Sunday 21 April 2019

OECD report does not indicate growing inequality in society

Brendan Keenan

Brendan Keenan

IT may seem a long way from my customary patch to the Pan Celtic International Song Contest next month, but bear with me. Ireland will be represented in the contest by Scoil Chriost Ri of Cloughleigh, Ennis, playing a song written by one of its teachers, Joe Garry.

Their selection has received quite a bit of publicity and the reason is that, while the song is as Gaeilge, most of the children in the band – 11 to be precise – are of African origin.

I wonder what those from the other Celtic nations will make of that? I wonder what they will make of it even in Derry, where the final will be held?

Alas, hardly a week goes by without the Northern Ireland news carrying reports of what the police call "hate crimes" – most of them involving attacks on immigrant families in their homes. Behind that lies the brutalisation (in the correct meaning of the word – to make brutal) of sections of the Northern population by decades of violence.

Yet it is my impression that there is more to the Chriost Ri story than the absence of such a destructive recent history in Southern society. From demonstration games in Croke Park, to stamps from An Post, there has been a very public effort to assimilate immigrants in a way one does not see across the Border, or across the water.

That is my impression anyway, which is where we get back to this column's patch. Impressions do not always accord with facts. Facts are difficult to establish, while impressions are unavoidable, but if impressions become too detached from facts, things will go wrong.

The patch in question this week is the new 'Society at a Glance' report from the OECD. This comes out every two years and most of the data in this one goes up to 2011. It is therefore the first such report to cover the full impact of the crash and the policy measures – aka "austerity", which followed.

First impressions were not good. Overall, the report said those who benefited least from economic growth before the crisis have borne a heavy burden during the recession. Young people and children have been hardest hit by income poverty.

Ireland suffered the biggest drop in household income of any country – over $3,000 (€2,200) for those on average earnings and $2,000 for those on low incomes.

On this basis, Ireland had the biggest increase in income inequality across the OECD – a rise of 6.5pc. The bulk of that was due to lost jobs, which were concentrated among low-skilled, lower-paid workers in the building trade. What had been a relatively low proportion of households with no one employed doubled to 15pc.

That is hardly surprising: it was the third biggest crash in the OECD, after Estonia and Greece. But Ireland also saw the biggest fall in wages of any member nation. This will have added to income inequality, but it may also have aided recovery.

But then comes something surprising, which runs counter to the widespread impressions. When the redistributive effects of welfare payments and tax increases are taken into account, the increase in net income inequality is just 0.75pc, which is one of the smallest in the OECD.

No other country achieved such a large income redistribution of the effects of the crash. Impressions are of no use when it comes to the effect on poverty and the public debate is so full of cliches as to be of little relevance.

Admittedly, the facts themselves are open to different interpretations. "Relative" poverty – defined as less than half of the typical (median) income – affected just under 9pc of households, which was below both the OECD average and the UK level. Indeed, it was one percentage point less than in 2002.

Another method "anchors" the incomes of the poor at 2005 levels and compares them with 2011. This does produce a much steeper rise in poverty levels but, whatever the merits of such a measure in normal times, "anchoring" incomes at nearly the peak of a credit bubble is not going to produce useful results.

The report does find, as the ESRI has done, that the bottom 10pc of households lost more than those earning higher amounts – not so much the rich as those earning a bit more. The report demonstrates one reason – the fact that the elderly have suffered no loss at all from the crash. Those with corporate pensions are not generally in the bottom 10pc of incomes and have enjoyed remarkable protection.

People are already interpreting the report as another illustration of growing inequality and uncaring austerity. There are many legitimate ways to assess such complex surveys but one of them is that the report shows nothing of the kind.

The 17pc rise in welfare spending since 2007 has been effective. Ireland suffered a wrenching 20pc fall in national income and there is no way of escaping the effects of that.

But the structure of Irish society has not changed to the same extent and, in most regards, it is still a typical high-income OECD country.

Government ministers can find themselves in very deep water if they say anything like that, although the Social Protection Minister's communications have been particularly garbled.

In fairness, she also has to fight for her budget. Claiming successes might have had the troika and Department of Public Expenditure saying in that case, she can manage with less money.

But at some point the discussions will have to shift from shibboleths to fact-based policy. In some critical respects Ireland is different from the typical OECD rich country.

There should be more concern that it has one of the highest proportions of young people not in work, education or training, as well as the highest percentage of the population in receipt of welfare payments.

There is also the uncomfortable fact that the future looks at least as challenging as the past. Social welfare spending, at a quarter of national income, may have done its job in crisis management, but it cannot continue at those levels.

Especially since the funds must be found for a rapid rise in pension costs. At 6pc of national income, these are currently half the average cost in the EU, but not for much longer.

As for health, Ireland stands out as having one of the biggest gaps between money spent (well up to OECD levels) and satisfaction with the service (well below).

Britain's National Health Service is the other way round, which makes one at least wonder about the merits of universal health insurance. It is time to start wondering about a lot more things which are too much taken for granted.

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