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The state we are in:inequality in Ireland todayRobert SweeneyThe state we are in:inequality in Ireland todayRobert SweeneyThe state we are in: inequality in Ireland…
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The state we are in:inequality in Ireland todayRobert SweeneyThe state we are in:inequality in Ireland todayRobert SweeneyThe state we are in: inequality in Ireland todayPublished by: FEPS Foundation for European Progressive Studies Rue Montoyer 40, Fourth floor 1000 – Brussels Belgium T: +32 2 234 69 00 Email: info@feps-europe.eu Website: www.feps-europe.eu/en/ Twitter @FEPS Europe TASC 101 Baggot Street Lower Dublin 2 D02 TY29 Ireland Tel: +353 1 616 9050 E-mail: contact@tasc.ie Website: www.tasc.ie Twitter: @TASCblog © FEPS, TASC 2018 The present report does not represent the collective views of FEPS and TASC, but only of the respective authors. The responsibility of FEPS and TASC is limited to approving its publication as worthy of consideration of the global progressive movement. With the financial support of the European Parliament. Disclaimer The present report does not represent the European Parliament’s views but only of the respective authors.4ISBN 978-1-83853-083-9ContentsTable of Contents 1 Introduction 3 2 The Irish labour market, low pay, weak employment and poverty 5 62.1 Institutional aspects of the labour market 2.2 Employment participation 9 2.3 Poverty and deprivation 113 Inequality in Ireland 15 3.1 Historical trend and breakdown 16 3.2 Inequality: top, middle, or bottom? 194 Sectoral components of inequality 23 4.1 Inter-sectoral inequality 24 4.2 Within-sector inequalities and the scope for redistribution 275 Annual update on inequality 2018 33 6 Conclusion 37 Bibliography 39 1The state we are in: inequality in Ireland today21. Introduction3The state we are in: inequality in Ireland today1 Introduction Inequality relates to the unequal distribution of material resources, capabilities, and outcomes within or across societies and populations. Inequality is often measured in terms of the unequal distribution of economic resources such as income and wealth. It can also be measured through other indicators of wellbeing such as health, education, work satisfaction, life satisfaction, decision-making power, access to social networks, among others. Naturally, within any one category of well-being a variety of metrics can be brought to bear to gauge the level of inequality. Countries with high levels of economic inequality tend to do poorly across a range of social indicators. As documented by the now well-known work of Wilkinson and Pickett (2010), countries with high levels of income inequality tend to have high rates of crime, poor physical and mental health, and so on. To the extent that high levels of inequality imply a lack of economic resources for significant portions of the population, poor education, health, and social outcomes are soon to follow. Segments of the population may be excluded from societal institutions, especially market-based ones. But over and above inequalities of access, socioeconomic inequalities put pressures and stresses on individuals through status competition and social hierarchies. High levels of inequality are associated with less socially cohesive societies, which may also affect social outcomes (see Layte, 2012). As we approach the 100-year anniversary of the DĂĄil, this update looks at inequality in Ireland, building on previous editions of the more comprehensive Cherishing All Equally reports. In the 2017 edition, TASC, in partnership with FEPS (the Foundation for European Progressive Studies), found that Ireland continued to rank in the middle among European countries in income inequality. However, in market inequality terms, Ireland was the most unequal country in Europe. Previous reports also pointed to deficits in public provision in key areas, including housing, health and social spending. This report examines income inequality in Ireland, and Ireland’s place among European countries. Before analysing facts and figures on inequality, it first looks at socioeconomic factors related to inequality, especially characteristics of the Irish labour market. Ireland has a comparatively employerfriendly labour market, and workers have comparatively little bargaining power. As well as predisposing Ireland to have high market inequality, coupled with low employment rates, this leads to higher levels of low pay, deprivation, and risk of poverty. The report also details how Ireland continues to rank in the middle when final or disposable income inequality is considered. This is achieved only after transfers by the state and a progressive taxation system. The report focuses on which groups drive inequality, emphasising how the top ten percent and bottom 40 percent of income earners struggle for greater shares of national income. Finally, we also look at inequality in different sectors of the economy. Though Ireland generally has