Poverty and Income Distribution in Ireland

Social Justice Ireland published its latest analysis and critique of poverty and income distribution in Ireland as well as its policy proposals in the annual Socio-Economic Review published in April, 2010. The full text can be accessed here.
 

Government and EU challenged to adopt ‘zero poverty’ as target for 2020.

 
Social Justice Ireland has challenged Government to adopt a target of ‘zero poverty’ by 2020. In its most recent Policy Briefing, Social Justice Ireland states that “Government needs to change direction in its approach to reducing poverty. A good starting point would be for Ireland and the EU to adopt a target of ’zero poverty’ to be reached by 2020.” This would be a very appropriate way of marking the European Year against Poverty and Social Exclusion. There are almost 615,000 people at risk of poverty in Ireland. Almost 200,000 of these are children; 116,000 are employed (these are the ‘working poor’). All of these numbers are extremely disturbing.

In its Policy Briefing, which addresses the issue of poverty, Social Justice Ireland claims that Government has forgotten the lessons that had been learned in recent years and reversed the strategies that had been reducing poverty.  The Policy Briefing argues that: “increasing the lowest social welfare rates was the key to reducing poverty from 19.7% in 2003 to a record low of 13.9% in 2008. This approach was supplemented by a wide range of initiatives aimed at mobilising local communities to tackle poverty effectively in their local areas. Budget 2010 reversed this approach; it reduced welfare rates (by more than the fall in the cost of living for poor people) resulting in Ireland’s most vulnerable people being worse off in 2010 than in 2009; it also reduced the funding for addressing poverty and social exclusion at local level.”
 
Government has claimed it had no choice in making the decisions it made. But this is not true. Social Justice Ireland produced a detailed set of fully-costed proposals that showed how Government could have achieved the adjustments of €4bn it sought in Budget 2010 without reducing social welfare rates and without cutting the funding for organisations and programmes addressing poverty and social exclusion.
 
The full text of Social Justice Ireland’s Policy Briefing on Poverty is available here. 
 
Recent changes in direction by Government are even more regrettable given that 2010 is the EU Year against Poverty and Social Exclusion. It is now likely that Ireland will mark this ‘year’ by increasing poverty and social exclusion.
 
In its Policy Briefing Social Justice Ireland proposes that if Government is to reduce poverty in the period immediately ahead it should:
o     Stop targeting Ireland’s most vulnerable people and improve their situation, not worsen it as they did in Budget 2010.
o     Recognise the problem of the ‘working poor’ and adopt policies to address the situation of the 39.6% of all households in poverty which are headed by a person with a job. 
o     Provide substantial new measures to address the threat of long-term unemployment among those recently unemployed. This should include programmes aimed at re-training and re-skilling those at highest risk.
o     Set a target of ‘zero poverty’ to be achieved by 2020. Advocate that this target be adopted by the European Union as part of its actions to mark the European Year against Poverty and Social Exclusion (2010).
o     Address family poverty.
o     Adopt a new approach to measuring deprivation - one that uses regularly updated indicators reflective of society as it currently is.
o     Accept that persistent poverty should be used as the primary indicator of poverty measurement once this data becomes available.
o     Move towards introducing a basic income system. All initiatives in the areas of income and work should constitute positive moves towards the introduction of a full basic income guarantee system.
o     Continue to honour the NAPinclusion and Towards 2016 commitment that the lowest social welfare payment for a single person will be benchmarked to 30 per cent of GAIE (gross average industrial earnings) from 2007-2016.
o     Move towards introducing a basic income system. All initiatives in the areas of income and work should constitute positive moves towards the introduction of a full basic income guarantee system.
 
The full text of Social Justice Ireland’s Policy Briefing on Poverty is available here

Legislators need to know what poverty is and how it is measured

Some legislators in Ireland are still working with illusions when it comes to measuring poverty. A meeting of the Joint Oireachtas Committee on European Affairs on March 25, 2010 saw a number of members of Ireland's Dail and Senate comment on what they thought the basis for measuring poverty was.

They took issue with the supposed 'fact' that measuring poverty on the basis of average incomes could give rise to problems. Brigid Reynolds and Sean Healy of Social Justice Ireland presented the real facts i.e. that poverty is not based on an average of anything. A short, and very incomplete, summary of the discussion appeared in the Irish Times on March 26, 2010. To clarify the matter we provide the note below which sets out what poverty is and how it is measured.

In passing Social Justice Ireland notes with regret that the report in the Irish Times made no mention of the topic which we discussed with the Committee for more than an hour i.e. the EU's Europe 2020 strategy.

