TASC director David Begg says Ireland has to retain level of welfare expenditure while increasing wages if economic inequality is to be tackled
23 July 2015
Government’s work in establishing Low Pay Commission and legislating for collective bargaining to be commended
European driven labour market ‘reforms’ and ‘flexibility’ are destroying working conditions built up over decades
TASC's director, Dr David Begg, has today argued that Ireland has to retain its current level of expenditure on welfare while increasing wages if it is to tackle economic inequality. Dr Begg was speaking on the topic Inequality: Is There Any Answer? at the MacGill Summer School in Glenties, Donegal.
The session also featured the Irish premiere of the film The Divide, a documentary inspired by the bestselling book, The Spirit Level, which looks at how the rising gap between the rich and the poor has impacted on our societies.
David Begg said that in relation to economic inequality the problem is not just that the rich are getting richer, it’s also that we are failing to tackle poverty and the economy is changing to leave the majority behind.
“We can see this problem in the growth in precarious work – like zero-hour contracts for example – and the hollowing out of the labour market in a way that destroys formerly good middle level jobs. This is a long term trend made worse by a change in the balance in power between capital and labour which can be traced to the entry of China to the global market place and the collapse of the Soviet Union. These events added 1.5 billion new workers to a pre-existing industrial workforce of 900 million.”
Dr Begg said that the issue of low pay is particularly relevant in Ireland where the inadequacy of universal public services and high charges for services like GP visits, childcare and eldercare – along with a cost of living that is 20% higher than the EU average – means that cash income is even more important in Ireland than it would be in other countries.
“Low pay is a feature of rising inequality. While average incomes in Ireland in real terms have more than doubled since the 1970s, the average for the top 10% has tripled and for the top 1% it has gone up five-fold.”
David Begg pointed out that the top 10% now take 34% of all income in Ireland up from 27% in the 1970s, while the bottom 90% take 66% of all income down from 73% in the 1970s.
“Ireland is now the most unequal country in the OECD when it comes to market income. As a result of our social protection or welfare system, Ireland moves from being the most unequal to around the average in terms of economic inequality. However, as economic inequality rises it is going to become unsustainable for our welfare system on its own to tackle this problem. This is why it is so important that we increase wages while retaining the level of welfare expenditure.”
In this context, David Begg commended the Government’s work in establishing the Low Pay Commission and introducing legislation to underpin the collective bargaining system.
“There is a European dimension to this as well. Since the onset of the 2008 financial crisis the idea of ‘Social Europe’ has been eviscerated and we are in the grip of a nightmare which – if it persists – could potentially destroy the European integration project. The dominance of the European Central Bank (ECB) and the narrowness of its remit is a catastrophic flaw in the institutional architecture of European Monetary Union (EMU). At a minimum, the ECB’s mandate must be brought into line with the US Federal Reserve, in other words, it must have regard to a broader range of social and economic concerns not just price stability alone.
“While it can be legitimately pointed out that the broader remit of the Federal Reserve has not prevented US inequality being the worst in the world, the issue in Europe is that the ECB’s policies are actively undermining labour market institutions which in other circumstances might give better outcomes. To be specific, labour market ‘reforms’ and ‘flexibility’ are euphemisms for undermining collective bargaining systems and destroying working conditions built up over decades and they should be called out for what they are,” David Begg concluded.
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