Must The Poor Always Be With Us?

on Sunday, 06 July 2003. Posted in Issue 37 Community Development in the Age of the Celtic Tiger, 2000

Tom Giblin, SJ

May 2000

 

Cherry Orchard Blossoms

Living in Cherry Orchard these past few years offers a window on the changing face of inequality in Ireland of the Celtic Tiger. A few things strike me as I travel each day from where I live to where I work in U.C.D. There are many more people going out to work in Cherry Orchard than four years ago. More of them are travelling in cars, some of them new. Some of those whom I see coming and going to work are people who, five years ago, I would not have predicted would ever find employment. The opportunities simply were not there.

 

At the same time there are many others in my area who for a whole variety of reasons stay at home. The reasons include, among others, looking after their children, old age, ill health, addiction problems, emotional problems, and failure to find suitable work. The people who stay at home do not benefit directly from the increased employment opportunities in our booming economy.

En route, I pass near the new family resource centre in Cherry Orchard, and the construction site for the new Ballyfermot civic centre. Coming home in the evening I often get stuck in traffic jams at points in Ballyfermot that are due to be changed under the town development plan. A particular short cut I use might soon disappear if a right turn I take each evening is to be outlawed as proposed. All this is a reminder that resources are flowing into the area and being invested in social and urban infrastructure. There is tangible evidence of benefits from the boom.

A Tale of Two Tesco\'s

The area around UCD where I work is very different from Cherry Orchard and becoming increasingly so. I notice this most acutely when I stop off to buy groceries on my way home. I have a choice of places to shop - Tesco\'s on the Merrion Road, or Tesco\'s in Ballyfermot. Both locations are prone to Tesco\'s policy of not carrying any surplus stocks so that items I want are often not there! Leaving that pet gripe aside however, shopping in both places is shopping in two different social worlds. The cars parked outside, the way customers dress, prices, range of products available, numbers of attendants in the shop, and many other things mark the difference starkly. When I compare the two \'Tesco\' social worlds it is all too clear to me that whatever the benefits of the Celtic Tiger for Cherry Orchard, and these are real, the people who shop in Merrion Road are benefiting even more. The gap in living standards between the two areas is growing.

I was interested then to find that my own perceptions are confirmed in recent research into trends in income inequality and poverty in Ireland.

The Celtic Tiger and its Claws

Bishop Brendan Comiskey was asked recently, did he think that the Celtic Tiger was good or bad? His reply was that he thought the Tiger was good but he was not so sure about its claws. I think that this image is a particularly apt one when it comes to considering inequality and poverty.

We have a lot of information about what was happening during the first years of the Celtic Tiger, 1994-1997, particularly in relation to poverty and inequality. The national cake got a lot bigger, with Gross Domestic Product (GDP) increasing at a rate of between 7% and 8% per annum. Many jobs were created; unemployment fell from 16% to 11%, and since then has fallen further, of course. Real average household incomes (adjusted for size and composition of household and consumer price inflation) increased by 16%. Social welfare rates also rose in real terms but not as fast as average incomes. Pensions, for example, grew by 6% in real terms over the period.

These facts alone would suggest that while everyone seems to have been becoming better off in the booming economy, particular groups are falling further behind relative to those on average incomes or above. This is true, in particular, for those depending on social welfare or on low wages. So the Tiger, while good, does have claws, even if they appear somewhat retracted.

Recent ESRI work on inequality and poverty - the Facts

Let us first examine relative income inequality. The usual way to measure this is to measure the percentage of households that have, say, less than 40% (or less than 50% or less than 60%) of average household income. Table 1 shows clearly that, despite the booming economy, by 1997 2-3% more households find themselves below these levels of average household income than in 1994.

Table 1: Percentage of Households having less than 40%, 50%, 60% of average household income in 1994 and 1997

 

1994

1997

Less than 40% of average household income

5.0

7.6

Less than 50% of average household income

18.8

21.9

Less than 60% of average household income

34.6

36.5

This does not mean, however, that the poor are getting poorer in every sense. In 1994 for example 20% of all households were below 60% of 1987 average household income while in 1997 only 11% of households were below that level. So the poor are getting richer but not as fast as the rich. In other words they are getting richer absolutely, but poorer relatively.

