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.
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.
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.
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.
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.
Being ‘in it together’. Sharing the burden. Putting the shoulder to the wheel. Pulling on the green jersey. In Ireland and elsewhere, these are among the euphemisms that have entered the lexicon of politicos in the age of austerity.
At the same time, of course, such exhortations to shared sacrifice have not always been supported by fiscal principles that see the burden matching means. In fact, austerity budgets have often hit the poorest hardest. The UK Chancellor’s recent ‘budget for working people’ was nothing of the kind: slashing working tax credits while cutting tax on corporations and hefty inheritances. Sometimes, inequality happens by accident. Sometimes it’s a matter of policy. By the same token, public policy can make things better – for everyone. It doesn’t have to be a zero sum game.
In May, the OECD launched the third instalment in its inequality trilogy: In it together: why less inequality benefits all. This tome builds on earlier work, 2008’s Growing Unequal?, and its 2011 sequel, Divided we stand. Even the IMF has been getting in on the act, publishing work last year on the links between inequality, redistribution and growth. In short, lower inequality is linked to stronger and more sustainable economic growth, while redistribution doesn’t reduce it.
Ireland’s economic winter of discontent has given way to the green shoots of spring. While the factor 50 isn’t yet flowing in all regions of the country, and the post-2008 bust still casts a long shadow on certain cohorts of the population, there is a sense that summer is coming.
On 28 May, the government launched its spring statement. Making a virtue of the necessity for all EU members to provide Brussels with an annual update on their public finances and economic projections, the usually-dry ‘Stability Programme Update’ was dressed up in political clothing this year to herald the supposed good times ahead.
Politically, the aim is not only to give voters a heads-up on the tax cuts and spending increases that lie in store. It is also designed, on the one hand, to project the sense that the government has a solid plan for the future and, on the other, to hamstring opposition parties by increasing the risks to their credibility if they step outside the broad fiscal framework set out. It also aims to put a ceiling on the demands of public sector trade unions as part of the forthcoming ‘national economic dialogue’ by establishing boundaries.
Economically, there was little ground-breaking in the spring statement: reasonably optimistic – but not outlandish – economic growth estimates out to 2020 and a stocktaking exercise on the state of the public finances, the labour market and the state-owned banks. There was also a technical – yet important – explanation of the results of recent negotiations on the application of EU rules on Ireland’s public finances. Essentially, this boils down to an extra billion or so for the government to play with in October’s budget if they are to comply with the rules. The government has signaled that the total budget package is therefore likely to amount to €600m of spending increases and €600m of tax cuts. No giveaway, but not to be sniffed at with an election on the horizon.