Poverty And Inequality

on Saturday, 05 July 2003. Posted in Issue 41 For Richer for Poorer: Three Issues of Fairness?, 2001

The picture about what has happened to poverty in Ireland during the economic boom of the 1990s is now fairly clear. It can be summed up quite simply. The poor have been getting richer, but they are falling further and further behind the rest of Irish society because everyone else has been getting richer at a much faster pace than they have.

The poor have been getting richer….
At the beginning of the economic boom in 1994, over one in every six Irish people earned less than 72 pounds a week in today\'s money. That amount of money is equal to 60% of what an average Irish person earned in 1987 at today\'s prices.

 

 

 

Just four years later in 1998 however, less than one in 16 Irish people were in that situation.

The same story emerges when we look at basic deprivation. In 1994, a quarter of the population lacked one or more of the items on the ESRI\'s basic deprivation list i.e. they were not able to afford one of the following: heating, a substantial meal once a day, new rather than second hand clothes, a meal with meat, chicken or fish every second day, a warm overcoat, two pairs of strong shoes, a \'roast\' or equivalent once a week, or they fell into arrears, or debt, when paying for everyday necessities.

Just one in eight people were facing this level of deprivation in 1998.

There were two main reasons for the increase in living standards among the poor during the boom years. Firstly, many poorer unemployed people got jobs and those who did were paid increased wages and themselves paid lower taxes. Secondly, those on social welfare received increases in payments that were greater than the increase in consumer prices.

These figures indicate a substantial improvement in living standards amongst the poor. I can see it every day in different ways as I walk out the door or visit friends in Cherry Orchard where I live. There are more cars, fewer neighbours come to use our telephone because they have their own, the odd home has PVC windows or a computer, people leave for work in the mornings when I am going out. This progress is to be welcomed.

The poor are falling behind everyone else….
Despite the real gains however, we also have clear evidence that the non-poor in Irish society have been gaining much more of our new found prosperity than the poor have. The figures, for the early years of the boom, show that in 1994 under a fifth of households earned less than half of the average earnings of an Irish household in that year. [v]

 

Four years later almost a quarter of households were below this poverty line, in other words earning less than half the average earnings of a household in 1998. [vi]

 

The reasons for this increase in relative poverty are also very clear. Social welfare increases lagged far behind the increase in incomes from other sources such as wages net of tax, salaries, property, investment etc. [vii] Furthermore the tax reductions in Budgets over the past eight years have favoured the middle and upper income groups more than the lower income groups.

Since 1998, the last year for which we have data, growth in incomes has continued to outstrip growth in welfare payments so we can expect that the relative poverty picture has continued to deteriorate up to the present.

 


Futures and options discounted
Consider the children...
This gap too is visible, most especially when considers children. As I return home to Cherry Orchard each evening young children, who have nothing to do, run across to sit on my motorbike. I know many of them by name and I wonder at their chances. Even in the small group I know, it is easy to detect that many face drastically limited opportunities. They have few sources of positive stimulation. I often contrast their lives with the children of my middle class relatives and friends, for whom, before every Christmas and birthday, I wander around stores for hours searching desperately for a present they might not already possess. In comparison to the band of children who gather round my motorbike each evening the gap in resources seems to be ever widening. It is clear already, looking at the four to ten year olds in my area, that although they will have more material goods than their parents did, in the future they will probably be just as poor if not poorer in the sense of being excluded.

Many of them already suffer from a poor diet that has knock on effects on their growth and development and ability to participate in the education system. Typically they cannot afford anything but cheaper clothes, and some wear hand me downs. This means that, especially as they reach teenage years, they are more vulnerable to teasing in the schoolyard and consequently may drop out. Money worries also cause immense stress and strain within many local households and children bear some of the brunt of this.

Yet unless they climb the educational ladder where will they be in the future? Doing the dead end jobs that are the first to be cut in a downturn? Some may succeed and achieve economic and relational stability. Yet many will probably not. Of course money is not the only factor here. Cultural factors also have an important influence. [viii] Adequate money is necessary however, if children are be able to participate both amongst their peers and in the education system, be properly fed, and live in a reasonably stable home environment.

