Clara Fischer: Ireland’s next budget is only around the corner, and people all over the country are bracing themselves for what is set to be another harsh exercise in cuts and tax increases. While much of this will be presented in abstract terms – a few percentages increased here, a few numbers decreased there – the very real effects of Budget 2013 will be keenly felt, especially by those already marginalised within our society.
Given the government’s reluctance to equality-proof or gender-proof the budget, it is more than likely that Ireland will continue in the current trajectory toward increased inequality and poverty, thus exacerbating a situation that has been worsening since the beginning of the economic crisis. In 2010 alone, there was a 25% increase in inequality in Ireland, with the top 20% earning 5.5 times the income of the lowest 20%. The percentage of people in Ireland living in consistent poverty increased, as did the percentage of children at-risk of poverty, which stands at 19.5%. Just recently, it was established that one in ten people in Ireland experiences food poverty.
Those are harrowing statistics, especially in light of the fact that people at the higher end of the socio-economic spectrum increased their wealth by 8% in 2010. The research clearly shows that ‘burden-sharing’, ‘collective belt-tightening’, or whatever similar misnomer successive governments have used and continue to use as a means of justifying disproportionate hardship for those at the bottom, is simply that – empty rhetoric that is not based on fact. The truth is that, at present, the government simply doesn’t have the required information to devise, implement and review policies that might actually result in a more level spreading of the economic burden across different sections of society. Instead, we are seeing the continued,disproportionate targeting of lone parents, people with disabilities, and women, to name but a few, as impact analyses are not undertaken, data is not collected, and information is not made available.
While one could be uncharitable about the political motives behind this, it is important to note that other countries do things differently. In Scotland, for example, it is common practice to publish a draft budget in September, which can then be debated before being finalised in January. Importantly, the draft budget is published alongside an “Equality Statement”, which provides a full impact analysis by equality category (such as gender, age, disability, etc.), as well as by budget theme (e.g. “health and wellbeing”). The budget process itself is also significantly at variance with the Irish process, as an Equality Budget Advisory Group, made up of civil society and government actors, ensures that equality is fully integrated in economic policy-making and planning. The meeting minutes of this group are readily available on the Scottish Government’s website, as are the draft budget, and the attendant Equality Statement.
The Scottish approach is far more transparent, and affords equality a central role in economic policy-making, planning and review. There is no reason why such an approach could not be introduced in Ireland. Given the pressure the government currently finds itself under, especially with regard to economic policies being perceived as unjust and unfair, adoption of an approach more akin to the Scottish model would actually take some of the sting out of the debate. The government would be able to point toward impact assessments and research, and could show that its decisions are based on evidence and carefully planned examination of the circumstances of different sections of Irish society with a view to implementing the most equitable policies. Equality budgeting would also halt the increases in inequality and poverty we’re currently experiencing in Ireland, while satisfying citizens’ demands for economic justice and true ‘burden-sharing’.
For the last number of months, the Equality Budgeting Campaign has been working toward the introduction of such a more transparent and equitable approach to economic policy-making, and has successfully won the support of the Sinn Fein parliamentary party, and of Labour, Independent and ULA representatives. More pressure must be brought to bear, however, upon the powers-that-be if a substantial reform like this is to be made a reality. The urgency of doing so cannot be stressed enough, as the brunt of the economic crisis continues to be borne by those least able to do so. For anybody interested in pursuing equality budgeting with us, we invite you to contact us or to follow us on Facebook, Twitter, or via our website. We also have a petition for the introduction of equality budgeting here. For further details on equality budgeting, see our information booklet here.
Contact:equalitybudgetingcampaign@gmail.com
Dr. Clara Fischer holds a Ph.D. in political philosophy and is a co-ordinator of the Irish Feminist Network. The network is part of a broad-based coalition of civil society organisations and concerned individuals seeking the introduction of equality budgeting in Ireland.
Showing posts with label equality. Show all posts
Showing posts with label equality. Show all posts
Thursday, 29 November 2012
Thursday, 9 August 2012
Scale of inequality now a drag on our economy and well-being
Colm O'Doherty: The results from the Central Statistics Office Survey of Income and living Conditions 2010, released earlier this year, confirmed what most Irish people are acutely aware of – the gap between the top and bottom 20% of income earners is increasing. The well-off are getting richer compared to the rest of the population and are suffering little or no repercussions from the economic crash. Average income of the top 20% of earners was 5.5 greater than those in the lowest 20 per cent. This inequality ratio is up from 4.3 a year earlier.
