Measuring inequality

Sir, – Brian O'Brien refers to the Gini coefficient as the benchmark measure of economic equality and suggests that Ireland's economic inequality is reducing due to our redistributive tax system (Letters, January 29th).

The Gini coefficient is a relative measure and it relates primarily to income distribution, not wealth ownership. For example, while both Bangladesh (per capita income of $1,693) and the Netherlands (per capita income of $42,183) had an income Gini coefficient of 0.31 in 2010, the quality of life, economic opportunity and absolute income in these countries are very different.

Therefore income inequality and wealth inequality are completely different. Income is about work and wages whereas wealth is about ownership. Wealth inequality is about who owns what. Ireland may have a relatively low Gini coefficient, due to excluding those on low incomes from the tax net, but by the same token, if the price of a house or home is beyond most of those on low or average wages, then wealth inequality will continue to increase, as a house is often the only substantial asset most people will ever own. – Yours, etc,




Co Kerry.

Sir, – Citing the Gini coefficient and an ERSI report that suggests we have a fair tax system, Brian O’Brien asks in exasperation, “what more our governments could possibly do in this regard?” The problem is that such statistics are very crude estimations. For example, Robert Joyce, the deputy director at the UK’s Institute for Fiscal Studies observes that, “The Gini is masking different things going on, like the fact that the top 1 per cent is still pulling away from everyone else.”

The tax system is still allowing more and more of the pie to move into the hands of the few. Other methods to determine these matters, such as the Palma ratio, are beginning to get closer to the reality – and the picture emerging is beginning to cause great concern among those interested in the creation and preservation of a society that is at ease with itself. What we are seeing is that the those on the bottom rung of the ladder who once held zero assets are now slipping into debt as they struggle to get by. And not surprisingly, the 10 per cent at the top have seen their wealth hugely increase while those in the top 1 per cent are seeing their wealth grow at such a rate that it is becoming difficult to count.

All of that said, may I suggest the best way to determine how equal or otherwise our society is. Take a walk through any of our towns and cities at night and see the numbers enduring the misery of homelessness. – Yours, etc,