What is poverty?
The National Anti-Poverty Strategy (NAPS) published by government in 1997 adopted the following definition of poverty:
People are living in poverty if their income and resources (material, cultural and social) are so inadequate as to preclude them from having a standard of living that is regarded as acceptable by Irish society generally. As a result of inadequate income and resources people may be excluded and marginalised from participating in activities that are considered the norm for other people in society.

This definition has been reiterated in the 2007 National Action Plan for Social Inclusion 2007-2016 (NAPinclusion).

Where is the poverty line?
How many people are poor? On what basis are they classified as poor? These and related questions are constantly asked when poverty is discussed or analysed.

In trying to measure the extent of poverty, the most common approach has been to identify a poverty line (or lines) based on people’s incomes. In recent years the European Commission and the UN among others have begun to use a poverty line located at 60 per cent of median income. The median income is the income of the middle person in society’s income distribution; in other words it is the middle income in society. This poverty line is the one adopted in the SILC survey and differs from the previous Irish poverty line (prior to 2003) which was set at 50 per cent of mean (average) income. This switch to using median income is to be welcomed as it removes many of the theoretical and technical criticisms that have been levelled against using relative income measures to assess poverty. In cash terms there is very little difference between the poverty line drawn at either 60 per cent of median income or 50 per cent of mean income. While the 60 per cent median income line has been adopted as the primary poverty line, alternatives set at 50 per cent and 70 per cent of median income are also used to clarify and lend robustness to assessments of poverty.

The most up-to-date data available on poverty in Ireland comes from the 2008 SILC survey, conducted by the CSO. The 2008 data includes a one-off effect on Irish household incomes associated with the SSIA (Special Savings Incentive Accounts) scheme. As a result of the release of these savings and the associated cash bonuses/interest, many household’s income increased in 2008 on a one-off basis (CSO, 2009:18-19). Given that this effect will not re-occur in future years the CSO have provided their 2008 SILC results both including and excluding the SSIA effect. To ensure continuity of analysis with previous and future years the majority of the analysis that follows reports the results excluding the once-off SSIA effects.

Using information gathered in the SILC survey for 2008, the CSO established that the median income per adult in Ireland (excluding the one-off SSIA effect) was €388.07 (2009:19). Consequently, the income poverty lines for a single adult derived from this average were:
50 per cent line - €194.03 a week
60 per cent line - €232.84 a week
70 per cent line - €271.65 a week

Updating the 60 per cent median income poverty line to 2010 levels, using the ESRI’s predicted changes in wage levels for 2009 and 2010, produces a relative income poverty line of €224.75 for a single person. In 2010, any adult below this weekly income level will be counted as being at risk of poverty. It is worth noting that the value of the 2010 poverty line is lower than the 2008 figure (above) because wages are projected to decline over this period and as the poverty line is a relative measure it adjusts accordingly.

Table 1 applies this 2010 poverty line to a number of household types to show what income corresponds to each household’s poverty line. The figure of €224.75 is an income per adult equivalent figure. This means that it is the minimum weekly disposable income (after taxes and including all benefits) that one adult needs to receive to be out of poverty. For each additional adult in the household this minimum income figure is increased by €148.33 (66 per cent of the poverty line figure) and for each child in the household the minimum income figure is increased by €74.17 (33 per cent of the poverty line). These adjustments are made in recognition of the fact that as households increase in size they require more income to keep themselves out of poverty. In all cases a household below the corresponding weekly disposable income figure is classified as living at risk of poverty. For clarity, corresponding annual figures are also included.

 One immediate implication of this analysis is that most weekly social assistance rates paid to single people are €28.75 below the poverty line.
 

Social Justice Ireland's Policy Briefing on Poverty - full text

The full text of Social Justice Ireland's Policy Briefing on Poverty is available here.

Benchmarking Social Welfare Rates @ 30% of Gross Average Industrial Earnings

Social Justice Ireland commissioned this brief report with the intention of establishing an appropriate benchmark for Ireland’s social welfare payments. The need for this study arises given changes to the availability of income data from the CSO. The aim of the study was to use available official data to establish a new and comparable benchmark and thereby allow ongoing assessments of the adequacy of social welfare payments relative to this benchmark.
The report may be accessed here.
 

Ireland should “Put people at the centre of policy measures,” according to UN expert on extreme poverty

The economic and financial crisis in Ireland poses a disproportionate threat to vulnerable segments in the country who benefitted little from its economic boom in the first place, the UN Independent Expert on human rights and extreme poverty, Magdalena Sepúlveda has warned.

Key reasons Child Benefit should be neither reduced nor taxed in Budget 2012

There is no justification for reducing Child Benefit. Below Social Justice Ireland outlines why Child Benefit should neither be reduced nor taxed in Budget 2012.
 