What can we conclude?
New, higher standards will be set in society about what constitutes an acceptable standard of living and capacity to participate fully in ordinary life.
The general economic boom has resulted from many factors such as, investment by foreign companies, the European Single Market, EU structural funds, and it has been facilitated by factors such as the partnership agreements, an educated workforce and healthy government finances. The boom in turn has delivered more jobs and better pay so the poor have been getting better off.

At the same time Government choices about the rate of increase in welfare payments have meant that many more Irish people are poor in the sense that they are farther behind the average level of wealth in Ireland. They are like participants in a race who are running somewhat faster but who find them selves falling further and further behind both the main group and the frontrunners who have increased their pace by even more.

How should we interpret the real fall in consistent poverty (the poor getting richer) versus the rise in relative poverty (the poor falling further behind everyone else)?

The ESRI put forward the view that

"consistent poverty does not on its own constitute a satisfactory way of framing a global poverty reduction target…….Very rapid economic growth has produced very welcome improvements in living standards… However, in the future,…… expectations and views about adequacy are likely to catch up and new, higher standards will be set in society as to what constitutes acceptable living standards and capacity to fully participate in ordinary life." [ix]

In short, during the boom years we have eased the symptoms of consistent poverty, but simultaneously laid quite deep foundations for their re-emergence. The poor are better off, but are also increasingly excluded from participating in a wealthier society with emerging higher expectations.

The ESRI also note that those countries, like Denmark, Sweden and the Netherlands, which have been most successful at reducing numbers below relative poverty lines have also been most successful in permanently bringing consistent poverty to low levels.

Does increased relative poverty go hand in hand with high economic growth?
There is no widely accepted economic argument or consistent economic evidence that relative poverty increases during a boom and falls in a recession.
Over the past few months commentators from various quarters have argued that we should not be worried about the increase in relative poverty.

The Irish Small and Medium Enterprises Association (ISME) say that "relative poverty increases when there is a boom period in an economy unlike when an economy is in recession" and they also assert that the only way to stop this would be to raise tax levels. They have also accused those who draw attention to relative income inequality of promoting envy. Other commentators have joined the debate in similar vein. [x]

Drapier, has critiqued the Community and Voluntary Pillar in the Partnership process. He writes, "an economic slowdown is exactly what our religious superiors in CORI have been waiting for. Bad times will narrow the gap between the rich and the poor like nothing else". He goes on to make various personalised comments about the Community Pillar as poverty professionals who are by and large "university educated, well paid and living far from the places they talk most about" and as lacking the courage to put their names on a ballot paper and seek election a course of action "which might mean having to go and do something rather than talk about it".

Personalised comments are no substitute for argument. It is interesting to note in passing though, that the groups in Irish society who are lobbying for increased welfare income for the poor excite such an
impassioned response. It seems that other groups can lobby for regressive ceilings on PRSI or tax reductions for the better off without attracting the same opprobrium. Why is that?

Contrary to the opinions expressed there is no widely accepted economic argument that suggests that relative poverty should increase in a boom and fall in a recession. During the recession in Ireland between 1980 and 1987 the percentage of Irish people living below the relative poverty line actually increased. So Drapier\'s faith in the equalizing effects of a recession is misplaced. After all the poor are frequently the first to lose their jobs in a recession so whether they keep pace with the rest of society or not is entirely dependent on the level of benefit increases they receive.

Conversely, during the post-war economic boom in Europe, inequality actually decreased. A key factor here was the development of the welfare state. The example challenges two arguments.

Firstly, economic growth does not necessarily cause greater income inequality. Instead it is public policy choices about tax and welfare that determine the impact of growth on relative poverty. Of course, there is a difference between the current boom and the post-war economic boom. Lower skilled workers have been employed less and received relatively lower increases in incomes in the current boom. This is because education and skills have become more important in an increasingly knowledge intensive economy. The implication is that there is a great need for investment in training and upgrading skills. Adequate welfare levels are also necessary so that the skills and human development of relatively unskilled workers is not totally undermined by the experience of unemployment.

In the contemporary scenario there is a delicate balance to be struck between welfare levels and incentives to work at the bottom end of the labour market because lower skilled workers will have relatively low earnings. The ESRI note that Ireland has relatively large incentives to work. Someone on a low wage who becomes unemployed in Ireland receives a lower percentage of their wages in welfare than in almost all other Western countries. [xi] The irony here is that we actually did maintain welfare levels during the pre-boom years when there was a significant effort to implement the welfare levels recommended by the Commission on Social Welfare. This was at a time when there were genuine concerns about the incentives to work. It is in the boom years when there appear to have been few problems with incentives to work that we have allowed welfare to lag behind so significantly.

