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Chart authors:

TerrenceMcDonough

JasonLoughrey

Booklet authors:

TerrenceMcDonough

JasonLoughrey

Project supported by:

ICTU(IrishCongressofTradeUnions)

TASC(athinktankforactiononsocialchange)

SSRC(SocialSciencesResearchCentre,NUIGalway)

TASC2009

Hierarchy of Earnings, Attributes and Privilege Analysis

THE H.E.A.P. CHART

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Reducing the income gap

Workablepoliciesaimedatreducingthegapbetween

highandlowincomesconstituteasecondstrategy

thathasbeenusedeffectivelyinothercountriesto

promoteeconomicequality.Therearetwoapproaches

thatcanbeusedtoreduceincomedifferentials.The

rstinvolvesredistributingincomefromrichtopoor

householdsthroughprogressivetaxationofincome

andwealth,whilethesecondinvolveshavingsmaller

differencesinincomesbeforetaxesandbenets,which

meansthereislessneedforredistribution.Sweden

achievesgreaterincomeequalitythroughredistributionwhile,inJapan,incomeequalityisachievedbyhaving

smallerincomedifferentialsbeforetaxes.

Inthemediumtolongterm,advancingincomeequality

wouldinvolveavarietyofmeasures,rangingfrom

addressingtheexcessivelevelsofexecutivepayand

bonusesenjoyedbysomeofthoseatthetopofthe

H.E.A.P.,toincreasingtheincomelevelsofthoseat

thebottomoftheH.E.A.P.bysettingaminimum

incomeoor,whichensuresthatno-onehasan

incomelessthan60percentofthenationalmedian

income.Preventingexcessivelyhighincomesandconcentrationsofwealthatthetopisasimportant

aspullinguptheincomesatthebottom.

Investment in education

Athirdandcrucialpolicyareaimpactingonincome

equalityinvolveseducation.Theanalysisclearly

demonstratestherelationshipbetweeneducation

andincomelevels,wherebythosewithhigher

levelsofeducationhavetheopportunitytoearn

higherincomes,andthosewithlowereducation

levels(primaryandsecondary)havesignicantly

lowerlevelsofincomeandareatmuchgreater

riskofpoverty.

Irelandcontinuestospendproportionatelylesson

education(4.7percentofGDP)whencomparedtothe

averagespendacross30OECDcountries(5.7percent

GDP).TheOECDhasalsofoundthatIrelandspends

relativelylittleonearlychildhooddevelopmentand

educationcomparedtoothercountries,andthatthe

percentageofIrishchildrenlivinginpoorhouseholds

(16.3percent)issignicantlyabovetheOECDaverage

(12.4percent).

Investmentinearlychildhooddevelopmentand

educationintherstsixyearsoflifereduces

inequality.Inpurelyeconomicterms,spendingin

thisareaisoneofthebestinvestmentsacountry

canmake.Overall,greaterinvestmentineducation,

andespeciallyearlychildhoodeducation,isneeded

ifincomeinequalityistobeaddressed.Aswith

socialprotection,increasedinvestmentineducation

wouldrequireprogressivetaxationtogetherwitha

broadeningofthetaxbase.

Thereisnoshortageofpolicyoptionsthatcanbeused

toaddressincomeinequalityandthethreeexamplesoutlinedabovedemonstratesomepracticalstepsthat

canbetakentoaddressthesymptomsandthecauses

ofincomeinequality.

Alltheevidenceshowsthataddressingincome

inequalityisessentialifwewanttoachieveeconomic

equality,whichisofcentralimportancetoourfuture

wellbeing.Thepolicyoptionswechoosetoadvance

thisaimarelessimportantthanwhetherornotwe

ultimatelysucceedintransformingIrelandfroma

societysufferingundertheweightofinequalitytoone

characterisedby(andgainingfrom)equality.WehopetheH.E.A.P.Chartwillinformthedebateoninequality

and,inparticular,willbeusedtostimulatediscussion

onhowwecanachievegreaterequality.

TASCandICTUwouldliketothankProfessor

TerrenceMcDonoughandJasonLoughreyfromthe

SocialSciencesResearchCentreatNUIGalwayfor

undertakingthisprojectandbringingittolife.

DavidBegg(ICTU)

PaulaClancy(TASC)

November2009

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02.Foreword

05.IntroductionandPurpose

07.WhatistheH.E.A.P.Chart?

HowtousetheChart

Datasource

Occupationaldenitions

10.InequalityinIreland

Measuresofinequality

Povertyrates

Hasinequalityworsened? Wealthinequality

16.WhyInequalityMatters

TheSpiritLevel

InequalityandIrelandscurrentcrisis

20.TheH.E.A.P.Chart:InterpretationandAnalysis

Theeffectofgovernmentbenetsandtaxation

oninequality

TheroleofSocialWelfare(SW)paymentsin

addressingpoverty

Comparisonofincomesformenandwomen Theeffectofeducationoninequality

26.Conclusions

27.Appendix:SuggestionsforWorkshopUse

28.Acknowledgements

TABLE

OF

CONTENTS

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Weallliveinunequalsocietiesinanunequalworld.Whatstandsoutmost

sharplyismassiveinequalityinthelifeprospectsoftherichandthepooran

inequalitywhichimpactsonarangeofoutcomesincludinglifeexpectancy,

health,happiness,educationandincome.

Inequalitiesareembeddedintheeconomicstructuresof

societyinareassuchasownership,wealth,income,taxation,

employment,health,housingandeducation.Althoughmany

peopleareawarethateconomicinequalitiesexist,somebelieve

thatthesolutionistoimprovethewell-beingofthepoorestinsociety,withoutaddressingtheissueofequalityitself(i.e.

thegapbetweenrichandpoor).However,recentresearchby

RichardWilkinsonandKatePickett,publishedintheirbook

TheSpiritLevel,indicatesthatwhileitisimportanttoimprove

thepositionoftheleastwell-offinsociety,thelevelofequality

alsomatters.Inthewordsofthebookssubtitle:moreequal

societiesalmostalwaysdobetter.