1. Child Benefit should not be reduced
Both the National Children's Strategy in 2000 and the Policy and Value for Money Review of Child Income Supports in 2010 recognised and acknowledged that Child Benefit has a significant impact on reducing child poverty, supporting the welfare of children and raising families above the poverty line (Department of Social Protection (2010), A Policy and Value for Money Review of Child Income Support and Associated Spending Programmes p.155; Government of Ireland (2000) National Children's Strategy 2000-2010 p.63).   The universality of Child Benefit is in keeping with the principle that all children should be entitled to basic rights without discrimination, a principle which Government signed up to in 1992 when it ratified the UN Convention on the Rights of the Child. 
Social Justice Ireland opposes any reduction in the level of Child Benefit payment or in its universal availability.  Child Benefit is currently the only universal means by which children in Ireland are given financial support to protect them against poverty.  Government has committed to providing children with the financial supports necessary to eliminate child poverty, yet poverty persists at a high level.  It has also committed to prioritising policies and services by their contribution to that quality of each child's daily life (Government of Ireland (2000) National Children's Strategy 2000-2010 p.23).   
The National Agreement  Towards 2016 contains a very relevant high-level goal concerning children, a goal we believe everyone in Ireland would support; it states: "Every child should grow up in a family with access to sufficient resources, supports and services, to nurture and care for the child, and foster the child's development and full and equal participation in society”(Government of Ireland (2006), Towards 2016 Ten-Year Framework Social Partnership Agreement 2006-2015 p.41).
If this outcome is to be achieved it should be noted that:

• 18.6% of children in Ireland aged 0-17 years are at risk of poverty, whereas the OECD average for this age group is 12.7% (OECD (2011), Doing Better for Families p. 176).
• Despite spending 2.6% of GDP on direct child income support (Department of Social Protection (2010), A Policy and Value for Money Review of Child Income Support and Associated Spending Programmes p.226). Ireland has a worryingly high rate of child poverty.  This is related to a lack of investment in family benefit services (0.3% GDP) and poor access to child related services in Ireland. 
• Any reduction in Child Benefit would have a significant impact on child poverty figures in Ireland when combined with the on-going lack of investment in other services.
• Without taxes and social transfers Ireland's child poverty rate would stand at 34% (Adamson, P (2010), 'The Children Left Behind-A Table of Inequality in Child Well-being in the World's Rich Countries' UNICEF: New York). 

Since 2009 it has been observed that Child Benefit has already fallen as a percentage of the weekly disposable income in the bottom decile (Department of Social Protection (2010), A Policy and Value for Money Review of Child Income Support and Associated Spending Programmes p.148); any further reduction in Child Benefit has the potential to move more children into poverty and significantly increase these unacceptable child poverty figures.
 
2. Child Benefit should not be taxed
The OECD states that one of the key areas of family policy and support should be helping parents to provide for their children and reduce the risk of family poverty by reducing barriers to parental employment (OECD 2011, Doing Better for Families p. 3).   Taxing Child Benefit would have possible negative effects on employment incentives for both those within the tax system and those within the welfare system.  The Value for Money Review of Child Income Support explicitly stated that it did not recommend taxation of Child Benefit (Department of Social Protection 2010, A Policy and Value for Money Review of Child Income Support and Associated Spending Programmes p.264).

• Child Benefit is the most effective and equitable means for Government to support children and families while continuing to encourage and support parents to enter the labour force.  It assists families with the cost of child-raising.
• It reduces poverty, particularly the poverty gaps for households with children. 
• It does not have a negative effect on maintaining work incentives as payment is made irrespective of whether claimant is in employment or not.
• This makes Child Benefit unique as it has portability across the work welfare divide. 

Taxation of Child Benefit is a form of horizontal inequity.  If the government introduced a proposal to raise revenue by taxing Child Benefit it could have the following effect:

• Consider two households, each earning €100,000 with the same earning patterns; one household has 2 adults and 2 children and the other household has 2 adults and no children.
• The taxation of Child Benefit reduces the income of the first household but has no effect on the second household.
• So the 2-person household maintains its income but the 4-person household sees their income reduced.    
• This is a form of horizontal inequity and is both unfair and unjust.

 If the Government needed to increase revenue through the income tax system then it would be fairer to increase income tax on both households equally.  Taxing Child Benefit penalises households with children.
 
Child Poverty
The number of children at risk of poverty rose by more than 35,000 in two years between 2007 and 2009, the most recent year for which statistics are available.  The income of a household of four on social welfare is currently €80 a week below the poverty line. However, it is crucial to realise that child poverty cannot be addressed in isolation; it needs to be considered within the wider issue of household poverty. 

