Guess what? Ireland’s levels of income inequality increased as the wealthy lost their footing paid a higher proportion in tax, whilst the country’s relatively generous welfare provision suffered less badly. Dan O’Brien with the detail:
There were specific reasons why many previously high earners were hit disproportionately hard by the slump. As lots of small and medium-sized companies went to the wall, the numbers working for themselves fell by even more than the numbers of waged employees. The self-employed who remained in business experienced a severe squeeze on profits, and therefore their incomes, as spending in the economy fell sharply. And those who owned shares in the indigenous financial institutions no longer earned dividends as the banks imploded.
Another factor in narrowing inequality over the 2007-09 period was the manner in which austerity was introduced. Analysis by the Economic and Social Research Institute shows that those on higher incomes lost out more due to budget measures than those on the lowest incomes.
That was mostly the result of higher taxes. Also important was the social welfare system. While some benefits have been reduced, both the current Government and its predecessor prioritised the protection of welfare payments for the least well off. As yesterday’s figures show, social transfers accounted for 27 per cent of disposable income, well above the share in 2008. By any measure the welfare system has done a great deal to cushion the effects of the crash.
Given the progressive nature of the budgetary adjustment and the stabilisation of the economy in 2010, yesterday’s new figures showing a rise in inequality in 2010 came as something of a surprise, even if there was a renewed narrowing in 2011. Deeper analysis of these most recent trends will be provided when statisticians publish more detailed figures on those years in the coming months.
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