AMERICANS, IT IS frequently observed, live in a new gilded age in which the incomes and wealth of the well-to-do soar while those in the middle and at the bottom endure stagnating wages and salaries. To make matters worse for the less-well-off majority, social mobility is declining too.
A nation once famed for giving those with little or nothing the opportunity to rise to exalted heights has changed profoundly. Some commentators go as far as to claim that the American dream is dying.
In Britain, where trends have most approximated those of the US among rich countries, similar concerns have been voiced – and for good reason. Rock-solid evidence over decades shows the same picture of stagnating lower incomes while the rich and super-rich have enjoyed ballooning remuneration and wealth.
The trends in those countries have been so marked for so long that the global political and business elite at last week’s annual Davos gathering spent much time discussing the issue and the threat it poses to the future of capitalism.
Here in Ireland, where the recession has been much deeper by most measures than in other developed countries, almost everyone is feeling squeezed. But, from the somewhat limited information available, it seems that Ireland has not followed the long-term pattern in evidence elsewhere in the Anglosphere.
Brian Nolan, a professor at the school of applied social science at University College Dublin and the country’s foremost authority on income distribution, says relative inequality in Ireland has long been more pronounced than the average across Europe. But, he adds, the difference is small and has not changed significantly over the past two decades. Moreover his figures – illustrated in one of the charts opposite – show that the bottom tenth saw their real earnings (adjusted for inflation) rise by 69 per cent in the 15 years to 2009, compared with 51 per cent for middle earners and 38 per cent for the top tenth.
What accounts for the difference between Ireland and other English-speaking countries? In Britain and the US much of the reason for the stagnating earnings of those on the bottom rungs of the income ladder is the decline of the traditional low-skills sectors, most notably industry.
This, in turn, is attributed to technological advances, such as automation, and the relocation of production to lower-wage economies. Together, these changes have cleared vast numbers of people from factory floors, pushing them into low-paid services jobs or on to welfare.
Ireland, by contrast, was a beneficiary of the outsourcing of manufacturing, at least until recently – something that helped maintain demand for manual labour. The influx of foreign direct investment over decades has meant industry still matters in Ireland. As a result, the proportion of the workforce toiling in factories is higher than in most other rich countries.
Anther important factor in boosting incomes among those with lower skill levels up to 2008 was the huge expansion in employment in the construction sector. Just before the bubble burst, more than one in 10 working people spent their weekdays on building sites, far above any historical or international norm. Tens of thousands of construction workers have since lost their jobs – something that is likely to explain, in part at least, a small increase in income inequality in 2010.
Since the crash, people working in construction have been far more likely than anyone else to have lost their jobs. But employment in most other most sectors has also fallen, with a general tendency for white-collar professions to have suffered less than blue-collar ones (again, see the charts opposite).
Curiously, though, average earnings figures from across the professions show no pattern that would suggest low-skilled workers have experienced bigger income falls than their more skilled counterparts.
Four of the five professions in which earnings fell in the three years to the third quarter of 2011 were white collar, while three of the seven professions in which earnings rose over the same period were blue collar.
If Ireland has differed from Britain and the US in income-distribution patterns, it has been more similar in a growing sense of insecurity, particularly among those whose parents had an expectation of job security and comfortable retirement.
Along with the disappearance of the job-for-life (a near universal phenomenon), being offered a decent defined-benefit pension when starting a job is extremely rare these days. Outside the public sector, and in common with other English-speaking countries, the proportion of the workforce in defined-benefit schemes has been falling fast over the past decade, and the number of private schemes has fallen even faster, with a drop of more than half in the 10 years to 2010.
Another source of rising insecurity has been the declining affordability of private health insurance. As of September last year, 2,174,000 people were covered by private insurance, or 47.5 per cent of the population. That is down from a peak of 51.7 per cent at the end of 2008.
Concerns about falling ill without insurance or being poor in old age are less immediate causes of insecurity for the many who are mired in debt, unable to make mortgage payments or losing their businesses.
Irish households are among the most indebted in the euro zone, and almost one in 12 mortgage holders is in arrears. For the self-employed, the recession has been a disaster, with many losing the businesses they have built up over a lifetime, and many others hanging on by their fingernails.
But despite recession, growing insecurity and the many nightmarish effects of the property crash, we have not sunk into collective despair. According to the EU’s Survey on Income and Living Conditions, 79 per cent of Irish adults told researchers in 2010 that they had been happy all or most of the time over the four weeks prior to being asked. And this dwell-on-the-positive attitude showed no signs of waning last year.
According to an EU-wide poll in 2011, Irish people remained among the most satisfied with their lives out of the 27 member countries, as they have been for decades, with a brief exception in the late 1980s. In the face of adversity, it seems, we remain more inclined than our neighbours to make do and to keep looking on life’s bright side.