Rise in numbers poor a major Budget challenge for Government

The increase in the proportion of Ireland’s population at risk of poverty, (from 14.1% to 15.8% in one year) clearly identifies a major challenge for Government as it finalises its Budget for 2012. Budget 2012 must give priority to protecting Ireland’s poorest and most vulnerable people according to Social Justice Ireland. 

An analysis of the new poverty statistics published by the Central Statistics Office today shows that:

• More than 220,000 children are now at risk of poverty up 37,000 in three years (19.5% of all children).
• Income inequality grew with the richest 20% of the population having 5.5 times the disposable income of those in the poorest 20%.
• Even though the poverty line fell by more than 10% in a single year, the risk of poverty among the whole population grew from 14.1% to 15.8% in a single year.
• More than one in six (17.3%) of all those at risk of poverty has a job.
• The social welfare system plays a critically important role in reducing poverty. Without social welfare payments 51% of the population would be at risk of poverty.

• Any decrease in Child Benefit will lead to an increase in child poverty.
• Any increase in VAT will increase income inequality as well as poverty because those in the poorest 20% spend a higher proportion of their income on VAT than any other quintile of the population.
• Any reduction in social welfare rates will increase poverty.
• Any further reduction on the income of the working poor will also increase poverty.
• The elimination of poverty should be a Government priority in Budget 2012 and in all that it does subsequently.

Top 10% have gained most since the 1980s as income gap widens between these and all others in society

New research published by Social Justice Ireland  shows that, while poverty in Ireland is high, Government policies since 1987 have been increasing the income of the richest ten per cent of households and widening the gap between these and the rest of society. 

Social Justice Ireland has called on all political parties participating in the forthcoming General Election to spell out how they intend to reverse this process in the years immediately ahead. 
In its latest Policy Briefing, which addresses the issue of ‘Poverty and Income Distribution’, Social Justice Ireland shows that:

• Government policies over the past two decades have moved resources towards the top ten per cent of households in the income distribution. 
• The top 10 per cent of Irish households receive almost a quarter (24.48%) of total disposable income - an increase of 1.34% on the situation in 1987. Disposable income is the amount of money households have to spend after they have received employment/pension income, paid all their taxes and received any welfare entitlements. (cf. page 6 of the Policy Briefing).

When the income distribution is broken down into deciles (i.e. 10% segments) we see that:

• The bottom decile receives 2.28% of all disposable income.
• Collectively, the poorest 50 per cent of households received a very similar share (25.25%) to the top 10% (24.48%).
• Overall the share of the top 10% is nearly 11 times the share of the bottom 10%.
• Two deciles saw their share of the total income distribution increase since the late 1980s - the bottom decile and the top decile. However, the change for the former is small (+0.11%) while the change for the latter is more notable (+1.34%).  [Note: Care must be taken with percentages as they can hide key facts e.g. 1.34% for a person on €2,000 a week amounts to €26.40 while 0.11% for a person on €200 a week amounts to 2cents!]
• All other deciles saw a decrease in their share of the national income distribution since the 1980s.
• This means that the gap between the top 10% of households and all the rest of society has widened over these years.

The EU/IMF Bailout and the Four-Year Recovery Plan are continuing the process of supporting the better-off and seem set to produce a dramatic increase in poverty and social exclusion. Welfare rates are being reduced, services are being cut and charges are being introduced and/or increased.
 
Resources are being taken from the poor to bailout gambling bankers and senior bondholders and to increase the incomes of the top 10%.  This process of dispossessing poor people by appropriating their resources to pay for activities they had no hand, act or part in may be legal but it is deeply unjust and unfair.
 
Other issues addressed in this latest analysis from Social Justice Ireland show that:

• There are more than 620,000 people (14.1% of the population) at risk of poverty in Ireland today i.e. their income is equivalent to less than €11,600 a year for a single person or €27,000 for a family of four. (cf. p. 3)
• The number at risk of poverty would be more than three times higher if it weren’t for social welfare payments (p. 3).
• Over 140,000 people are long-term unemployed - the highest since the late 1980s (cf. p.5).
• The risk of poverty in rural Ireland is 6% higher than in urban Ireland (17.8% and 11.8% - cf. p.5).

Proposals from Social Justice Ireland:

• The EU/IMF and the Government’s approach to fiscal adjustment (i.e. emphasising cuts rather than broadening the tax base) is both unjust and unnecessary in a country with one of the lowest total tax-takes in the developed world. 
• The human rights of poor people must be particularly protected in times of economic uncertainty.