This picture is confirmed when we look at indications of basic deprivation such as not being able to afford:

· new as opposed to second hand clothes
· a meal with meat, fish or chicken every second day
· a warm waterproof overcoat
· two pairs of strong shoes
· a roast or its equivalent once a week.
Table 2 shows that fewer households experience this type of deprivation in 1997 than did in 1994.

Table 2: Percentage of households deprived of a given number of 8 basic items in 1994 and 1997

Number of items

1994

1997

None

74.9

84.7

One

12.6

8.3

Two or Three

7.2

4.7

Four to Eight

5.4

2.0

The improvement is clear. In 1994 more than one in four households experienced this very basic type of economic deprivation. By 1997 only one in seven households were in such circumstances. Still it is startling that in an economy where there is now so much wealth that there are still many households (about 150,000) who are deprived in such a basic way. This is all the more troubling because many households that are deprived both in terms of relative income and in terms of these basic items also:

· experience "extreme difficulty" in making ends meet, (40%)
· feel constantly under strain, (35-45%)
· feel they cannot overcome their difficulties, 
· are unable to enjoy their day to day activities, 
· are unable to face their difficulties,
· feel unhappy or depressed 
· lose sleep over worry.

No nation can be satisfied when such suffering and distress is present in a large number of households within its borders. No matter how bright the economic picture looks it certainly loses its gloss from this perspective. Nonetheless we should not lose sight of the fact that the Celtic Tiger has done more than anything else to reduce the numbers living in such penury. The Irish Government has also set up a National Anti-Poverty Strategy since 1997 that is worth examining.

NAPS - Is It Really a Strategy?

The National Anti-poverty Strategy (NAPS) set itself the aim of reducing the numbers of households who were below 60% of average income and also basically deprived in not being able to afford one or more of the 8 basic items. It set a target for the period 1997-2007 of reducing the percentage of households in this category of deprivation from 15% to 10%. The most recent data shows however, that the percentage in this category, while close to 15% in 1994 (the latest information available when the NAPS target was set), had already fallen to under 10% in 1997 when the NAPS began. So the Celtic Tiger delivered the 2007 target even before the NAPS began to be implemented! This has meant setting a new target for the NAPS which is to reduce the percentage of households in this category of deprivation to 5% by 2007.

The fact that the NAPS targets had already been eclipsed before the programme started should lead to a thorough rethink of the whole anti-poverty strategy. Looking at the other targets set in the NAPS we see that the unemployment targets, namely

· Reducing unemployment as measured by the Labour Force Survey to 6% of the labour force by 2007
· Reducing long term unemployment to 3% 
have also largely been delivered by the Celtic Tiger, to a considerable extent independently of NAPS policies. Unemployment, for example, was 5.5% of the labour force in 1999 and is expected to fall to 4.5% this year.

The targets on disadvantage urban areas and on rural poverty according to ESRI commentators are "so unspecific and anodyne as to scarcely merit the name". They contribute little to the strategy. They simply say that educational disadvantage, income inadequacy and unemployment should be tackled in these areas. This leaves just one meaningful target for the NAPS, - the one relating to educational disadvantage, namely:

- To eliminate early school leaving before the junior certificate,
- have 90% completing the senior cycle by the year 2000, and 98% by 2007,
- to ensure no student with serious literacy and numeracy problems in early primary education within five years. 
This remains an ambitious target. It is genuinely a target since the outcome is both measurable and should make a considerable contribution to meeting the overall anti-poverty target.

What is also striking however in the Annual Report of the Interdepartmental Policy Committee 1998/1999, that deals with NAPS, is that even where there is a good target (i.e. in education) there is no attempt by the Department of Education to monitor outcomes on the ground. One would expect that, of all Departments, Education would be the one best placed to measure the numbers leaving school early and also to evaluate the impact of its programmes to counter early school leaving. After all everyone who goes to a school is registered within the system. To date however, there is little sign of this happening.

What are cited throughout the report are activity levels by the different Departments, - so much has been spent on this, that programme has been initiated etc. Nothing tells us whether this activity by the Departments is having any effect. This of course is not to deny the value of many of these programs, just to note that their impact, in terms of reaching the targets set, is not known.

On the issue of education, there is widespread anecdotal evidence on the ground in Ballyfermot and elsewhere that it is the Celtic Tiger economy that is having an impact, rather than government activity. Worryingly, however, the impact is not towards the NAPS targets but away from them, as increasing numbers of secondary school children quit school and take up relatively low skilled and low paid jobs. These individuals will be particularly vulnerable in any future economic recession. So the seeds of future poverty may be already planted.