more people employed in both high and low-pay sectors than comparable countries, most of the inequality in Ireland is driven by inequality generated within, rather than between, sectors of the economy. In other words, inequality is not driven by large differences in income between different industries. This report is organised as follows: Section 1 looks at aspects of the Irish labour market which relate to inequality, and also presents information on low pay, poverty, and deprivation. Section 2 looks at inequality in Ireland, and how Ireland’s inequality differs from comparable countries. Section 3 examines sectoral components of inequality in Ireland and the scope for redistribution. Section 4 documents year-on-year changes in social indicators. The final section summarises the findings and concludes.42. The Irish labour market, low pay, weak employment and poverty5The state we are in: inequality in Ireland today2 The Irish labour market: low pay, weak employment and poverty As the key site of distributional struggle, this section examines the Irish labour market. Ireland’s labour market structure predisposes it to high levels of inequality. Ireland has what might be termed a flexible labour market: workers offer great flexibility to employers. Union membership and coverage are comparatively low and labour protection comparatively weak. One consequence is an unusually high incidence of low pay. Moreover, though employment has increased in recent years, participation rates remain low, which intensifies distributional pressures. Ireland also has high rates of poverty and deprivation.2.1 Institutional aspects of the labour market Not only in Ireland but across Europe, labour markets have undergone a major transformation in the last three decades or so. There has been increased polarisation in remuneration from work, an unprecedented growth in the number of women in paid employment and a shift from manufacturing and agriculture towards services. These processes are related in that women disproportionately occupy service positions, often in the public sector. A further change peculiar to Ireland is the comparatively high dependence of employment on foreign direct investment (FDI), though the domestic-oriented1 sector still accounts for some 90% of employment (Jacobson, 2018). In addition to structural transformation, another key source of change in the labour market has been increased ‘flexibility’, as elsewhere in Europe. According to textbook neoclassical economics, a variety of ‘rigidities’ are said to impede the smooth operation of labour markets and these can, it is argued, lead to higher unemployment. As such, governments across the continent have sought to limit or scale back a variety of labour-protective measures, from restrictions on hiring and firing to the role and salience of trade unions.2 Both structural change, including in Ireland the penetration of FDI, and the move towards more flexible workplaces have weakened organised labour. These trends are evident in Figure 1, which shows trade-union density – the share of employees who are members of a union – in Ireland and comparator countries since 1960. A pattern of increase from the 1960s followed by sustained decline from around the early 1980s is observable. Trade-union density in Ireland is currently close to the EU-15 average,3 and much below social-democratic Sweden, albeit somewhat above the UK. Unsurprisingly, this has been a period of steadily increasing inequality.1 This includes foreign-owned firms catering to the domestic economy such as supermarkets. 2 The evidence that more employer-friendly labour market structures lead to higher employment is decidedly mixed (Howell et al., 2007). 3 the 15-member EU before the enlargements to the east in the 21st century62 The Irish labour market: low pay, weak employment and povertyFigure 1: Trade-union density Trade union density1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016Trade union densityEU-15IrelandSwedenUKEU-15IrelandSwedenUK1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016100 90 80 100 70 90 60 80 50 70 40 60 30 50 20 40 10 300 20 10 0Source: OECD labour statistics.Note: Historical data was not available for Eastern European countries. Due to missing data the EU15 average could not be statistics. measured exactly; it was measured every five years using nearest-year data Source: OECD labour statistics. Source: OECD labour and linearly interpolated. Historical data was not available for Eastern European countries. Due to missing data the EU-15 average Note:Note: Historical data was not available for Eastern European countries. Due to missing data the EUcould not be measured exactly; it was measured every five years using nearest-year data and linearly 15 average could not be measured exactly; it was measured every five years using nearest-year data interpolated. and linearly interpolated.Trade-union density can however give a misleading picture of the role and strength of Trade-union density can however