Manypeoplendthattheyassociateintheirworkingandpersonalliveswith

othersatroughlythesamelevelofincomeandsocialstatus.Itiseasyto

assumethatthemajorityofpeopleinthecountryshareyourincomelevel.Groupsoutsideourownincomelevelbeithigh,low,ormiddlingtendtobe

lessvisible,andthereforeeasilyforgottenorignored.Inordertogetthebig

pictureofequalityorinequalityinIrishsocietyitisimportanttostepoutside

ourownpersonalexperience.WehopethattheHierarchyofEarnings,Attributes

andPrivilege(H.E.A.P.)Chartandanalysiswillhelpusallseethatbigpicture.

ThepurposeoftheH.E.A.P.Chartandthisbookletistoprovidesomeofthe

basicfactsrelatingtoincomedistributioninIreland,drawingon2006data.

Theanalysisprovidesaclearandeye-openingpictureofIrelandssocio-economic

structureintermsofincomedistribution,occupationandhouseholdtype

(e.g.female-headedhouseholds,couplesetc).

Onceweknowtheoverallsituation,we

canstartdebatingwhetherthecurrent

stateofincomedistributionishealthyor

desirable.Andifweconcludeitisnt,we

mustbeginanewdebateabouthowwe

addressincomeinequalityandhowwecanachieveajustsociety.

Foldedinsidethiscompanionbooklet,theH.E.A.P.Chartshowscolour-codedguresallowingus

tolocatehouseholdtypesandoccupationswithintheincomedistribution.Thisbookletprovides

aclearexplanationonhowtousetheH.E.A.P.Chart,andputsahumanfaceonthedrystatistics

underpinningdiscussionsoninequality.

INTRODUCTION

AND

PURPOSE

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H.E.A.P.standsfortheHierarchyofEarnings,Attributes

andPrivilege.Earningsareusedtolocatehouseholds

onthechartfromthebottomtothetop.Attributes

includeemploymentstatus,occupation,andfamilytype.

Privilegeiswherehouseholdsstandinrelationtoone

anotheraretheyatthetop,middleorbottomofthe

incomeheap?

WhiletheH.E.A.P.Chartoffersanat-a-glanceviewof

incomedistributioninIreland,italsomeritscloserstudy.

Inadditiontoinformationabouthouseholdincome,

theChartcontainsinformationaboutthestructureof

Irelandsfamiliesandtheoccupationsoftheadultsin

thefamily.

07

EachiconontheChartrepresents2,800Irish

households.Becauseofthis,somefamilieswithlesscommonoccupationsandhouseholdtypeswillnot

showupontheChart.Ifyoundthisisthecasefor

yourhousehold,youcanchoosetheclosestmatching

iconatyourincomelevel.

Thedataisdrawnfromsurveyscarriedoutin2006.

Theyear2006waschosenbecauseitrepresents

thelatestavailabledata.Itwasalsothelastyearof

theboom,somuchhaschangedsince.Theongoing

recessionhasaffectedincomesatalllevels.Thus,

whileincomesacrosstheboardarereduced,the

structureofoverallincomeinequalitystillapplies.TheChartwillbeupdatedwithnewdataasit

becomesavailable.

YoucanndyourhouseholdslevelontheChartby

addinguptheincomesofeachindividualandthen

addinggovernmentbenetsreceived.Wehave

usedpeoplesheadlineannualincometomake

thiseasier.Wecouldhavecorrectedfortaxation

andotherfactorswhichinuencetakehomepay,but

thiswouldhaveaddedcomplications.Whenadding

upyourhouseholdincome,use2006gureswhere

possibleandmakesuretoincludethefollowing:

The incomes of all adults

Theincomesofallchildrenunder16shouldbe

included.Adultchildrensincomesshouldbe

includediftheyareunder20,000.Unmarriedadults

inthehouseholdwhoearnmorethanthisamount

areconsideredindependentandarerepresented

asseparatehouseholds.Benetsinkindfromyour

employer,likeacompanycar,shouldbeincluded.

Perhapssurprisingly,thestatisticsincludeemployers

PRSIinemployeeincome.Consequently,ifyouhaveanemployerwhopaysPRSIyoumustaddthisamount

toyourincometondyourplaceonthechart.Ifyou

madelessthan18,512youmustadd8.5percent

astheemployerhasalowerPRSI.Forinstance,if

youmade10,000thiswouldbe850.Ifyoumade

18,000thiswouldbe1,530.Ifyoumademorethan

18,512youmustadd10.75percent.Thiswouldbe

1,075forevery10,000.

Pensionsshouldbeincluded.

Propertyincomelikerentorsharedividendsshouldbeincluded.

Youshouldalsoincludeanymoneyyoumadefrom

thesaleofanyassetslikepropertyorshares.

Government benefts

Theseinclude:

unemploymentbenets;

oldagebenets;

childbenets;

housingallowances;and

education,survivors,sickness,carersand

disabilitybenets.

Mostfamilies(95percent)willbeabletousethe

largechartshowinghouseholdswithincomesof

134,000orless.Householdincomesupto330,000

areincludedinthesmallerchart.Ifthischartwere

printedtothesamescaleasthebiggerchart,the

highesticonwouldbetwometresupthechart.

Incomesabovethislevelaretoodispersed,andthe

householdstoofewinnumber,tocreateanicon,

exceptforoneat600,000.Thisiconwouldbeacouplewithtwomanagerial/professionalincomes.

WHATISTHE

CHART?

H.E.A.P.

HowtousetheChart

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Example 1:

Acouplewithtwochildren.Themanisawelderearning

27,000.Thewomanisasalesclerkearning18,000.