Secondly, higher tax levels are not necessarily incompatible with high economic growth. In practice, there seems to be a range of taxation regimes that are compatible with sustained successful economic development. The Scandinavian countries for example, tax at much higher levels that we do, and still experience good rates of economic growth. They are also more prosperous and less unequal societies than we are. That prosperity is in part founded on high quality public services in health, education, child-care, infrastructure, transport etc. that are funded by the higher tax levels. These are precisely the areas that many economists and commentators understand to be the current constraints on economic growth here. The degree of equality is also due to a more adequate welfare system that is also funded by taxation.

It is not plausible then to argue that lower taxes are always compatible with improving economic and social life in Ireland. Indeed Ireland has low average tax rates when compared to other OECD countries. [xii] Colm Rapple asked the relevant question in a recent radio interview. How do we expect to have quality public services when we extract so much less in Pay Related Social Insurance as a percentage of GNP (2.6%) that the EU average of 6.5%? To expect ever-lower taxes and ever-higher quality public services is a contradiction.

Those who draw attention to relative poverty are frequently accused of the opposite to this contradictory expectation. They are charged with pushing for a high tax economy that will inevitably lead to a low growth economy. The evidence suggests however that the trade off between tax and growth is not as simple as some would have us believe. There is a margin for maneuver on tax changes that can have a significant effect on investment for growth and also on the adequacy of welfare payments without stifling economic growth.

Of course, since 1994, the need to increase taxes in view of objectives like reducing inequality and increasing investment has not arisen. The economy has been growing so fast we have had sufficient resources both to reduce taxation while at the same time increasing welfare payments and investment. The balance in the boom year Budgets, between tax reductions and welfare increases, has been inequitable however. Indeed this is the principal cause of increased relative poverty. Taxation could still have been reduced while increasing incomes for the poor more quickly. Economic growth would have been largely unaffected. There was little danger that the entrepreneurial classes would have been restrained, especially since many of them are foreign multinationals not Irish citizens, and even under alternative more equitable proposals Irish entrepreneurs would have benefited from falling company taxation as well as (albeit more modest) reductions in personal taxation.

The truth is that we have chosen to distribute the fruits of the economic boom in a way that increases relative poverty. We could have had the growth and chosen differently. We could yet choose differently, especially if the current down turn is relatively short lived. Even if economic growth is slower in the coming years we have real choices to make about optimal tax levels that are compatible with growth and sufficient to fund high quality public services and adequate welfare payments for those on the margins. The question is will we make the right choices?

Does Relative Poverty Matter?
Growing relative poverty in terms of income will lead to absolute poverty in terms of capabilities to function socially within a society that is getting richer.
Most commentators from the ESRI to the first National Anti Poverty Strategy (NAPS) acknowledge that it does. Yet there are varied opinions even amongst official commentators about how much it matters. The first NAPS argued that relative poverty should not be allowed to increase but it included no specific target or set of policies that might bring that about, the result being that relative poverty did in fact increase.

Some other commentators dispute the entire concept of relative poverty. David Quinn in his Magill article of September 2001 attempts to show \'the ludicrousness of relative poverty as a measure\' by means of a hypothetical example. [xiii] He suggests that if a group of the world\'s richest people (billionaires whose individual wealth is superior to the annual output of many countries) moved into a town like Sligo then relative poverty would skyrocket. "The people of Sligo would end up convincing themselves they were worse off because of the arrival of the billionaires even though their incomes were the same as they were before they arrived."

What this shows however is not that relative poverty is ludicrous, but just that it is relative! Simply because it is relative, this concept of poverty is always easy to caricature with an unrealistic example. For instance, I might imagine a millions of super wealthy extra-terrestrials settling in Africa in a benign and culturally sensitive manner and making the US and Europe appear relatively poor. True, but is it remotely realistic?

When applied to real situations a relative measure is just as important as an absolute one. For example, if you purchased new players and trained your soccer team and they grew a lot in skill and fitness that would be good. If however your opponents had evermore resources relative to yours and they bought even better players and better coaching so that they became relatively more skilled and fitter compared to your team than they were before, all your progress would yield little on the field of play.

