Saturday 19 October 2019

Once again, the balance is wrong in equality row

The number of people in jobless homes, not measures of income, is the issue to be tackled

Caught in a trap: single-parent families - which make up a large chunk of the jobless households - have very limited childcare supports, making it more difficult to find paid work
Caught in a trap: single-parent families - which make up a large chunk of the jobless households - have very limited childcare supports, making it more difficult to find paid work
Dan O'Brien

Dan O'Brien

Ireland is among the most equal countries in the world. When it comes to how both income and wealth are distributed, the Republic ranks in mid-table among developed economies, which are, almost without exception, much more equal than developing countries. That makes Ireland - it is worth repeating - among the fairest countries in the world when it comes to who has what materially.

If that surprises you, there is more in that vein that might cause your eyebrow to arch. Although we don't know how wealth equality has changed (because the first ever figures on the matter were published only in recent weeks), a consistent data series on income equality has been produced by the State's statisticians for a decade. Those numbers show no significant change in income distribution over the past 10 years. In other words, Ireland is becoming neither more equal nor less equal, and that is despite trends which have made many other peer countries less equal in recent times.

There has been a tendency in Ireland for quite some time for some ideologically motivated people and those who enjoy moral posturing to ignore these hard facts and claim Ireland is either unusually unequal or becoming more unequal. More often than not, they make both claims simultaneously and do so with a great deal of righteous indignation to show what caring people they are. These claims are made repeatedly despite the absence of evidence to support them. Many people believe the claims to be true because they have heard them repeated so frequently they assume them to be true. But let's be clear: they are not.

The equality issue was in the news again last week, when a left-wing think-tank published a report on the subject. The clever people at Tasc know the facts. Their report states: "Net income inequality in Ireland is close to the EU28 average" and that Irish wealth distribution is "roughly average with other developed countries". Unlike their more excitable comrades who ignore facts that do not support their political prejudices, the folk at Tasc accept what is beyond dispute.

But they are also highly ideological. Just as their counterparts at the other end of the political spectrum believe less government and less taxation is the solution to every problem, the ideologues in Tasc can be depended upon to find that more intervention and more redistribution are needed, always and everywhere, because inequality has "potentially devastating social and economic effects".

One of the ways Tasc exaggerates the level of inequality is to focus on something called "gross income". This is the hypothetical case in which nobody pays a cent in tax and nobody receives any welfare benefits. This hypothetical situation receives a huge amount of attention in the report, while the actual situation, though mentioned, is played down.

Such make-believe scenarios can have their uses (more of which anon) but the reality is, of course, that taxes are paid by almost everyone in one form or another, and welfare absorbs far more of tax raised than anything else - the annual social transfers budget is just under €30bn (with €20bn accounted for by the Department of Social Protection and the rest from various other central and local government sources covering housing, health, education and the like).

What people have in their pockets and purses each week is infinitely more important than what they would have if they didn't pay tax or receive benefits. But let's indulge Tasc's obsession with the imaginary no-tax-no-welfare scenario, and look more closely at it.

If we all had only the money we earned and paid no tax, Ireland would be very unusual. In the unimaginable event that all government intervention ended overnight, Ireland would be, as Tasc stresses repeatedly, very unequal.

Why is this?

Tasc mentions Ireland's higher than the EU average share of workers on low pay. This is certainly a factor and not enough is known about why it is so. It is, for this reason, that just last week the Government appointed a low pay commissioner to look into the matter and report back. It may well be that there is a case to use the welfare system to supplement the incomes of those on low pay.

But the most likely explanation for the uneven spread in earned income is the fact that a huge proportion of the population live in households in which nobody works. At last count - 2013 - the figure stood at almost one in four people aged under 60 (known as the jobless household rate). That was not only well over double the EU average, it was highest in Europe bar none and very significantly higher even than Greece and Spain.

When an unusually large share of the population is not earning income, it is not surprising that there is a very uneven distribution of earned income across the population.

What is most worrying about this state of affairs is it existed long before the recession. Throughout the boom years, when jobs were more than plentiful, Ireland had the second highest jobless household rate in Europe.

Despite jobless households being a major contributory factor to pre-redistribution inequality (and very possibly the most important factor), Tasc's 140-page report hardly touches on the issue. That may be because the scholarly community have shown little interest in the subject, despite it being such a significant social phenomenon. It might also be because ideologues stop asking questions when they know the answers will not suit their agendas.

Among the questions that need answering is whether a badly designed welfare system traps people into welfare dependency, causing Ireland's highest-in-Europe rate of household joblessness.

A hugely under-explored issue in this regard is why Ireland has proportionately more single-parent households - one in 10 of all households - than any other country in Europe. That proportion is more than twice the EU average and five times higher than Spain and Poland, two other countries with strong Roman Catholic traditions.

For a socially conservative country with low divorce rates (normally the main factor in the formation of single parent families), it is very puzzling that Ireland is such an outlier on its number of single-parent families.

One suspects that the reluctance to discuss the issue may come from a fear of being labelled judgemental or, worse still, anti-single-parent families. As someone who spent most of his childhood in a single-parent family, I am neither of those things. Moreover, as a social liberal I don't think it is the Government's business to tell people what sort of family arrangements they should have.

But if government actions, however inadvertently, are influencing people's decisions on the kind of family structure they decide to form, there is a public policy issue worth discussing. That is all the more so in this case because the facts show clearly that children in single-parent households are much more likely to suffer poverty and deprivation - and that is despite the heroic and often very lonely efforts of single parents.

The question must be posed whether the very high cash payments for single parents compared with other countries, but very limited childcare supports (which would facilitate finding paid work), have contributed to Ireland's highest-in-Europe share of single-parent households and the very low employment rates of single parents (this grouping makes up a very large chunk of total jobless households).

I am a strong believer in an intelligently designed, well-funded, northern European-style social safety net. Although I recognise that there are some downsides to such a system and it produces some undesirable, unintended consequences, the price is worth paying because of the extent of the reduction in the quotient of human misery such systems bring about.

But if that system is doing harm it must be addressed, not ignored. The huge share of Irish citizens in jobless households is the great inequity in Irish society, not make-believe measures of relative income inequality. Not nearly enough non-ideological research has gone into why this is the case and - more importantly - what can be done to make it better.

Twitter: @danobrien20

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