WelderscomeunderCraftandrelatedoccupations.

SalesclerkscomeunderSalesoccupations.

Thewelderwouldhavetoadd10.75percentfor

employersPRSI.

27,000x1.1075=29,902.50

Thesalesclerkwouldhavetoadd8.5percentfor

employersPRSI.

18,000x1.085=91,530

Childbenetfortwochildren(2006rate)is3,600.

29,902.50+19,530+3,600=53,032.50

Thiscoupleshouldgotothelineoficonsbetween

52,000and54,000andlookforacoupleiconwith

acolourcodedividedbetweenCraftandrelated

andSales.

Example 2:

Asinglewomanwithonechild,workingasahairdresserearning25,000.Heroccupationwouldcomeunder

Personalandprotectiveservices.

Shewouldhavetoadd10.75percentfor

employersPRSI.

25,000x1.1075=27,687.50

Shewouldthenadd1,800childbenet(2006rate).

27,687.50+1,800=29,487.50

Sheshouldgothelineoficonsbetween28,000and

30,000andlookforasinglefemaleiconwithdependents

colourcodedforPersonalandprotectiveservices.

Example 3:

Asingleretiredmanonthecontributorygovernment

pension.Hewouldbereceivingjustover10,000in

pensionpayments.

Heshouldgotothelineoficonsbetween10,000and

12,000andlookforasinglemaleiconcolourcoded

forRetired.

SINGLE MALE SINGLE FEMALE FEMALE PLUS

DEPENDENT

COUPLES

To fnd your households position on the Chart

First,ndthelevelofyourfamilysannualhousehold

income.Thenlookalongtherowtondtheicons

whichmostcloselycorrespondtoyourhousehold

type.Wehaveincludedthefollowingfamilytypes:

Thecouplescategoryincludesbothcoupleswithandwithoutchildren.Non-retiredcoupleswithoutchildren

weretoofewinnumbertoincludeasaseparate

category.Thesameconsiderationappliedtosinglemen

withchildren.Althoughwewouldhavelikedtoexplicitly

recognisethisfamilycategory,theytendedtodisappear

intheaggregationnecessarytocreatetheicons,and

hencewerenotincludedasaseparatecategory.We

werealsounabletodistinguishbetweensame-sex

couplesandsinglepeoplesharingaccommodation.

Same-sexsingleadultssharingaccommodationare

usuallyrepresentedasseparatesingleadulthouseholds.

Finally,ndtheiconwhichmostcloselymatchesthe

occupationsoftheadultsinyourhousehold(each

iconiscolour-codedtodenoteoccupation).Wehave

distinguishedthefollowingoccupationalcategories:

Managerialandprofessional

Clericalandsecretarial

Craftandrelated

Sales

Other

Personalandprotectiveservices

Plantandmachineoperatives

Unemployed,peoplewithdisabilitiesandstudentsRetired

Farmers

Homeduties

Whereacouplehasdifferentoccupations,theiconis

splitbetweenthetwocolours.Afulldescriptionofthe

occupationsisfoundonthenextpage,includingmany

examplesofjobtitlesincludedineachcategory.

Thefollowingillustrateshowtolocatedifferent

householdsontheChart.

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ThedatafortheChartissourcedfromtheIrishSurvey

ofIncomeandLivingConditions(SILC).Thedatafrom

theIrishSILCfeedsintotheEU-SILC,whichistheEU

referencesourceforcomparativestatisticsonincome

distribution,livingconditionsandsocialexclusionat

Europeanlevel.

ThepurposeofSILCistoallowtheMemberStatesand

theEuropeanCommissiontomonitornationaland

EUprogresstowardskeyEUobjectivesintheareas

ofsocialinclusionandsocialprotection.EU-SILCisa

multi-dimensionalsurveyfocusedonincomebutalsocoveringtime,housing,materialdeprivation,labour,

health,demographyandeducation.AlltheEUcountries

andafewothersnowconductcomparableSILCsurveys.

Plant and machine operatives

Power-productionoperators;watertreatmentoperators;assembly-lineoperators;industrial-robotoperators;chemical-productsmachineoperators;printing-machineoperators;sewing-machineoperators;food-processingmachineoperators;andvehicledrivers.

Unemployed, people with disabilities and students

Thiscategoryincludespeoplewhoareunabletoparticipateintheactiveworkforceduetodisability;thosewhoarecurrentlyunemployed,butavailabletotakeupemployment,andfull-timestudents.

Retired

Thiscategorycomprisesthosewhohaveretiredonagegrounds.

Farmers

Cropgrowers;vegetablegrowers;horticulturalists;dairyandlivestockproducers;poultryproducers;farmlabourers;forestryworkers;andsheryworkers.

Home Duties

Thiscategoryincludespeoplewholookafterchildren,olderpeopleand/orpeoplewithdisabilitiesonanunpaidbasis,andthosewho,becauseofhomeduties,arenotavailabletotakeuppaidemployment.

Managerial and proessional

Managers,directorsandotherexecutives;scientistsandengineers;healthprofessionals;teachers;businessprofessionals;lawyers;writers;andtechnicians.

Clerical and secretarial

Secretaries;clerks;cashiers;banktellers;travelagents;receptionists;telephoneoperatorsandcall

centreoperators.

Crat and related

Builders;plumbers;electricians;painters;welders;motormechanics;handicraftworkers;foodprocessingworkers;textileworkers;garbagecollectors;constructionandmaintenancelabourers.

Sales

Models;shopsalespersons;shopdemonstrators;marketsalespersons;andstreetvendors.

Personal and protective services

Travelguides;waitersandbartenders;child-careworkers;personalcareworkers;hairdressers;

beauticians;undertakers;re-ghters;policeofcers;armedforces;domestichelpersandcleaners;caretakers;messengersandporters.