Persistent and increasing inequality is a serious threat to both our economic prospects and our well-being. A new wave of research on the effects of inequality, growth and financial crisis all see inequality as a driver behind the unsustainable surge in household indebtedness which triggered the crash.
On the level of individuals, Joseph Stiglitz suggests that in the US people on lower incomes over-borrowed in order to maintain a rising standard of living in the face of stagnating real incomes. This borrowing, over time, became unsustainable and led to default and pressure on over-extended financial institutions such as Fanny Mae, precipitating the wider financial crash. A second set of theorists (Rajan, Fitoussi and Saraceno) argue that on the societal-level inequality is the driving force for policy choices which, in turn, lead to unsustainable household and governmental debt levels. In this scenario, neo-liberal economic policies use regulatory tools to facilitate low income households’ access to credit , particularly mortgages.
These policies encouraged low interest rates and financial deregulation to compensate for inadequate incomes. They also aided and abetted financial liberalisation and raising top incomes, seen as progressive policies by neo-liberals, through regressive taxation strategies. Policies such as these permeated the thinking of successive Fianna Fail coalition governments and, many people were convinced that that they represented a natural economic order. It appears that the current Government is also in thrall to these doctrines. While there is some overlap between these theoretical standpoints, they all clearly make valid links between inequality and the financial crash.
The consequences of inequality are also becoming clearer. Economic hardship, manifested as unemployment, wage reductions and income support cuts, is affecting all tiers of Irish society except those at the top who are becoming more and more adept at looking after themselves and their own. A recent report from the Irish League of Credit Unions found that 1.82 million adults, say they have less than 100 Euro a month spend after bills are paid. Poverty rates are on the rise with yearly increases in consistent poverty and at-risk–of-poverty rates being recorded by the CSO. Reductions in essential public services such as health and education, are weakening the social contract between citizens and the State.
The State is pursuing policies which openly discriminate in favour of the wealthy and against all other citizens. This policy direction is the road to economic and social ruin. While the left here appear not to have woken up to this reality – blaming the EU, the IMF and global capitalism for everything - world leaders in the US and France accept that government policy needs to be framed around re-distribution of wealth in order to balance the fiscal books and fulfil the social contract obligations of the State.
On the academic front, Robert Putnam, the author of Bowling Alone, who is recognised as an authoritative academic but not a firebrand, has pinpointed inequality, the closure of social mobility and diminishing social trust as threatening America’s economic future. The tax burden in Ireland, at 28% of GDP, is one of the lowest and most regressive in the EU. Sweden and Denmark and other Scandanavian countries have tax burdens of the order of 45.8 % and 48.2% respectively, and are not in the same economic disaster zone as us. Despite going against the economic orthodoxy we have been in thrall to for the past twenty years the Nordic region's tax policies have protected their social models, encouraging and realising more equal societies and avoiding the financial crash which is now inflicting terrible damage on the most vulnerable and weakest sections of our society.
The big question facing our Government now as it begins to frame its second budget is: will it continue to progress inequality and ramp up social and economic decline in the pursuit of measures which are widely discredited or will it put in place fair and equitable taxation measures which share the burden of economic and social renewal?
Persistent and increasing inequality is a serious threat to both our economic prospects and our well-being. A new wave of research on the effects of inequality, growth and financial crisis all see inequality as a driver behind the unsustainable surge in household indebtedness which triggered the crash.
On the level of individuals, Joseph Stiglitz suggests that in the US people on lower incomes over-borrowed in order to maintain a rising standard of living in the face of stagnating real incomes. This borrowing, over time, became unsustainable and led to default and pressure on over-extended financial institutions such as Fanny Mae, precipitating the wider financial crash. A second set of theorists (Rajan, Fitoussi and Saraceno) argue that on the societal-level inequality is the driving force for policy choices which, in turn, lead to unsustainable household and governmental debt levels. In this scenario, neo-liberal economic policies use regulatory tools to facilitate low income households’ access to credit , particularly mortgages.
