equivalence scales.The other four sets of equivalence scales described in Chapter2 are now employed, to see whether the shape of the disposableincome distribution is affected by the choice of scale. Table3.3 shows decile shares among households in both the 1994and 1997 LII surveys with each of these scales. We see theequalising impact of equivalisation occurs with each of thescales, and the shape of the distribution is very similar acrossThe Distribution of Income in the 1990s 19all five sets of scales. Comparing 1994 and 1997, all the scalesshow once again the marked decline in share for the bottom ofthe distribution and the top decile which we saw in Table 3.3.While there are some differences across the scales in the exactpattern of change from 1994 to 1997, all show a substantial declinein share for the bottom half of the distribution and increasefor the top half.Up to this point, we have been concerned with the distributionof income among households. As discussed in Chapter 2, itmakes sense to treat each household as a single unit and "counthouseholds" if no adjustment is made to income for differencesin household size. When equivalent income is used, however,focusing on persons seems more appropriate since we are primarilyconcerned with the distribution of welfare or living standardsamong persons rather than households. Much of the previousresearch on the Irish income distribution refers to thedistribution among households, and it is only on this basis thatresults from the 1973 and 1980 Household Budget Surveys areavailable. However, it is of interest to now also look at the distributionamong persons, which is achieved by weighting eachhousehold in the analysis by the number of persons it contains.It must be emphasised that, as discussed in Chapter 2, the assumptionis still being made that resources are distributedwithin the household so that each member of a given householdhas the same living standard: we are now in effect simplycounting persons rather than households.