The analogy applies to poverty. Even though the poor are getting richer, if they are falling further behind everyone else their chances of participating successfully in society are ever reduced. This is not about envy but about having enough resources to participate and belong to a society with increased expectations.

Amartya Sen the Nobel Prize winner in Economics has written extensively on poverty. He asks a simple but fundamental question about inequality. What are we trying to equalize? If we answer we want to equalize income, he points out that the same level of income can yield very different standards of living, depending on whether one is sick or healthy, old or young, living in a good area or a bad one, living in a rich society or in a poor one. The more fundamental issue Sen argues is equalizing human capabilities to function.

These are things like capability to live, to be healthy, to develop one\'s understanding, to move freely, to express one\'s sexuality in loving relationships, to form stable sustaining social partnerships, to have children, to express oneself culturally/religiously, to pass on adequate human and economic resources to others, to appear in public without shame.

Income is vital in purchasing goods and services that allow us to realize these capabilities. A key point that Sen makes is that different sets of goods are required to enable us to realize these capabilities in rich countries than in poor countries. For example, clean clothes (even if they are old and worn) are all that is required to appear in public without shame in a poor country. In a rich country however, more expensive or branded clothing is frequently required if one is not to be shamed. Similar considerations apply to the level of housing that is considered acceptable. Cheaper foodstuffs available in supermarkets in poor areas in rich countries do not provide as adequate a diet as the foodstuffs available to many farming families in middle-income countries who are poorer in terms of income. Relative deprivation in terms of incomes can lead to consistent deprivation in terms of capabilities. Being relatively poor in a rich country can be a great capability handicap even when one\'s absolute income is reasonably high by world standards.

It is because of this that the ESRI are careful to test whether the list of items in their index of deprivation, mentioned above, still correlates well with other measures of poverty such as psychological distress. There is no static point of comparison. They expect that over time the measurement of consistent poverty will need to include other items as expectations change.

This process of updating expectations is most likely to occur between generations. Prior to the housing crisis we often heard older generations commenting on how newly wed couples start out with everything whereas they had to save perhaps for several years to buy a carpet or some other basic household furnishing. Thirty years ago that did not indicate any great degree of poverty because it was the situation of the majority, today it does. Now with many couples finding it so difficult to get a house older people comment that they were better off because they were able to get one! Yet in real income terms their children are so much better off than they were! Buying the same capabilities to function socially now requires much more income than it did in their day.

The widening gap between the rich and the poor is of serious concern because the poor are progressively being deprived of an adequate income to buy the goods and services they need to function socially in a society with higher expectations. If the increase in money in their pockets means that for now, this does not matter so much to adults in poor areas, it does and will matter to their children. The irony is that we may alleviate poverty in this generation while simultaneously increasing it in the next.


Looking Ahead
Why has relative poverty been growing in Ireland?
Let us look at what actually happened in Ireland between 1994 and 2001.

The ESRI has compared what has happened to each income group (from the poorest tenth of the population to the richest tenth) due to direct Budgetary changes to the tax and social welfare system. They do this by comparing what actually happened against what happened to average wages. The neutral benchmark is that every group would have its income increased by the same percentage as the increase in average wages. It means that the income of each group would be in exactly the same proportion relative to the others as before. [xiv] This is the zero position in the graph below. [xv]   Any changes above and below the zero line indicate that a particular tenth of the population from the poorest (1) to the richest (10) has gained more or less than the increase in average wages.

Looking at the graph it is clear that in the Budgets from 1994 to1998 the poorest 20% of the population (1, 2) received 2% less than the increase in average wages, the next poorest 20% (3, 4) received in or about the same increase as average wages. On the other hand the (5, 6,7, 8, 9,10) richest tenths of the population received about 4-5% more than the increase in average wages.

Due to the Budgets from 1998 to 2001 the poorest tenth received 1% less than the increase in average wages, the next 20% (2,3) did better, they received 2-4% more than the increase in average wages. The richest 70% (4,5,6,7,8, 9,10) however did much better again receiving 7-9% more than the increase in average wages.

In summary the tax and social welfare changes during the boom years have been the principal cause of the widening gap between the rich and the poor in Ireland and the increase in relative poverty.