Finally, and most surprising of all, while the Interdepartmental committee acknowledges that real increases in social welfare have been critical in reducing the numbers living in consistent poverty, the NAPS makes no reference to policy issues affecting social welfare. There is no discussion of whether growth in social welfare should keep pace with growth in average incomes. Nor does it discuss what the consequences of increasing relative poverty will be if it does not so keep pace. Nor is there adequate discussion of the proposal for a significant increase in child benefit, that many commentators argue would have a significant impact on poverty. The Budget increases are noted, but there is no discussion of what should be the desirable level of this benefit.

One is left with the impression that we have no national anti-poverty strategy but simply a set of national anti-poverty targets of varying quality and relevance and a listing of government activities that relate in some vague and unsubstantiated way to meeting these targets.

Reproducing Poverty

Claws once clipped grow again. As we have seen there are many indications that poverty has been decreasing in our booming economy. At the same time it is troubling to note that there has been an increase in the percentage of households in the most extreme poverty. These households have less than 40% of average household income and are also deprived of one or more of the 8 basic items. In 1994 2.4% of households were in this situation while in 1997 this had risen to 3% of households. So the numbers in extreme poverty may actually be increasing even though the poor generally are becoming better off. This suggests that the Celtic Tiger is leaving a small but increasing minority of households far behind.

The ESRI have compared the share of disposable income that each 10% of the population had in 1994 and 1997. The results are given in Table 3

Table 3: Shares in Disposable income of each 10% of persons

10% of population

1994

1997

Bottom 10%

3.8

2.8

2nd

4.8

4.6

3rd

5.5

5.4

4th

6.4

6.2

5th

7.4

7.6

6th

8.8

8.9

7th

10.5

10.4

8th

12.4

12.4

9th

15.3

16.0

Top

25.1

25.7

This shows that between 1994 and 1997 the poorest 40% of the population lost 1.5% of their share in disposable income, while the wealthiest 20% gained 1.3% in their share. Clearly if Budgetary policy continues to give bigger gains to the wealthy as several recent Budgets have done, and social welfare increases do not keep pace with the growth in average income, then we can expect to see income inequality increase in Ireland.

This should be of particular concern in Ireland because we are one of the European countries with the most unequal income distribution. Only four countries,

Portugal, the U.K., Spain and Greece have similar or greater inequality.

Conclusion

The evidence shows that there is much to be grateful for in recent times in Ireland. Living standards have improved for most people. Yet there are several important qualifications to this otherwise rosy picture:

- the distribution of income is becoming more unequal; relative poverty is increasing and this will tend to reproduce poverty over time;
- a small, but increasing, minority of households are falling into the most deprived category;
- our national anti-poverty strategy is weak on targets, poor on evaluation, and does not include an adequate discussion of or decision about the use of some of the most important means to tackle poverty in the hands of government, namely social welfare and child benefit.
In relation to this last point, if NAPS is to be made more effective, the following steps are necessary:

- NAPS should be integrated with fiscal and budgetary policy and Partnership agreements;
- proper evaluation should be made of the impact of the more significant NAPS programmes, rather that mere reporting of their existence;
- the NAPS targets should be revisited, to make them more explicit and relevant in areas other than Education.

 

Acknowledgments:

Thanks go to Eithne Fitz Gerald for discussion on the NAPS, also to Brian Nolan for discussion at the Irish Economics Association. The article depends heavily on the recent work done at the ESRI.

 

Notes:

[1] Tim Callan, Brian Nolan, Christopher T. Whelan, “Targeting Poverty: The Irish Example”, ESRI, paper for the Irish Economics Association Annual Conference, Waterford, March/April 2000.

[1] Ibid., p. 7.

[1] Ibid., p. 9

[1] Annual Report of the Inter-Departmental Policy Committee, 1998/99, Social Inclusion Strategy, National Anti-Poverty Strategy. p. 70-80.

[1] Brian Nolan, Bertrand Maitre, “A Comparative Perspective on Trends in Income Inequality in Ireland”, ESRI, paper for the Irish Economics Association Annual Conference, Waterford, April 2000.

[1] Ibid. p. 10.

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