These policies encouraged low interest rates and financial deregulation to compensate for inadequate incomes. They also aided and abetted financial liberalisation and raising top incomes, seen as progressive policies by neo-liberals, through regressive taxation strategies. Policies such as these permeated the thinking of successive Fianna Fail coalition governments and, many people were convinced that that they represented a natural economic order. It appears that the current Government is also in thrall to these doctrines. While there is some overlap between these theoretical standpoints, they all clearly make valid links between inequality and the financial crash.
The consequences of inequality are also becoming clearer. Economic hardship, manifested as unemployment, wage reductions and income support cuts, is affecting all tiers of Irish society except those at the top who are becoming more and more adept at looking after themselves and their own. A recent report from the Irish League of Credit Unions found that 1.82 million adults, say they have less than 100 Euro a month spend after bills are paid. Poverty rates are on the rise with yearly increases in consistent poverty and at-risk–of-poverty rates being recorded by the CSO. Reductions in essential public services such as health and education, are weakening the social contract between citizens and the State.
The State is pursuing policies which openly discriminate in favour of the wealthy and against all other citizens. This policy direction is the road to economic and social ruin. While the left here appear not to have woken up to this reality – blaming the EU, the IMF and global capitalism for everything - world leaders in the US and France accept that government policy needs to be framed around re-distribution of wealth in order to balance the fiscal books and fulfil the social contract obligations of the State.
On the academic front, Robert Putnam, the author of Bowling Alone, who is recognised as an authoritative academic but not a firebrand, has pinpointed inequality, the closure of social mobility and diminishing social trust as threatening America’s economic future. The tax burden in Ireland, at 28% of GDP, is one of the lowest and most regressive in the EU. Sweden and Denmark and other Scandanavian countries have tax burdens of the order of 45.8 % and 48.2% respectively, and are not in the same economic disaster zone as us. Despite going against the economic orthodoxy we have been in thrall to for the past twenty years the Nordic region's tax policies have protected their social models, encouraging and realising more equal societies and avoiding the financial crash which is now inflicting terrible damage on the most vulnerable and weakest sections of our society.
The big question facing our Government now as it begins to frame its second budget is: will it continue to progress inequality and ramp up social and economic decline in the pursuit of measures which are widely discredited or will it put in place fair and equitable taxation measures which share the burden of economic and social renewal?
Wednesday, 27 July 2011
Questions that should be put to the Minister
Michael Taft: The Cabinet has approved the interim Household Charge of €100, designed to ‘raise’ €160 million from 1.8 million households. There are some exemptions: those in receipt of mortgage interest supplement, social housing tenants, commercial property and premises owned by a charity. Otherwise, the charge will be universal.
Is it inequitable? Yes, it is. Even Fine Gael opposed such a tax in opposition:
‘. . . flat rate charge means that houses in standard neighbourhoods worth a fraction of some mansions will pay the same rate of tax. It will be difficult to pay for asset-rich but income poor households, particularly the elderly and the unemployed; and it will be deeply unfair for a young generation that paid exorbitant amounts of stamp duty and VAT on the purchases on over-valued houses, many of whom now find themselves in negative equity.’
Question 1: Why is the Minister performing a U-turn, - committing to one thing before the election, and doing the exact opposite afterwards?
The Minister has claimed he had no choice – that it’s in the EU-IMF deal. Interesting, though, that Fine Gael published the above after the deal was signed. In addition,
There is no mention of a flat-rate charge in the EU-IMF deal.
Second, a property tax is stipulated for next year and the following year. But as Minister Noonan pointed out, the Government is free to substitute one fiscal measure for another as long as it yields the same fiscal result. The Government has done this already – with the Jobs Initiative. It has also announced there will be no income tax increases, even though the EU-IMF deal explicitly calls for such increases this year and next. So merely stating that something is in the EU-IMF agreement is not a sufficient explanation.
Question 2: Why is the Minister introducing a regressive, flat-rate household charge when (a) there is no reference to it in the EU-IMF deal, and (b) the Government has declared that it is free to substitute measures in the deal?
The imposition of the household charge is, to put it bluntly, a political choice. It is also, in economic terms, a highly irrational one.
