Archive for January, 2011

Creating Greater Income Equality


Unequal societies are detrimental to our economy, to society in general and to our individual health and psychological welfare.[1] The wider the gap that exists between high and low earners the greater the prevalence of these negative effects. As Irish levels of income inequality are increasing[2] it is important that we take a comprehensive look at this issue as part of the current debate on what type of society we want in the future. It is essential that, as a first step in the process, a minimum essential standard of living is researched, implemented and monitored in order to ensure that we have a just and sustainable foundation from which to implement greater income equality.

As things exist the income floor is set by the social welfare system. This is a subsistence level of income that does not permit a life of dignity. Rather than lower the minimum wage or subsistence level provided by the Social Welfare we should focus first on establishing what exactly it is that the basic minimum income needs to be in order to ensure dignity and the opportunity to live a socially inclusive life. Sweeping the rug from under those on low incomes is not acceptable; instead we should secure their footing on the income ladder and use that as a sound foundation from which to bring improved wages. This would be more in line with what is just, equitable and socially sustainable. It is also an economically sound approach, as those on lower incomes redistribute the majority of their income back into the economy.

A minimum essential Standard of Living

Especially in these times of economic crisis social welfare transfers need to be protected therefore cuts in Government spending should not be targeted at those on the lowest incomes. In addition, in reconstructing our economy new mechanisms for redistributing wealth in a more egalitarian way can be found. The Vincentian Partnership describes a Minimum Essential Standard of Living as one which meets a person’s physical, psychological and social needs. They have devised minimum essential budgets for six household types, ranging from a lone parent with two children to a pensioner couple. These budgets are based on components such as health related costs, household services, personal care and a range of items necessary for social inclusion and participation, with approximately 2,000 items, goods and services being evaluated. Based on data collected in 2009 the minimum essential budgets per week for these household types stack up as follows: €280.81 for a female pensioner living alone, €588.26 for a lone parent with two young children, and €264.22 for a single adult male. Social welfare payments for these same family types are €269.02, €575.31 and €196 respectively. This highlights the importance of maintaining the social welfare at the current rates and increasing them if possible in order to ensure there are no shortfalls, such as that experienced by young male adults who have a weekly deficit of €68.22, which will increase to €76.22 after the introduction of the 2010 Budget.

When a household has a manifestly low income which is considerably less than that required for a Minimum Essential Standard of Living there can be no justification for measures which plunge them deeper into poverty and debt. Other choices are possible.”[3]

In 2009 the Vincentian Partnership also supported the need to protect the National Minimum Wage at its present pre-budget rate of €8.75, as those earning this rate and working 37.5 hours a week still encountered a shortfall of €49.28 a week (if living in rented accommodation) against what the Vincentian Partnership essential budget indicates. As will be discussed, the prices of basic goods and services have in fact risen over the last year, and whilst rents have in general declined this is mainly at the upper end of the rental market.  Thus there are increased difficulties for those earning the minimum wage to survive. The Government’s proposals to reduce this further, in the above scenario by €37.50, would result in a shortfall of nearly €90 a week and €360 a month. In addition the plans to introduce property and water taxes mean that those who will be hit the hardest are those with the least ability to withstand such fiscal reductions.[4]

The minimum wage should be at a level to ensure that every citizen can reach their basic expenditure costs and not be a tool with which to appease employers, the IMF or the EU. It is more important than that, it is the difference between a life of poverty and one of dignity for thousands of people. It also begs the question why the issue of reining in high pay has not been foremost on the agenda? This would have a myriad of positive effects; create more equality in our society, which is better for everyone and lessen the cost of business for companies. It could also create less risk-taking as seen in the financial sector where large bonuses were connected to short-term profit making.

Increases in the price of a number of basic goods

The importance of this is highlighted in a survey conducted by Age Action which found that between the dates of January 2008 and July 2010 the price of a number of basic goods have in fact risen throughout the recession. Increases can be seen in electricity, solid fuel and bottled gas meaning that the average cost of home heating has risen significantly. Other basic goods/services such as healthcare and travel have also seen price increases, for example; GP fees have risen by 8.15%, dental fees by 17.7%, petrol by 11.2%, whilst car insurance has risen on average by 14.8% and health insurance by 32.8%.[5] These figures reveal the increased pressure on low income earners. The combination of these factors will result in the majority of those dependent on social welfare being unable to live with basic dignity.