TheSILCsurveydividesoccupationsintonine

categories.Theseare:managersandadministrators,

professionals,associateprofessionalandtechnical,

clericalandsecretarial,craftandrelated,personal

andprotectiveservices,sales,plantandmachinery

andother.Inaddition,thosenotinworkarecounted

invecategories:unemployed,thoseonhomeduties,

students,peoplewithdisabilitiesandretired.

Toincludeallofthesecategoriesseparatelywould

createtwoproblems.Firstly,somecategoriesarenot

numerousenough,andwouldtendtodisappearwhenfamiliesareaggregatedintoicons.Secondly,including

allcategorieswouldcreatetoomanycoloursonthe

chart.Wehavecombinedthemanagerial,professional

andassociateprofessionalcategoriesintoone

managerialandprofessionalcategory.Wehavealso

combinedtheunemployed,peoplewithdisabilitiesand

studentcategories.

Examplesofthetypesofjobswithineachcategoryare

listedbelow.

Datasource Occupationaldenitions

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Denmark

Sweden

AustriaNetherlands

Finland

Germany

France

Belgium

Luxembourg

Spain

Italy

UK

Ireland

Greece

Portugal

WecanseefromthisthatIrelandisamongthecountrieswithrelativelyhighlevels

ofinequality.Irelandsinequalitymeasureis33percenthigherthanDenmarkorSweden.

Anothermeasureofinequalityistheincomequintileshareratio.Thisinvolvestaking

theshareofincomeofthetopone-fthofthepopulationanddividingitbytheshare

ofincomereceivedbythebottomone-fth.Thehigherthisnumber,thehigherthe

levelofinequality.

INEQUALITY

IN IRELAND

TherstmeasurementwewillexamineistheGiniCoefcient.Thismeasurementassesses

inequalitybycomparingasituationinwhichthereisperfectequality(everyoneina

countryhasanequalincomeshare)tooneofperfectinequality,whereonepersonhas

100percentoftheincomeandeveryoneelsehasnothing.PerfectequalitygivesaGiniCoefcientofzero.PerfectinequalitygivesaGiniCoefcientof100.TheclosertheGini

Coefcientisto100,thehigherthelevelofinequality.TheEU-SILCsurveyin2006found

thatIrelandhadaGiniof32.Wecantgetagoodsenseofwhatthismeansuntilwe

compareittotheGiniofothercountries.

ItisoftenobservedthatIrelandhasarelativelyhighlevelofincomeinequality.

WecaninvestigatethisbycomparinglevelsofinequalityinIrelandwithlevels

inothercomparablecountries.Forthispurpose,wewilllookatIrelandin

relationtotheothermembersoftheEU15(membersoftheEuropeanUnion

beforetherecentenlargements).

0 5 10 15 20 25 30 35 40

Measuresofinequality

GiniCoefcientoftheEU15

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Athirdwaytoassessinequalityistoexaminetheat-riskof-povertyrate.Thismeasure

looksatthepercentageofindividualswhoreceive60percentorlessofthemedian

income.Ifyouweretolistalltheincomesinthecountryfromthehighestdowntothelowest,medianincomewouldbetheonepreciselyinthemiddle.Exactlyhalfofthe

countrywouldbericherthanthemedianincomeandexactlyhalfpoorer.Ifyouhave

anincomebelowthree-fthsofthemedian,youarejudgedtobeatriskofpoverty.

Denmark

Sweden

Finland

Austria

Netherlands

France

Germany

Belgium

Luxembourg

Ireland

Spain

UKItaly

Greece

Portugal

0 1 2 3 4 5 6 7 8

Again,Irelandisinagroupof

relativelyunequalcountries.

Povertyrates

0 5 10 15 20

Netherlands

Sweden

Denmark

Austria

Finland

France

Luxembourg

Germany

Belgium

Portugal

Ireland

UK

Spain

Italy

Greece

Onceagain,Irelandishighup

theinequalityleaguetable.

AtriskofpovertyratefortheEU15(fromEurostat2007)

IncomequintileshareratiosfortheEU15

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Thefollowingexampleillustrateshowameasureof

inequality,liketheratioofthetopandbottomincomes,

mayfailtocaptureariseininequality.Supposea

countryhadtwocitizens.Thepoorcitizenmakes5andtherichcitizenmakes50.Theratiooftheirincomes

isonetoten.Therichcitizenis45aheadofthepoor

citizen.Supposeaftertenyearstheirincomesdoubleto

10and100.Theratiooftheirincomesisstilltenbut

therichcitizenisnow90aheadofthepoorcitizen.The

gapbetweenthemhaswidenedbuttheratiomeasure

remainsthesame.Thisiswhathashappenedover

theCelticTigerperiod.Theincomeofallgroupshas

increasedroughlyproportionately,andhencetheGini

Coefcientandthequintileshareratiodontchange

much.Ontheotherhand,thegapbetweenhighincomes

andlowincomeshaswidenedconsiderablyinIreland.

Theusualstatisticalmeasuresofinequalitydontcatch

thisdevelopment.

TherehasbeenagreatdealofdebatearoundwhetherinequalityinIrelandhasworsened

duringtheCelticTigerperiod.Manyobservershavenotedthatthestandardmeasures

ofinequality,liketheGiniCoefcientandtheincomequintileshareratio,whilerelatively

high,didnotbecomeworsebetween1987andthelatestgures.Theirconclusionisthat

inequalitydidnotincreaseinIrelandinrecentyears.

Thisconclusionisnotvalid,however.

TheproblemwiththestandardargumentisthatmeasuresliketheGini

Coefcientandthequintileshareratioaredesignedtobeindependent

oftheoveralllevelofwealthandincomeinthecountry(technicallyspeaking,thisisknownasmeaninvariance).Thisisausefulquality

forameasuretohavewhencomparingtwodifferentcountries.Ifyou

wanttocompareinequalitywithinChadtoinequalitywithinGermany,

themeasureshouldnotbealteredjustbecauseChadispoorerthan

Germanyoverall.Thesemeasuresfalldown,however,whencomparing

thesamecountryduringdifferenttimeperiods.