Already, the spin being put out is that it’s only €2 a week. However, if we are to believe the findings of the ‘What’s Left’ tracker published by the League of Irish Credit Unions, that €2 will impose a further substantial burden on households and the economy.
The tracker found in July that 750,000 people (or approximately 20 percent of the adult population) had only €70 each month after paying bills. A €100 charge will reduce this discretionary spend by 12 percent.
A further 250,000 had no money left after paying their bills. The €100 charge will send them into negative balance.
For a million people, the charge will reduce their discretionary budgets by 12 percent or more. Of course, a proportion of these will be either tenants – public and private – while others will be receiving mortgage supplement. Still, many, if not most, will be liable to the charge. So when you hear someone going on about ‘only €2 a week’, just remember: there are significant sections of the population who only have €16 a week or less to spend after essentials.
Even if people had twice the amount left after paying bills - €140 – the charge will still amount to a substantial cut of 6 percent.
Question 3: What is the Minister’s Department (or the Department of Finance) economic impact assessment on households’ discretionary spending budgets (that is, after bills and essentials are paid for)?
There are other losers. What about the businesses dependent on the spending power of these households? Using the ESRI’s impact of an income tax, we should expect the household charge to result in a consumer decline of approximately €100 million next year. However, this figure is likely to be higher: the ESRI was estimating a rise in a progressive tax (income tax); the household charge will disproportionately hit low-average income earners.
Question 4: What is the Minister’s Department (or the Department of Finance) economic impact assessment on consumer spending and, so, economic growth?
And while the Government hopes to ‘raise’ €160 million, the benefit to the Exchequer will be less. Once you factor in the fall in consumer demand and, so, spending taxes; and the impact on employment (firms coming under pressure may reduce hours, pay and even let people go), the actual savings will be less. Again, based on the ESRI’s simulations, the actual benefit could be of the order of only €100 million. Again, as noted above, this figure could be lower because of the regressive and, therefore, more deflationary nature of a flat-rate tax.
Question 5: When the deflationary impact of the charge is assessed, how much will the Exchequer actually ‘save’, as opposed to how much the charge will ‘raise’?
The Government wants to promote growth, employment and demand. Yet they seem determined to do the opposite. A regressive flat-rate charge on top of pay cuts for JLC workers? These questions could help determine exactly what the Government’s strategy is.
And the answers could tell us a lot about what we can expect in the budget later this year.
Is it inequitable? Yes, it is. Even Fine Gael opposed such a tax in opposition:
‘. . . flat rate charge means that houses in standard neighbourhoods worth a fraction of some mansions will pay the same rate of tax. It will be difficult to pay for asset-rich but income poor households, particularly the elderly and the unemployed; and it will be deeply unfair for a young generation that paid exorbitant amounts of stamp duty and VAT on the purchases on over-valued houses, many of whom now find themselves in negative equity.’
Question 1: Why is the Minister performing a U-turn, - committing to one thing before the election, and doing the exact opposite afterwards?
The Minister has claimed he had no choice – that it’s in the EU-IMF deal. Interesting, though, that Fine Gael published the above after the deal was signed. In addition,
There is no mention of a flat-rate charge in the EU-IMF deal.
Second, a property tax is stipulated for next year and the following year. But as Minister Noonan pointed out, the Government is free to substitute one fiscal measure for another as long as it yields the same fiscal result. The Government has done this already – with the Jobs Initiative. It has also announced there will be no income tax increases, even though the EU-IMF deal explicitly calls for such increases this year and next. So merely stating that something is in the EU-IMF agreement is not a sufficient explanation.
Question 2: Why is the Minister introducing a regressive, flat-rate household charge when (a) there is no reference to it in the EU-IMF deal, and (b) the Government has declared that it is free to substitute measures in the deal?
The imposition of the household charge is, to put it bluntly, a political choice. It is also, in economic terms, a highly irrational one.
Already, the spin being put out is that it’s only €2 a week. However, if we are to believe the findings of the ‘What’s Left’ tracker published by the League of Irish Credit Unions, that €2 will impose a further substantial burden on households and the economy.
The tracker found in July that 750,000 people (or approximately 20 percent of the adult population) had only €70 each month after paying bills. A €100 charge will reduce this discretionary spend by 12 percent.
