Irish solution has been to make most vulnerable pay
AT A conference in Dublin on Monday, an academic from Iceland, Thora Kristin Thorsdottir, showed a chart contrasting the impact of the crisis measures adopted by governments in Iceland and Ireland on real disposable earnings of couples by income deciles (that is the poorest tenth of earners, the next poorest tenth, through to the richest tenth).
It showed that the poorest tenth of earners in Iceland suffered a drop of 9 per cent, whereas in Ireland the drop was 26 per cent (the data for Ireland was for the period 2008-2009 and for Iceland 2008-2010).
For the second-poorest 10 per cent of earners, the drop in Ireland was 14 per cent, in Iceland, 9 per cent. For the second-richest tenth in Iceland the drop was 17 per cent, in Ireland it was just 2 per cent. But, the most revealing figure of all, for the richest 10 per cent in both countries, in Iceland the richest had a drop in earnings of 38 per cent, in Ireland the top 10 per cent showed an increase of 8 per cent.
Quite simply, the left-leaning Icelandic government chose to focus the impact of the adjustments necessitated by the crisis on the richest sectors of Icelandic society. In Ireland, the right-leaning government did the opposite (it was a Fianna Fáil-Green government during the relevant period but its prescriptions have been followed by the right-leaning Fine Gael-Labour Government).
As in Iceland, there were and are clear choices for an Irish government in dealing with the crisis: whether to focus the impact on the adjustments on those best able to bear the pain, ie the richest sectors of society, or to focus the impact on those least able to bear the pain, ie the poorest.
Perhaps the cruellest measure introduced here has been the universal social charge. Initially, everyone being paid €4,004 and above had to pay the charge. Amid a flurry of self-congratulation, the current Government increased the threshold to €10,036, but with a vicious sting retained in the tail.
Anyone getting even a single euro over €10,036 has to pay the charge on their entire income. But not just that, whereas a levy of 2 per cent applied on earnings up to €10,036, those between €10,036 and €16,016 were levied at 4 per cent and everything above that attracted a levy of 7 per cent.
In other words, people living on slightly over the minimum wage (€8.65 per hour) were catapulted into the highest levy bracket (€8.65 multiplied by 38 hours a week, multiplied by 48 weeks, equals €15,777.60).
Since the crisis broke in 2008, there have been reductions in child benefit; carer’s allowance; disability payment and blind pension; jobseeker’s benefit; jobseeker’s allowance for those aged 18-21 years; supplementary allowance for those aged 22-24; one-parent family payment; and earnings disregard (by €16.50 to a weekly amount of €130).