Onthenextpagethegraphdemonstratesthechanges

inincomedistribution,showingthedistributionofincome

in1987,1994,2001and2005.

Hasinequalityworsened?

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Wealth,ortheaccumulatedresourcesownedbyhouseholds,isas

importantafactorineconomicinequalityasincome.Althoughthere

arearangeofwealthcategories,commonformsincludebankdeposits,

stocksandbonds,commercialproperty,investmentfundsandpension

funds;thevalueofthefamilyhomeisalsosometimesincluded.

Netwealthsubtractsthelevelofdebtfromtotalwealth.

StatisticsaboutwealtharehardtocomebyinIreland.TheBank

ofIrelandpublishedastudyofwealthin2007,givingusguresfor

2006.Theyfoundthatthegrosswealthofthetoponepercentofthe

populationwasaneven100billion.Thistoponepercentowned

20percentofthewealthinIreland.Whenthevalueofresidential

propertyisexcluded,thegureownedbythetoponepercentrises

to34percentormorethanathird.

Thered1987lineshowsadistributionwiththebulkofincomesbunchedcloselytogetherand

thereforerelativelyequal.Onlyarelativelysmallnumberofhouseholdsmakesubstantially

morethanthisgroupandconsequentlythereisntafattailstretchingtotheright.Bycontrast,

thegreen2005lineshowsfewerincomesbunchedtogetherandthepopulationisspreadout

alongthehorizontalsidewithmanyatbothhighandlowincomes.The1994and2000linesshowthemovementawayfromthemoreequaldistributionof1987.

Equivalisedweeklydisposableincome1987-2005

60

50

40

30

20

10

00 50 10 0 1 50 200 25 0 3 00 35 0 4 00 450 50 0 550 600 6 50 700 7 50 8 00 850 9 00 9 50 1,000

percentageoftotal

weeklyincome

1987

1994

20002005

Wealthinequality

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Index of:

Lifeexpectancy

Math&literacy

Infantmortality

Homicides

Imprisonment

Teenagebirths

Trust

Obesity

Mentalillness

includingdrug&

alcoholaddiction

Socialmobility

WilkinsonandPicketthavefoundthat,ifyouexamine

thevariousdimensionsofhealthandarangeofsocial

problems,youdiscoverthatlessequalsocietieshave

moreproblemsandpoorerrecords.Thisistrueeven

inrichersocieties.

WilkinsonandPicketthaveconstructedanindexto

measuresocietiesperformanceintheareasofhealthandsocialproblems,goingdownfrombettertoworse.

Themeasureincludesthingslikementalillness,life

expectancy,infantmortality,educationalperformance

andmurderrates.Theyndthatincreasingthelevel

ofnationalincomeperpersonintherichercountries

doesntimprovethescoresignicantly,butincreasing

thelevelofequalitydoesimproveperformance.

Conversely,acountrysperformancedeclinesas

inequalityrises.Thefollowingpicturetellsthisstory.

Itisoftenarguedthatinequalityisnottheissue.

Proponentsofthispositioncontendthatthe

problemistheabsolutelevelofdeprivationofthe

leastwelloff.Ifwecanraisethewell-beingofthe

poorestinsociety,orsotheargumentgoes,what

differencedoesitmakethatothersarestillvery

muchbetteroff?Recentresearch,however,indicatesthat,whiletheabsolutelevelofwell-beingoftheworst-offis

certainlyimportant,thelevelofequalitymattersaswell.AsthesocialscientistsRichardWilkinsonandKatePickett

observeinthesubtitleoftheirbook,TheSpiritLevel,moreequalsocietiesalmostalwaysdobetter.

Healthandsocialproblemsareworseinmoreunequalcountries

Worse

Better

IncomeInequality

Source:Wilkinson&Pickett,TheSpiritLevel(2009)

Low High

USA

NewZealand

Australia

ItalyCanada

Spain

Sweden

Japan

Switzerland

Netherlands

Portugal

UK

Greece

Ireland

France Austria

Denmark

Finland

Norway

Germany

Belgium

www.equalitytrust.org.uk

Indexofhealthandso

cialproblems

WHY INEQUALITY

MATTERS

TheSpiritLevel

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Thischartdemonstratesthelevelsoftrustacrossarangeofcountries.Eachcountrysdoton

thelefttorightscaleshowsitsrelativeincomeinequality.Thefurthertotheright,thehigherthe

incomeinequality.Thedotsverticalpositionshowshowwellthatcountryisdoingintermsof

theleveloftrust.Thehigherthedot,thehighertheleveloftrust.Thelineslopingdownshows

thatascountriesgofromlowtohighlevelsofinequality,onaveragethelevelsoftrustgodown.

Therearethosewhoarguethatinequalityisnecessarytopromoteinvention,innovationandcreativity,

contendingthatahighlevelofinequalityisessentialtoincentiviseahighlevelofinternational

competitiveness.This,however,doesnotseemtobethecase.Onthecontrary,inequalityreduceschildrensperformanceinschools,whileWilkinsonandPicketthavefoundthatmoreequalsocieties

producemorepatentsforinventions.Moststudiesndthatmoreequalsocietiesgrowfaster.

Therearemanyreasonsforthis.Studiesshowthatinequalitycreates

highlevelsofstress,largelyasaresultofunhealthycompetition

andstatusanxiety.Importantly,overalllevelsofsocialtrustgodown

asinequalitygoesup.ThefollowinggraphshowsWilkinsonand

Pickettsndingsaboutinequalityandtrust.