If these 8 Budgets had changed tax and social welfare over the period so that each income group gained as much as the increase in average wages the graph above would show zero for each group. Now the cost of doing still leaves 878million pounds as against the cost of the actual Budget changes. This 878million could, and in our view should, have been distributed so that each tenth of the population from the poorest to the richest got roughly similar increases over and above the increase in average wages. If that had happened relative poverty would not have increased in Ireland.

What should be done?
Several policy proposals that have been explored by different groups are worth our attention. They have the potential to really make a difference to poverty in Ireland both relative and consistent.

The first two policy proposals relate to the National Anti Poverty Strategy.

1) Indexation of welfare payments

The ESRI argue that there should be four elements to the indexation of welfare payments strategy that is central to any meaningful NAPS. [xvi]
a) the real value of welfare payments should be protected (i.e. inflation proofing)
b) welfare payments should be indexed to growth in average earnings net of tax (NAIE).
c) with an annual correction mechanism to ensure no overshooting or undershooting
d) and with a review every 3-5 years based on updated relative and consistent poverty studies and wider analysis of the economic cycle and public finances

This implies a change from the previous NAPS because they did not have any specific target on relative poverty and had no policy commitment to indexation of welfare payments to average wages. Instead they had targets to reduce consistent poverty, and the economic boom delivered these targets with ease. In a real sense the consistent poverty target in earlier NAPS turned out to be a distraction. It meant that the government could claim its policies were making great strides in reducing poverty when in fact if the government policies mentioned in the Strategy had not been implemented at all, consistent poverty would in all probability have still fallen. This is not to say that these policies have not helped.

2) An adequate level of welfare payments

A key issue in the new NAPS is, at what level welfare payments should be set. It is clear that if the level is too low then simply keeping pace with average wages net of tax will not be of much use. If your wagon is falling apart it will be no use hitching it to a faster wagon in order to progress forward because it will still fall apart. You need an adequately strong wagon in the first place.

This begs the question what would be adequate? The Final Report of the Social Welfare Benchmarking and Indexation Group quote the ESRI who say it is impossible "to derive in an unproblematic, objective and scientific way estimates of income adequacy which would be universally convincing". True but they fail to note that it is not difficult to make a widely acceptable prudential judgment about what would be adequate based on empirical data that correlate various methods of measurement.

We think that an increase in welfare rates to 30% of Gross Average Industrial Earnings GAIE over the next few years would represent a significant shift towards adequacy. This would see increases of around 30 pounds in the most basic welfare payments from current levels. Within the welfare benchmarking group, the Community and Voluntary Pillar and the Trade Union representatives both argued for this medium term target i.e. by 2007. The Labour Party has also been endorsed this position.

The increase in welfare levels that the 30% benchmarking represents correlates well with the recommendations that emerge from the Vincentian Partnership Study One Long Struggle. The main finding they arrived at in interviewing 118 people in 12 community centres around Dublin was that a lone parent with two children faces a shortfall of over 30 pounds each week in buying a minimally adequate basket of goods. Living on welfare is effectively a debt sentence.

Without this additional income both children and adults frequently have an inadequate diet in households depending on welfare, and when children become teenagers they are increasingly vulnerable to shame and slagging in school because they cannot participate fully due to lack of funds for new uniforms, materials, school trips, transport, extra-curricular activities and for the \'right gear\'/clothing. The impact of relative poverty is not difficult to see. Indeed the feed through into future consistent poverty is also evident. Poorly nourished and inadequately clothed children who drop out of school early are likely candidates to be parents in consistently poor households in the future.

One Long Struggle also found that amongst households whose income was less than 128.93 a week (40% of average industrial wage in 1999) the average weekly shortfall in income was of the order of 50 pounds. In this light the 30 pounds a week extra (bringing payments up to 30% of GAIE) does not seem over-generous. It will make a big difference however.

In the benchmarking group the IFA on the other hand wanted to see welfare levels increase to 27% of GAIE in other words by under 20 pounds a week, or 10 pounds a week less. Fine Gael has endorsed this position. We note in passing that they propose this lower level without advancing any objective evidence as to adequacy. The main argument for the 27% seems to be that it maintains the differential between social welfare payments and pensions given the recommendation by the Pensions Board of increasing pensions to 34% of GAIE. We suggest however that what is important for pensioners is that they have adequate income relative to the average income in society and not that they preserve a differential in income that keeps those on welfare in poverty.