give a misleading picture of the role and strength of unions in an unions in an economy. In several countries, the share of the workforce who are a member economy. In several countries, the share of the workforce who are a member of a union is not high but of a union is not high but most workers are still covered by collective-bargaining Trade-union density however give a misleading picture of the role and strength of most workers stillcan covered by collective-bargaining agreements. As shown in Figure 2, at just a third agreements. As are shown in Figure 2, at just a third of the workforce, collective-bargaining unions in workforce, an economy. In several countries, the share of low the inworkforce who are a member of the collective-bargaining coverage unusually IrelandOnly by EU-15 coverage is unusually low in Ireland by EU-15iscountry standards. the country UK andstandards. some of aOnly union is and notsome highhighly butunequal most Eastern workers are still covered bycoverage. collective-bargaining the UK European states have lower Surveys of global highly unequal Eastern European states have lower coverage. Surveys of global opinion and agreements. Asalso shown in Figure 2,similar at just a thirdsuggest of thegrowing workforce, collective-bargaining opinion and in the UK, which is to Ireland, support for collective bargaining also in the UK, which is similar to Ireland, suggest growing support for collective bargaining coverage is unusually lowforintrade Ireland by(ITUC, EU-15 country standards. Only the UK and some and greater prominence unions Ipsos, 2017). and greater prominence for trade unions (ITUC,2018; 2018; Ipsos, 2017). highly unequal Eastern European states have lower coverage. Surveys of global opinion and also Figure in the 2: UK,Collective-bargaining which is similar Ireland, suggest growing support for collective bargaining Figureto2:coverage Collective-bargaining coverage and greater prominence for trade unions (ITUC, 2018; Ipsos, 2017). Collective bargaining coverage Figure 2: Collective-bargaining coverageAustriaFranceAustriaFranceSweden SwedenBelgium BelgiumFinland FinlandItaly ItalyDenmark DenmarkSpain SpainNetherlands NetherlandsEU-15 EU-15Portugal PortugalSlovenia SloveniaGermany GermanyLuxembourg LuxembourgGreece GreeceCzech Republic Czech RepublicIreland IrelandSlovakia SlovakiaEstonia EstoniaHungary HungaryLatviaUnited Kingdom United KingdomSource: OECD.LatviaCollective bargaining coverageLithuania Lithuania100.0 90.0 80.0 70.0 100.0 60.0 90.0 50.0 80.0 40.0 70.0 30.0 60.0 20.0 50.0 10.0 40.0 0.0 30.0 20.0 10.0 0.0Note: figures are based on most recent data, which is generally 2015 and 2016 but occasionally 2014.4 47Source: OECD. Note: figures are based on most recent data, which is generally 2015 and 2016 but occasionally 2014. The state we are in: inequality in Ireland todayUnsurprisingly then, Irish labour law offers workers low protection. As shown in Figure 3 Unsurprisingly then,22nd Irish labour workers low protection. Figure 3protection, below, Ireland below, Ireland ranks out oflaw theoffers 23 EU countries in terms As of shown labourinmarket out of the 23 EU countries in termsThough of labourseverance market protection, and 20th for crucially temporaryand ranks 20th 22nd for temporary-contract regulation. pay is reasonable, contract regulation. Though is reasonable, crucially can Ireland poorly given Ireland performs poorly givenseverance the easepay with which employers layperforms off employees – forthe ease with which employers lay off employees – for (Murphy, instance, comparatively little noticemost has to instance, comparatively little can notice has to be given 2016). Interestingly, be given (Murphy, 2016). Interestingly, most Nordic countries also offer relatively weak labour-market Nordic countries also offer relatively weak labour-market protection. They have achieved achieved highdegrees prosperity and historically high of equality highprotection. prosperityThey and have historically high of equality through a degrees bargaining processthrough which a bargaining process which integrates relatively flexible and force productive force into international integrates a relatively flexible and aproductive labour intolabour international markets, markets, by a social welfarewith system high replacement and active labour-market backed by a backed social welfare system highwith replacement rates rates and active labour-market programmes. programmes. Figure 3: Index of labour-market protectionFigure 3: Index of labour-market protectionRegular contract regulationBelgiumNetherlandsItalyLatviaFranceGermanyPortugalLuxembourgSwedenCzech RepublicAustriaLithuaniaGreecePolandSloveniaSpainDenmarkCroatiaSlovakiaFinlandHungaryIreland4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00United KingdomIndex of labour market protectionTemporary contract regulationSource: OECD employment-protection statistics. Source: OECD employment-protection statistics. Notes: recent data mostly refersto to2013 2013 but