Relative poverty deepens despite Celtic Tiger

In the mid-1990s, nearly 33 per cent of the population lived on less than 60 per cent of average income in the Republic. Of the then 12 EC states only Portugal had equal relative poverty. The US had greater relative poverty.

Since then, relative poverty has deepened in Ireland. The proportion of the population on the lowest incomes, less than 40 per cent of the average, rose from 7 to 10 per cent in the years 1994 to 1997.

There are no figures yet for the years since then and, doubtless, the large drop in unemployment will have helped the picture. However, trends in earnings, taxation and social welfare are all ensuring that inequality of income is growing in Ireland.

Mr Brian Nolan, an ESRI economist and author of many of the studies of poverty, expects that "in all likelihood not a lot has changed" in relative income poverty in the late 1990s.

The NESC has pointed out that although social welfare payments have increased in percentage terms more than earnings during the 198799 period relative income poverty has increased. This is because budgets have given tax relief to those in work which allowed them to continue to outstrip those on social welfare and has particularly favoured high-income earners. While the National Anti-Poverty Strategy introduced by the Rainbow Coalition can be credited with reducing absolute deprivation, inequality has continued to grow.

Trends in earnings have favoured the already highly paid, too. In 1997, the last year for which detailed figures were available, nearly 12 per cent of poor households were headed by an employee - thus 1 per cent of the households in the State could be characterised as "working poor", according to the NESC.

Ireland started into its period of recovery in 1987 with high inequality of earnings by international standards (see inequality chart). The chart shows that inequality in Ireland was exceeded only by Canada (figures for the US were not available) in 1987 for the 14 OECD countries listed. By 1994, Irish inequality had worsened and was converging on North American levels, quite different to the European countries. The increase in inequality in earnings in Ireland was the greatest for any of the countries on the chart.

It is not hard to see why. The table shows that managers received on average each year 3 per cent more than national wage agreement rates during the 10 years from 1987 to 1997, while labourers received just over 1 per cent and production operatives (generally semi-skilled manufacturing workers) only 0.5 per cent above the wage agreement rates.

Tax relief gave everyone more money in their pockets over the same period but since it tended to favour the higher paid, this increased inequality further.