Thischartdemonstratestheextentofhealthandsocialproblemsacrossanumberofcountries.Eachcountrys

dotonthelefttorightscaleshowsitsrelativeincomeinequality.Thefarthertotheright,thehighertheincome

inequality.Thedotsverticalpositionshowshowwellthatcountryisdoingintermsofhealthandsocialproblems.

Thehigherthedot,theworsetheperformance.Thelineslopingupshowsthatascountriesgofrom

lowtohighlevelsofinequality,onaveragetheirabilitytoavoidhealthandsocialproblemsgetsworse.

Levels of trust are hiher in more equal rich countries

Sweden

Norway

Portugal

Singapore

CanadaGermany

Spain IrelandItaly

UKGreece

0

Low HighIncomeInequality

Source:Wilkinson&Pickett,TheSpiritLevel(2009)

Mostpeoplecan

betrusted(%a

greeing)

20

40

60

80

Netherlands

Denmark

Finland

NewZealand

Switzerland Australia

Belgium

Japan

Austria

FranceIsrael

USA

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InequalityandIrelandscurrentcrisis

Inequalityisalsoaprimefactorintherecession.Atthetimeofwriting,Ireland

isfacingfourinterlinkedcrises.Weareinthemidstofaninternationalcrisis,

anancialorbankingcrisis,ascalorgovernmentdecitcrisis,andan

unemploymentcrisis.

Highlevelsofinequalitytendtowaste

thetalentsofalargeproportionofthe

population.

Theinternationalcrisiswascausedbymanyfactors,butprominent

amongthemwasahighlevelofinequalityintheUnitedStates,which

ledtostagnantconsumerdemandandhighlevelsofindebtedness.Facingreducedlevelsofdemand,investmentwassluggish,andthose

withmoneyturnedincreasinglytonancialspeculation.Financial

speculationwasfurtherdrivenbythedemandbylowerincomegroups

forsub-primemortgages,andbythebloatedbonusesawardedto

bankersforshort-termperformance.Thisbubbleeventuallyburst

precipitatingawidercrisis.

HereinIreland,inequalitycontributedto

highlevelsofindebtedness,becausepeople

borrowedtokeepupwithhigherincome

consumptionlevelsinhousing,carsand

othergoods.Thehighincomesofbankers

andpropertydevelopersdivertedinvestment

intopropertyratherthanmoreproductive

uses.ThisdynamichelpedcreateIrelands

ownpropertybubble.Tomaintainpersonal

consumption,allincomegroupssupported

ataxsystembasedonpropertytransactions

ratherthanincome-anunsustainable

systemwhichhasnowcollapsedcreating

abudgetcrisis.Theinternationalcrisis,

thenancialcrisis,thebudgetcrisis,

andhighlevelsofpersonaldebthaveall

contributedtoacrisisofdemandinIreland,reducingeconomicactivityandincreasing

unemployment.

WilkinsonandPickettconclude:

Ifyouwanttoknowwhyonecountrydoesbetterorworse

thananother,therstthingtolookatistheextentof

inequality.Thereisnotonepolicyforreducinginequalityin

healthortheeducationalperformanceofschoolchildren,

andanotherforraisingnationalstandardsofperformance.

Reducinginequalityisthebestwayofdoingboth.

InequalityandIrelandscurrentcrisis

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Ireland 2001 2004 2006 2007

PovertylevelsbeforeSocialWelfare(%) 35.6 39.8 40.3 41.0

TheroleofSocialWelfare(%) -13.7 -20.4 -23.3 -24.5

PovertylevelsafterSocialWelfare(%) 21.9 19.4 17.0 16.5

Thistableshowsthatpovertylevels(beforeSocialWelfare)inIrelandincreasedfrom

35.6percentto41percentfrom2001to2007.ThetablealsodemonstratesthatSocial

Welfareplayedacriticalroleinreducingpovertylevelsfrom21.9percentin2001to

16.5percentin2007(theseguresarenotadjustedforpurchasingpower).Irelandhas

alsoenteredintoarecessionsincethesegureswerepublished,andwearelikelyto

seepovertylevelsincreasedramatically,notonlyasaresultofgrowingunemployment,

butalsoduetogrowingpressureonSocialWelfarerates.

IrelandssocialprotectionratesarenotgenerousbyEuropeanstandards.In2006,

spendinginthisarearepresented18.2percentofGDP,whichcomparesbadlywith

countriessuchasFrance(31.1percent)andSweden(30.7percent)andevencountries

suchasGreece(24.2percent)andPortugal(25.4percent).ThereisadirectcorrelationbetweenspendingonSocialWelfareandincomeequality:countriesthatspendlesson

SocialWelfarehavehigherlevelsofincomeinequality.

WhilewewerenotsurprisedbytheoverallshapeoftheChart,twothingsstoodout

whenwehadlaidtheiconsout.InthehorizontaldimensionoftheChart,thelongest

lineisthatjustabovethe10,000line.Thisisbecausepensionsandsocialwelfare

paymentspreventpeoplefromfallingfurtherdowntheChart.Thisisincontrastto

placesliketheUnitedStateswherethiskindofooronincomedoesntexist.Inthe

verticaldimension,itisstrikingthatthemanagerialandprofessionaloccupation

categoryistheonlyonetoweaveitswayfromnearthebottomoftheCharttothe

verytopoftheheap.

Socialprotectionprovidesanimportantsafetynetforindividualsandhouseholdswho

areatriskofpoverty,andincludesarangeofsocialwelfarepaymentsandbenetsthat

coverareassuchasillness,disability,oldage,unemploymentandhousing.

Poverty rates

TheincomesofallgroupsinIrelandhaveincreasedoverthelastnumberofyears,

andthiscouldleadonetoassumethatifeveryonesincomehasincreasedpovertylevels

musthavefallen.However,thisisnotthecase.Thetablebelowdemonstrateshow

povertylevelsincreasedandtherolesocialwelfarepaymentsplayinaddressingpoverty.