The Employers Organizations, the Department of Finance, and the Department of Enterprise and Employment, in the benchmarking group, all pointed to the increase in real welfare levels that we noted at the outset. [xvii] They argued that the matter should be left to the discretion of the Government. As we pointed out, the Government has used its discretion in such a way that those on welfare are falling further and further behind those on average incomes. That performance underscores the importance of agreeing to a benchmark.

The second two policy proposals relate to Budget Policy. They concern how the increase in welfare levels should be implemented and also how attention to relative poverty impacts should be institutionalized in poverty proofing the Budget.

3) Refundable tax credits

The most effective way to give increases in income to the poorest 30% of the population is by progressively implementing a system of refundable tax credits. These work in a simple fashion. On welfare your tax credit would be paid to you as an increase in your welfare payment. In a low paid job where you are not in the tax net you would receive the tax credit as a top up to your wages. In the tax net you would either continue to claim your tax credit as a tax-free allowance or else you could receive it as a cash payment and pay tax on all your income. The system can be implemented easily. When completing tax details everyone would receive an additional form enabling them to apply for the tax credit. The welfare system would handle payment to welfare recipients.

The ESRI have analysed different tax and welfare options in terms of their impact on different sections of the population from the poorest tenth to the richest tenth. They find that two policies that might be thought to help the poorer sections of our society do not in fact have that effect. Making those on the minimum wage exempt from paying tax sounds a good thing to do. Indeed it is, and it is the preferred strategy of the present Government. The benefits however, go virtually exclusively to the richest half of the population. This is for two reasons a) many who are on low pay are married to someone who earns more so the benefit goes to a richer household, b) many of the poor are not paying tax anyway so the benefit goes to those who do, and the wealthy benefit because they pay tax on less of their income. For the same two reasons a lower starting rate of tax does almost nothing to reduce household poverty, the bulk of the benefit goes to the richest half.

The most effective way of targeting additional income to the bottom four tenths of the income distribution is to give everyone the benefit of tax credits as a cash payment. This is like the current system where mortgage holders now receive their tax credit as a direct payment offsetting their mortgage repayments. A refundable tax credit system would pay the value of the standard rate tax-free allowance to all irrespective of their income level and irrespective of whether they are on welfare or at work. The ESRI estimate that the full cost of implementing all current tax credits refundable would be in excess of 850 million. The poorest four tenths of the population would gain virtually all the benefits.

While it is clear that implementing this in one go would be unrealistic in the current fiscal and economic climate we think that Budgetary policy should make a firm start in this direction.

4) Proper poverty proofing

Finally adequate poverty proofing and poverty auditing procedures need to be implemented when framing annual Budgets. Not doing so is effectively saying that the poor do not matter as much as everyone else. [xviii]

Both the Department of Finance and the Department of Social Community and Family Affairs measure the poverty impact of any change in tax or welfare against a conventional benchmark of no-change. Any change that improves the position of poorer groups as against a no-change scenario is then evaluated as poverty proof. The ESRI show however that de facto when these changes are being implemented in
Budgets poorer groups are frequently given smaller increases through tax and welfare changes than richer groups without showing up in the poverty proofing procedure at all. Thus both Departments can be worsening relative poverty without it showing in their evaluation. Indeed that is what has been happening.

Instead the ESRI proposes that the Departments should compare the impact of tax and welfare changes on poor groups against the benchmark of the same percentage increase as is forecast for net average industrial earnings (NAIE). In short, the benchmark should not be \'no change, because no change is the one thing that is not going to happen! In using a forecast for the change to the net average industrial wage each year there will need to be a subsequent poverty audit that is an input in poverty proofing the subsequent year\'s Budget. If the forecast increase in the NAIE were to be higher (lower) than the true outcome, the following year\'s Budget would trim back (augment) the welfare adjustments accordingly.

These four policy changes constitute a substantial program to lessen relative poverty in Ireland. They are achievable goals in the medium term especially if economic growth picks up towards the end of next year, as both the ESRI and OECD forecast. The economic downturn does not affect the legitimacy of these four policy proposals it simply affects the speed at which they may be implemented. They represent a determined strategy to give a fair share of our prosperity to all our citizens.