and 2015. Notes: MostMost recent data mostly refers butsometimes sometimes2014 2014 and 2015.Low bargaining power for workers is likely to lead to high pay inequality. One indicator of the distributional consequences of weak labour-market institutions is low pay, as shown in Figure 4 below. It shows theLow bargaining power for workers is likely to lead to high pay inequality. One indicator of incidence of low pay among EU countries, arranged according to total and specifically female pay the distributional consequences of weak labour-market institutions is low pay, as shown in for 2016, the latest year of available data. Someone is low-paid if, as a full-time worker, they earn less Figure 4 below. It shows the incidence of low pay among EU countries, arranged according than two-thirds of gross (that is, pre-tax) median earnings. The low incidence of low pay in countries to total and specifically female pay for 2016, the latest year of available data. Someone is such as Italy is likely a result, at least in part, of fewer women in the workforce, and hence fewer lowlow-paid if, as a full-time worker, they earn less than two-thirds of gross (that is, pre-tax) paid service occupations. The Nordic countries’ ability to combine a low incidence of low pay and high median earnings. The low incidence of low pay in countries such as Italy is likely a result, at participation is likely a result of collective bargaining in which comparatively high wage floors leastfemale in part, of fewer women in the workforce, and hence fewer low-paid service are set sector-by-sector (see Eldring and Alsos, 2012). occupations. The Nordic countries’ ability to combine low incidence of low pay and high 582 The Irish labour market: low pay, weak employment and povertyFigure 4: Incidence of low pay and in-work povertyFigure 4: Incidence of low pay and in-work poverty35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00Belgium Finland Italy Denmark France Portugal Luxembourg Netherlands Spain Austria Greece Malta Bulgaria Germany Slovakia Slovenia UK Hungary Czech Republic Cyrpus Lithuania Poland Estonia Ireland Romania LatviaLow pay and in-work poverty2016Female 2016At-risk povertySources: Low-pay based on OECD labour statistics; ratebased basedonon Eurostat. Sources: Low-pay based on OECD labour statistics;in-work in-work poverty poverty rate Eurostat. Notes: in-work poverty dataare arefor for 2016 2016 and disposable income of less than than 60% of Notes: in-work poverty data and refer refertotoequivalised equivalised disposable income of less median; Swedish and several Eastern European figures for low pay are not available. 60% of median; Swedish and several Eastern European figures for low pay are not available.At 23% of the workforce, Ireland has among the highest incidence of low pay in the EU with only Romania and Latvia higher.4 In 2006, things were somewhat better, in that ‘only’ a fifth of the workforce were low-At 23% of the workforce, Ireland has among the highest incidence of low pay in the EU with paid (OECD, 2018). Ireland also has a high rate of low pay among women, where more than a quarter only Romania and Latvia higher.4 In 2006, things were somewhat better, in that ‘only’ a fifth are in low-paying jobs. Again, things have deteriorated for Irish women over the course of a decade,as somewhat fewer women were in low-paid jobs in 2006 (ibid.). The existence of low pay coincides, Ireland’s unusually highbelow-average rate of low pay is replicated hourly earnings are used. Among EU-15 countries, incidentally, with labour costswhen (wages plus employers’ pay-related social insurance) data for the same period as above show that only Germany has a higher incidence of low pay (Wickham, 2017: throughout the economy (Unite, 2016; TASC, 2018). This is despite Ireland being a high-cost economy 43). relative to EU norms (NCC, 2018; ibid.).46 That said, the in-work poverty rate in Ireland is low by European standards. At 4.8%, only Belgium and Finland had lower in-work poverty in 2016. The reason for the discrepancy between pay and poverty is that low pay refers to pay, whereas the poverty figure incorporates income received from other sources. In particular, the Irish state supplements the income of the low-paid through a variety of transfers such as family income and child supports, and jobseekers’ allowance for part-time workers (Collins and Murphy, 2016). The state, in effect, subsidises a low-pay economy and enables employers to pay low wages.2.2 Employment participation In addition to its impact on pay, the labour market affects the distribution of income in that participation in paid employment varies across different groups in society. Figure 5 shows the overall employment and unemployment rates for segments of the Irish and European labour forces. Countries are ordered according to the total employment rate. Employment figures are based on the end of the first quarter of 2018 for 20-64 year olds
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