INTERPRETATION

AND ANALYSIS

THE H.E.A.P.

CHART:

Theeffectofgovernmentbenetsandtaxationoninequality

TheroleofSocialWelfare(SW)paymentsinaddressingpoverty

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WeretheprinciplesofsocialinsuranceinIrelandtobedismantled,thiswouldhave

adetrimentaleffectnotonlyonincomeinequalitybutonindividualsalreadyplacedin

aprecarioussituation.Itwouldexposemorehouseholdstotheriskofpoverty,whichwould

haveamyriadofnegativeeffectsontheindividualandadverseconsequencesforsociety.

TheeffectsofsuchamodelcanbeseenintheUnitedStateswherecitizensarenotafforded

minimumsocialprotections,theresultsofwhichareinstarkcontrasttoourown.

ThechartbelowrelatesthelevelofinequalityasmeasuredbytheGiniCoefcientwith

thepercentageofGDPwhichisspentonsocialprotectionintheEU15countries.

Eachcountrysdotonthelefttorightscaleshowsitslevelofsocialprotectionspending.

Thefarthertotheright,thehigherthespendingasapercentageofGDP.Thedotsvertical

positionshowshowwellitisdoingregardingthelevelofinequality.Thehigherthedot,the

higherthelevelofinequality.Thelineslopingdownshowsthatascountriesgofromlowto

highlevelsofsocialprotectionspending,onaveragethelevelsofinequalitygodown.For

instance,Irelandhasalowlevelofsocialspendingat18.2percentofGDPandarelativelyhighlevelofinequalitywithaGiniCoefcientof32.Swedenhasalevelofsocialspendingat

30.7percentofGDPandacorrespondinglylowlevelofinequalitywithaGiniCoefcientof24.

40

38

36

34

32

30

28

26

24

22

200 5 10 15 20 25 30 35

Portugal

Greece

Ireland Italy

Spain

Luxembourg Belgium

Germany France

Finland

Austria

Denmark

Netherlands

Sweden

Higherlevelsofsocialspendingareassociatedwithlowerlevelsofinequality

PercentageofGDPspentonsocialprotection

GiniCoefcien

t

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Thechartshowswomendominatingthelowerincomes

whereasmenarebetterrepresentedathigherincome

levels.Allthose16oroverareincluded.

Womensincomein2006wasaroundtwo-thirdsofmensincome.Afteradjustingfordifferencesinhoursworked,

womenshourlyearningswerearound86percentofmens.

Theproportionofmenatriskofpovertyin2007,afterpensions

andsocialtransfers,was15percentcomparedto19percent

ofwomen.

Inadditiontoinequalityamongthegeneralpopulation,thereisstillinequalitybetween

menandwomen.

Thefollowinggurecomparestheincomesofmenandwomen.

18

16

14

12

10

8

6

4

2

00 100 200 300 400 500 600 700 800 900 1, 000 1,100 1,200 1, 300 1, 400 1,500 1,600 1, 700 1, 800

Male

Female

percentageoftotal

weeklydisposableincome

Comparisonofincomesformenandwomen

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Youcanseethatthelowerincomesaredominatedbythose

withoutauniversityqualicationwhiletheoppositeisthe

caseforhigherlevels.Onlythose25andoverareincluded.

Thechartdemonstratesthecentralroleplayedbyeducational

opportunitiesindeterminingsubsequentincomethe

educationpremium.

Thefollowinggraphcomparestheincomesofthosewithauniversityqualicationand

highertothosewithoutsuchaqualication.

Non-univ

Univ

20

18

16

14

12

10

8

6

4

2

01 00 2 00 3 00 4 00 5 00 6 00 7 00 8 00 9 00 1 ,0 00 1, 10 0 1 ,2 00 1, 30 0 1 ,4 00 1, 50 0 1 ,6 00 1, 70 0 1 ,8 00 1, 90 0 2 ,0 00

percentageoftotal

weeklydisposableincome

Theeffectofeducationoninequality

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Thetableontheleftgivesthemedian

grossincomebyeducationlevelachieved.

Themedianisthemiddleincomeifall

incomesinthecategorywerelisted

fromtoptobottom.Equivalisedmeansa

correctionhasbeenmadeforthesizeof

thehousehold.

Thetableontheleftshowshowhigher

educationallevelsreducetheriskof

poverty.Disposableincomerefersto

incomeleftforspendingafterdeductions

suchastaxes.

Highest Percentage of Equivalised

education level household gross income

achieved heads median ()

Primary/noformal 30 13,489

Lowersecondary 18 19,742

Uppersecondary 17 24,933

PostLeavingCert 9 26,433

Thirdlevelnon-degree 9 31,812

Thirdleveldegreeorabove 17 45,707

Highesteducationlevelachievedbyhouseholdhead

At risk (%)

Primary/noformal 33.6

Lowersecondary 23.3

Uppersecondary 15.1

PostLeavingCert 11.6

Thirdlevelnon-degree 8.7

Thirdleveldegreeorabove 3.2

Atriskofpovertyi.e.percentageofhouseholdsbelow60percentofequivalisedmediandisposableincome

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Thisinsightisparticularlydisturbingforusin

Ireland.Irelandhasformanyyearsbeenamong

themostunequalofthedevelopedsocieties.Our

boom,nowapparentlyover,raisedtheoveralllevel

ofincomeinIrishsociety.Unfortunately,however,

studiesshowthatwedidnotusethebenetsof

theboomtoreducethelevelofinequality.Onthe

contrary,thedistancebetweenthoseatthetopand

thoseatthebottomhaswidened.Thiswideninginequalityhasplayedaroleinourcurrentcrisis

byencouragingtheexpansionofunsustainable

consumptionlevelsanddebt,whiletaxrateshave

beencutbelowthosewhichcouldsustaindecent

publicservices.

