On Thursday, 19 May, the Thinktank for Action on Social Change (TASC) launched its report on the state of inequality in Ireland. TASC is an independent organisation which aims to address inequality and sustain democracy by turning analysis into action.
The TASC report states that income inequality has fallen over the last 25 years with the ‘welfare state’ being a major reason for this. The report shows that the welfare system plays an unusually substantial role in redistributing income in Ireland with taxes and transfers leading to a 40% reduction in income inequality. In comparison, taxes, and transfers, on average, led to a reduction of 25% in income inequality across the OECD.
Income inequality also fell during the pandemic with Covid-19 supports helping to soften losses in income. A reduction in market income, due to job losses or a reduction in the number of hours worked, drove income distribution during the pandemic. The Pandemic Unemployment Payment had a progressive impact on the distribution of income. Without social transfers or Covid-related supports, 41.3% of the population would have fallen into poverty.
The report also looks at the current cost-of-living crisis. The opening up of economies after Covid-19 lockdowns was predicted to put upward pressure on prices as supply strained to meet pent up demand. The Russian invasion of Ukraine has also added to this, especially when it comes to energy prices.
The report shows that the bottom 20% of income recipients in Ireland have experienced the largest increase in prices with their inflation rate standing at just under 8%. For the next 20% of income recipients, the inflation rate is around 7%.
The report also reveals that those who live in rural areas have experienced greater inflation than those in urban areas. It also shows that those who rent their accommodation have faced marginally greater inflation than those who own outright. Those with mortgages have experienced less than renters and owners.
A major contributor to inflation is energy prices. The report reveals that these have risen by 43.8% in the past year. Energy is a necessity with all households consuming it to different extents. It comprises a larger share of low-income household budgets. Energy prices in Ireland are higher than in other countries with residential electricity prices being the third most expensive out of 14 EU countries and the UK.
The report looks at the measures introduced by the Government to relieve the cost-of-living pressures and their impact. These included increasing the fuel allowance, providing an energy credit and a reduction in excise duty. The report found that though these measures protected the poorest, they favoured middle-income households the most.
The report makes several policy recommendations to reduce income inequality and blunt the impact of the cost-of-living crisis. TASC advocates for engaging in sector-by-sector collective bargaining is to reduce wage inequality which would lead to a fall in income inequality. It suggests achieving this by making greater use of Joint Labour Committees (JLCs). In sectors where JLCs are in place, employers can abstain leading to the process being halted. The report advises that this could be addressed by permitting committees or the Labour Court to make wage recommendations without the participation of abstaining parties.
The report also supports greater investment in education and training to repair any damage caused by the disruption of education during Covid-19 lockdowns. The report highlights the combination of comparatively high levels of low pay, generous income transfers and very high childcare costs. This combination creates financial deterrents to do paid work leading to poverty traps that amplify inequality. The report recommends an increase in investment in early childcare and education to address this issue. The report proposes that Ireland increase its investment in the sector to 1% of national income.
Regarding the cost-of-living crisis, the report suggests increasing social welfare payments including the state pension, Jobseekers Allowance, and the One-parent Family Payment. The report also recommends an increase of €1 per hour to the minimum wage, which currently stands at €10.50 per hour. The report points out that though many workers earn above the minimum wage, they are still on low or are paid less than average, with early years staff tending to be around or below the low pay threshold.
The report also advocates for the government to compel energy companies to contribute to the cost-of-living crisis. It also suggests putting a tax on the excess profits of energy companies. Another option suggested is temporarily regulating energy prices.
If you have any questions regarding the report or would like to engage with us, please contact our policy team.