Post script Budget 2002
The 2002 Budget contains some positive developments for the poor in Irish society notably the increase in child benefit and the raising of basic weekly welfare payments by 8 pounds a week. The welfare changes are double the rate of inflation and thus represent increases in real terms. Yet it is unlikely that the increases will do any more than maintain the relative poverty position of those on welfare if that, es…ÐMYGET http://www.itx.ie/webmail/src/webmail.php HTTP/1.0 Acept: */* Referer: http://www.itx.ie/webmail/src/login.php Accept-Language: en-ie Proxy-Connecti?n: Keep-Alive User-Agent: Mozilla/4.0 (compatible; MSIE 6.0; Windows 98) Host: www.itx.ie Pragma: no-cache? Cookie: key?XGRxR%2BBSs2Y%3D; SQMs not done in years where we had the resources. The need for medium term anti-poverty benchmarking, indexation and poverty proofing are clear.


Notes:
[i] 72 pounds a week is equivalent to 60% of the average weekly incomes that Irish people were earning in 1987. Then that was 47.7 pounds, which, taking consumer price inflation into account is equal to 72 pounds in 2001.

[ii] See. See R. Layte et. al., Monitoring Poverty Trends and Exploring Poverty Dynamics in Ireland, ESRI, Policy Research Series, Number 41, June 2001, p. 17.

[iii] Ibid.,  p. 33.

[iv] Unemployment Benefit and Assistance were increased in real terms by 7% while Pensions went up in real terms by 9-10%. Ibid.,  p. 18.

[v] (Note that the following figures are in 2001 and not 1994 prices.) In other words the equivalent of receiving today less than 80 pounds a week for a single person, less than 185 a week for a couple with two children. Derived from Ibid. p 18.

[vi] The equivalent today of receiving less than 111 pounds a week for a single person, and less than 260 pounds a week for a couple with two children. Derived from Ibid. p. 18.

[vii] A person on Unemployment Assistance for example, was comfortably above the 40% line in 1994 (64 pounds a week at today’s prices) but below that 40% level in 1998 (90 pounds a week at today’s prices). A lone parent with two children on social welfare was close to the 50% line in 1994 but below the 40% line in 1998. Ibid.

[viii] See Bill Toner, ‘Working Class Cultures: Can they Adapt’, Working Notes, Issue 30, Nov 1997 and “The ‘Dependency Culture’ A Good or a Bad Thing’, Working Notes, Issue 32, July 1998. Downloadable at www.cfj.ie .

[ix] R Layte et. al., op. cit.,  p. 51.

[x] David Quinn in his Sunday Times column July 29th 2001 under the startling title “Ireland’s growing wealth gap is good for the poor”, argues like ISME,  that “almost by definition, relative poverty must increase when there is a boom”. He also writes “how might you stop this gap between the rich and the poor from increasing? The only way would be to put the brakes on the entrepreneurial class, to hold it back, to stop it going so far, so fast… through high taxation.” This would cause more unemployment and poverty. “The poverty industry thinks it is the friend of the poor, but it is their enemy”.

[xi] T. Callan et.al., Reforming Tax and Welfare, ESRI, Policy Research Series, Number 42, October 2001, p. 36. Among 17 OECD countries, Ireland has between the 5th and 6th lowest rate of replacement of low wages (2/3 of average earnings) by welfare and housing assistance when people become unemployed

[xii] Average tax rates are Income tax plus PRSI less Cash Benefits as a percentage of the Gross Wage. In 1998 Ireland had the second, third or fourth, lowest average tax rates both for single people and married one earner and two earner couples (with children and without) who earn incomes that are average or below average. The only group that faced relatively high tax rates was single people on one and two thirds of average income. Ibid. p. 31.

[xiii] “Is the Conference of Religious in Ireland going to far with its teachings on social justice”, p. 41.

[xiv] The rich-poor gap would continue to grow because the poor get the % increase on a smaller sum than the rich.

[xv] Derived from T.Callan, et. al.,  p. 91.

[xvi]   Ibid.,  p. 27-28.

[xvii] See Final Report of the Social Welfare Benchmarking and Indexation Group, p. 82.

[xviii] Department of Finance, 2001: Annex C, pp. C47-C50 and Department of Social, Community and Family Affairs, Poverty Proofing, 2001, as analysed in Ibid. p. 96.

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