Wemustnotaskanimaginaryinternationalbond

marketwhatkindofsocietyweshouldhave.We

shouldinsteadsetaboutbuildingthesocietywe

want.Agoodsocietywillhaveamuchhigherlevelof

incomeequality,andthesocialsolidaritythatgoes

withit,asoneofitsessentialfoundationstones.

WehopethattheH.E.A.P.Charthashelpedto

illuminateanimportantaspectoflifeinIreland

today.Sinceweeachoccupyonlyoneplaceinthe

heap,itisdifculttoknowabouttheconditionsfaced

bythosebothaboveandbelowus.Further,studies

likethosecarriedoutbyWilkinsonandPickettin

TheSpiritLevelhaveestablishedthattheshapeof

theheapisimportantaswellasthelevelofincomeit

represents.Moreequalsocietiesdobetter.

CONCLUSIONS

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Exercise 1

Placetheposterontheooroftheclassroom

inacorneroftheroomoppositethewindows.

Haveoneparticipantstand3.6metresfromthe

bottomofthepostertorepresentthetopiconat

anincomeof600,000.Haveanotherstudent

standoutsidethewindowonapremarkedspot

6.3metresawaytorepresentaCEOincomeof

1,000,000.Youmightalsowanttorepresent

4,000,000at25metresifyouhavespace.Call

everyonebackintheroomandengageindiscussion.DidtheythinkincomesinIrelandwerethisunequal?

Isthislevelofinequalityacceptable?Canitbe

justied?Isthislevelofinequalitygoodorbad

forsociety?

Exercise 3

Asktheparticipantswhatlevelofincomeitwould

taketolivecomfortablyforafamilyoffourinIreland

today.Youmayhavetospecifyaparticularplace,

likeDublinorTullamore,dependingonwhereyour

participantslive.Thiscouldbedoneopenlyand

youcouldattempttoarriveatanagreedlevelofincome.Oryoucouldhaveparticipantswritedown

alevelanonymouslyandyoucouldtakeanaverage.

HoldapointerorstickatthislevelontheChartand

examinehowmanyhouseholdsfallbelowthislevel.

Asktheparticipantsiftheyweresurprisedbythe

numberbelowthecomfortlevel.

Theat-risk-of-povertylevelofincomeforafamily

offourcorrespondsroughlyto28,000onourChart.

TheVincentianPartnershipforjusticeundertook

astudywhichcalculatedaMinimumEssential

Budgetforafamilyoffourwhichstoodatjustunder34,000for2006onourChart.Showtheselevelson

theChart.Discuss.

Exercise 5

Brainstormpolicieswhichcouldbeadoptedby

governmentwhichwouldreduceinequality.

Exercise 4

Asktheparticipantstoindentifyotherdimensionsof

inequalitybesidesincome.Examplesmightinclude

placeofresidence,workingconditions,accessto

education,settledvs.traveller,etc.Discusshow

theseotherdimensionsofinequalitydoordonot

relatetoincomeinequality.

Exercise 2

Haveeachparticipantaddupandwritedowntheir

familyincome.(Thisworksbetterwithadultsor

perhapsolderteenagers.)Thenhavethemidentifytheirhouseholdcomposition.Thentheyshould

identifytheoccupationsoftheadultmembersof

thehousehold.Answeranyquestionsaboutwhere

anoccupationmighttinthecategoriesonthe

poster.Thenallowthestudentstoexaminethe

H.E.A.P.Chartclosely(perhapsinsmallgroups)

toidentifyforthemselveswheretheirhousehold

appearsontheChart.

Asktheparticipantstovolunteeranysurprises

theymayhavegot.Wasanyonesurprisedathow

hightheirincomewasontheChartcomparedto

thegeneralpopulation?Wasanyonesurprisedat

howlowtheirhouseholdwas?Didanyoneturnup

inthemiddlewhentheydidntexpectto?

Collectthedescriptionsoftheparticipants

households.Makesuretheyarenotidentied

byname.Shufethedescriptions.Locatethe

householdsonthechartandmarkthem(usesticky

notestoavoidpermanentlymarkingtheposter).

Discussthepositionoftheworkshopinrelationto

therestofthepopulation.Didtheyformapattern

orweretheybunchedupatacertainlevel.Asktheparticipantstoexplainwhythisisthecase.

APPENDIx:SUggESTIONS FOR WORkSHOP USE

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Therearemanypeoplewhohavebeenagreathelp

inbringingthisprojecttofruition.

StephenRose,theauthoroftheoriginalAmerican

ProlePoster,wasnotonlyasourceofinspiration,

buthasalsobeengenerouswithhishelpand

encouragementalongtheway.

PaulSweeneysinitialandcontinuingenthusiasmforthisprojecthasbeenessentialinpressingitforward.

AtTASC,PaulaClancy,AlexKlemmandSinadPentony

havebeencentraltogettingthisdone.

SallyAnnKinahansactivesupportforthisprojectwithin

ICTUhasbeencrucial,whileFionaDunnehadthetough

jobofholdingthisprojecttogether.

RiccaEdmondsonandOliverFeeneyattheSocial

SciencesResearchCentreatNUIGalwayhavebeen

unfailinglysupportive.Wealsoreceivedindispensible

assistancefromCathalODonoghueintheSchoolof

BusinessandEconomicsatNUIGalway.

OneIrishhouseholdhasprovidedinvaluablesupportto

TerryMcDonough.ItisbestknowninMoycullenand

beyondasMarianBradyshouse.

OurcolleaguesfromWhitenoiseStudiosinBelfast,AlixBritton

andPaulAllen,havebeenenthusiasticfromthebeginningand

deservespecialmentionfortheirgraphicinterpretationand

presentationofthistopic.

ACkNOWLEDgEMENTS