Wage Inequality

A national debate needs to begin on issues of rights, a social floor and equality in the context of social welfare legislation, and bringing those on lower and higher incomes closer together. The proposed cuts to social welfare payments and the minimum wage will only exacerbate the problem of pay inequality and its social ramifications. Social Justice Ireland has examined the increases in payments to those on social welfare and those in high earning political positions from 1986 to 2010, which highlights the extent of the unjustness of the proposed cuts to those already faced with poverty. The take-home weekly pay of T.D.’s for example rose by over six times more than that of someone in receipt of social welfare[6]; surely the answer to where to reduce spending is to reduce the wages of those who benefitted the most rather than vice versa, thus increasing equality and ensuring that no person on the brink of poverty is pushed over the edge. It is unacceptable that some of Ireland’s most wealthy and powerful groups are not even involved in the government’s debate on where to cut spending.

This shocking disparity between the wealthy and poor in our society, and our blasé attitude to its existence and detrimental impact, was brought to the attention of current debate in the Irish Examiner on the 6th of December last year. This article detailed the extraordinary wages of senior members of our semi-state bodies, who earn more than the leaders of major country leaders, including Barack Obama. The Chief Executive of ESB earns over €700,000 a year, way above what is received by any other public office holder, anywhere, and way above what is necessary to have an extremely high standard of living. It is wage disparities such as this that have led to the culture of risk-taking, money grabbing and overall dissatisfaction with life that is rife in developed countries such as Ireland. While it is welcomed that the Government eventually took cuts to their wages and pensions in the budget it is unacceptable that those surviving on the very minimum, and it could be argued that many are indeed not receiving the minimum required to have an acceptable standard of living, are to have their social welfare cut by a further 5%, the minimum wage to be reduced by €40 a week and taxes and charges on lower income families to be increased.

Conclusion

An opportunity to implement an equitable income structure now exists, and should be implemented before our recessionary lessons are forgotten. We need to decide as a nation the future direction of our society and change the pro-rich culture of the past to one which provides first and foremost the infrastructure to maintain every citizen’s right to equality, dignity, and economic and social security. A 2009 Behaviour and Attitudes Poll commissioned by TASC found that 85% of adults believe the government should take steps to reduce income inequality,[7] while a more recent MRBI poll conducted by the Community Platform found that 82% of the respondents agreed that the Government should introduce a wealth tax. The Governments planned budget cuts are a complete contradiction of this view and will go a long way to increasing rather than decreasing income inequality. The initiative now needs to be taken to start the essential process of introducing greater equality and sustainable progress for our society and for our economy, starting with the introduction of a minimum essential standard of living. This is an achievable goal which will have an immeasurable benefit.

 


[1] Wilkinson. R and K. Pickett, “The Spirit Level: Why More Equal Societies Almost Always do Better” Allen Lane Books, 2009.

[2] Johnston, L. “The Rising Tide that forgot to lift all Boats: poverty, inequality and the Celtic Tiger”, Limerick Student Journal of Sociology, Vol 1(1), 2009, p.6, available at http://www.ul.ie/sociology/socheolas/vol1/1/Louise%20Johnston.pdf, accessed December 2010.

[3] Vincentian Partnership, “Pre-Budget Submission 2010”, September 2009, available at http://www.budgeting.ie/images/stories/Publications/pre_budget_submission_2010.pdf, accessed November 2010.

[4] Based on calculations for a single male adult aged 25+, Vincentian Partnership, “Pre-Budget Submission 2010”, September 2009, available at http://www.budgeting.ie/images/stories/Publications/pre_budget_submission_2010.pdf, accessed November 2010.

[5] Age Action Ireland, “Pre Budget Submission 2011” available at http://www.ageaction.ie/sites/default/files/pdf/Prebudget%202011%20briefing%20documents_0.pdf , accessed December 2010.

[6] Social Justice Ireland, “TDs take-home pay rose by €980 a week while social welfare rates rose only €144 over past 24 years”, December 2010, available at http://www.socialjustice.ie/content/tds-take-home-pay-rose-%E2%82%AC980-week-while-social-welfare-rates-rose-only-%E2%82%AC144-over-past-24-year, accessed December 2010.

[7] McDonagh, T., “Hierarchy of Earnings, Attributes and Privilege Analysis” , TASC 2009, p.2, available at http://www.tascnet.ie/upload/file/9644%20HEAP%20BOOKLET(1).pdf.

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