Let’s have a budget that makes Ireland more equal

The Irish people deserve better.

This is the not unreasonable thrust of ICTU’s pre-budget submission for 2017.

People deserve better than the five-in-a-row inequality-increasing budgets they were subjected under the previous Fine Gael-led government.

People deserve more investment in the health, education and welfare services on which they depend: more hospital beds, more special needs assistants, more home care packages. These can make a real and positive improvement in people’s immediate living standards, while reducing reliance on the sort of spending that becomes necessary when such early interventions have been in short supply. Home care packages are a prime example. For a relatively small outlay, people can be helped to live a full life in their homes and in their communities, as they grow older, rather than being carted off to a more expensive hospital or nursing home.

The country also urgently needs to ramp up its capital spending programme to address the housing crisis and plug the most critical infrastructure gaps that are holding our economy back. The Action Plan for Housing and Homelessness is clearly welcome, but it’s a case of too little too late. The housing crisis has been brewing for years as the dysfunctional rental and owner-occupier property markets have been allowed to fester. The Plan’s social housing target of 5,000 new builds per year by 2021 – from next to zero currently – lacks ambition in the face of the scale of the emergency. More generally, capital spending has been cut to the bone since 2008. Under-investment in public transport, rural broadband, flood defence, waste management and water infrastructure reduce living standards today while imposing constraints on future economic growth.
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Brexit blues for all-Ireland economy

So, the British people have spoken. Brexit it is.

Acres of newsprint have been taken up since the vote of 23 June speculating on what it all means. In a nod to the summer’s big cinematic blockbuster, the date has been proclaimed by some erstwhile Leave campaigners as the UK’s ‘Independence Day’.

But, while the people may have voted, uncertainty reigns.  Nobody truly knows what it means, what will happen, or when.

Scottish independence. The fate of the border dividing Ireland. The financial future of the City of London. The extrication of a country from the mass of European legal, regulatory and constitutional fabric. The future of the European project itself. Era-defining challenges lie ahead not only for the UK and its four constituent nations, but for the entire European political class.

More than most, Ireland has skin in the game. But, rather than speculating on some of the bigger existential questions, this column focuses narrowly on the prospects for economic relations between the North and South of our island.
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Ireland needs an ‘education revolution’

More than ever, what we learn is key to what we earn. In today’s economy, having the right skills is critical to getting and keeping a job, and to getting on in your career. Across the OECD, a person with a third level qualification can expect to earn about 50% more than someone without one. This ‘education premium’ is even larger in Ireland.

At the same time, the unemployment rate of those aged 25-64 is about 13 percentage points higher in Ireland for those who didn’t complete the Leaving Cert – one of the biggest such disparities in the OECD. As important as degrees and qualifications are the social and emotional skills necessary to thrive in modern society.

As I have written previously in these pages, investing in education and skills – together with ‘womenomics’, ‘more and better jobs’ and redistribution – are part of a ‘core four’ policy pillars of stronger, fairer Irish economy.

A solid education can be a great social leveller, but people from less well-off backgrounds face bigger barriers, financial and otherwise, in seizing its opportunity. Not only is the education and skills gap a key driver of inequality, but the effect can be self-reinforcing. So, while the distance between the rungs of the social ladder have grown, so social mobility has declined, individual potential has gone to waste through un-or-under-employment and productivity growth has lagged. All this means that society as whole ends up worse off.
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More and better jobs key to social recovery

There’s no doubt about it: Ireland’s economy is absolutely flying. Being honest, the bounce-back has been stronger than many of us would have dared dream during the dark days of 2009-2011.

Sure, the amount of stuff Ireland produces every year may be growing at a faster clip than China. But while the economic recovery has been going from strength to strength, the social and rural recoveries still lag behind.

That’s why the looming election is so important. It’s not just about ‘securing the (economic) recovery’, but about making sure everyone gets to share in this renewed prosperity. It means spreading the benefits to every town and village across the country. And, it means doing more to raise the living standards of those no longer young or able enough to work. It also means getting more people into jobs and making sure fewer kids grow up in poverty or in a house without a working parent to lead by example. It’s about electing people that can make progressive change happen – not more hurlers on the ditch.

Crucially, we need to keep the jobs recovery going. Creating more and better jobs will be key to keep unemployment falling, to accelerate the rise in wages, and to make sure every worker has the right to be represented by a recognised trade union. It’s also a ‘win win’ way to reduce inequality.
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Budgets can be powerful tools to tackle inequality

Is Ireland a particularly unequal country to live in? Well, it depends who you ask, what you measure, and relative to what.

Many developing and emerging economies are vastly more unequal than Ireland, with a narrow oligarchy controlling the bulk of many countries’ wealth and power. For reasons of historical and colonial legacy, Latin America remains particularly unequal. A better point of comparison for Ireland is countries at a similar stage of economic development. The OECD, a group of 34 mainly advanced economies, distinguishes between market income and disposable income, then uses a range of measures for income inequality.

So, how does Ireland compare?

When you look at the distribution of market income, before taxes and benefits are taken into account, using what policy wonks commonly refer to as the GINI index, only Chile is more unequal than Ireland among OECD countries. However, even after years of austerity, taxes and benefits reduce inequality in Ireland by more than in any other OECD country. This means that when you look at disposable income – what people really care about – Ireland is actually less unequal than the OECD average. Not quite Scandanavia, but far from Latin America.
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‘Womenomics’ key to a stronger, fairer Ireland

Writing in July, I flagged four policy pillars crucial to reducing inequality in Ireland. First of these was to increase women’s participation in economic life. Far from being a women’s issue, society as a whole stands to gain from stronger growth, less inequality and an off-set to the impact of ageing on our workforce. In some jurisdictions, this has been christened ‘womenomics’.

Despite the very real advances in recent decades, the table remains tilted in men’s favour both in the Irish workplace and at home. On average, women do more housework, spend more time taking care of the kids, are less likely to be in employment and, when they are employed, they get paid less. For every 8 euro Irish men earn, mná na h’Éireann earn only 7. While nearly 7 in 10 Irish men participate in the labour force, barely 5 in 10 Irish women do.
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Beyond 2020: tweaking Ireland’s growth model

Ireland’s policymakers were authors of our home-grown “Celtic crash”, their errors exposed and compounded in brutal fashion just as the global financial crisis struck. From the Honohan and Regling-Watson reports to the banking inquiry, we have been treated to seven years of introspection.

It is critical we learn the right lessons, and there have been some encouraging changes to how we formulate economic policy: a highly-respected economist as Central Bank governor, an injection of economic expertise into the Department of Finance, incremental improvements to the budgeting process.

For all the focus on “what went wrong”, however, it’s easy to lose sight of what went right – what gave rise to the pre-2002 vintage, export-driven Celtic Tiger.

To continue reading on the Irish Times website, click here.