A further 250,000 had no money left after paying their bills. The €100 charge will send them into negative balance.
For a million people, the charge will reduce their discretionary budgets by 12 percent or more. Of course, a proportion of these will be either tenants – public and private – while others will be receiving mortgage supplement. Still, many, if not most, will be liable to the charge. So when you hear someone going on about ‘only €2 a week’, just remember: there are significant sections of the population who only have €16 a week or less to spend after essentials.
Even if people had twice the amount left after paying bills - €140 – the charge will still amount to a substantial cut of 6 percent.
Question 3: What is the Minister’s Department (or the Department of Finance) economic impact assessment on households’ discretionary spending budgets (that is, after bills and essentials are paid for)?
There are other losers. What about the businesses dependent on the spending power of these households? Using the ESRI’s impact of an income tax, we should expect the household charge to result in a consumer decline of approximately €100 million next year. However, this figure is likely to be higher: the ESRI was estimating a rise in a progressive tax (income tax); the household charge will disproportionately hit low-average income earners.
Question 4: What is the Minister’s Department (or the Department of Finance) economic impact assessment on consumer spending and, so, economic growth?
And while the Government hopes to ‘raise’ €160 million, the benefit to the Exchequer will be less. Once you factor in the fall in consumer demand and, so, spending taxes; and the impact on employment (firms coming under pressure may reduce hours, pay and even let people go), the actual savings will be less. Again, based on the ESRI’s simulations, the actual benefit could be of the order of only €100 million. Again, as noted above, this figure could be lower because of the regressive and, therefore, more deflationary nature of a flat-rate tax.
Question 5: When the deflationary impact of the charge is assessed, how much will the Exchequer actually ‘save’, as opposed to how much the charge will ‘raise’?
The Government wants to promote growth, employment and demand. Yet they seem determined to do the opposite. A regressive flat-rate charge on top of pay cuts for JLC workers? These questions could help determine exactly what the Government’s strategy is.
And the answers could tell us a lot about what we can expect in the budget later this year.
Wednesday, 15 June 2011
Unnatural selection
Paul Sweeney: In Tuesday's Financial Times there was a really provocative book reivew by Joshua Kurlantzick on a book by Mara Hvistendahl on the unnatural selection of boys over girls. He and she explore the implications for certain countries if this really develops much further. Whatever ones views on demography, on abortion, on ultrasounds,on boys and girls, on equality or whatever, this is very thought provoking.
Wednesday, 20 April 2011
Towards the Good Society
Sinéad Pentony: As the debt, fiscal and economic crises rumble on, and as fire-fighting policy responses continue, it can be difficult to think about the bigger picture and the wider impacts the crises are having on societies across Europe. However, if we are to avoid repeating the mistakes of the past we need to understand that a paradigm shift is required. Orthodox responses to the failings of neo-liberalism are clearly not working for anyone (with the possible exception of some financial institutions), and there is a growing acceptance of the link between the crises and inequality
That’s why events such as the recent conference in Stockholm on ‘Dimensions of Equality in a Good Society’, and the accompanying online debate at the Social Europe Journal, are so important. The conference was organised by two think tanks, Germany’s Friedrich Ebert Foundation and the Swedish labour think tank, Arbetarrörelsens Tankesmedja.
The aim of the conference was to analyse the concept of inequality and to locate it within a wider framework of a new social and democratic political agenda.
The focus was on four dimensions of equality: the philosophical, economic, social and integration dimensions. I’m going to focus on the economic dimension, where the conference attempted to broaden the boundaries of the discourse on equality beyond “marginal debates on a couple of percentage points up or down in a progressive tax system”.
We can’t have equal citizenship if there is a large gap between rich and poor, mainly because the rich have the means to influence the political system and public institutions. This was considered to be a systemic problem – regulatory capture with inequality spiral – whereby the richest players influence the rules and their application, thus expanding their own advantage. Public facilities come under the influence of players who are motivated by short-term profit gain – and who buy support from media and academics for this purpose. Sounds familiar? We don’t need to look much further than the Nyberg Report, as an example of how regulatory capture manifested itself in the Irish banking system.
This systemic problem is a major contributing factor to current (and future) trends of continued increases in social, political and economic inequalities. For example, during the last US economic expansion (2002 – 2007) average per capita household income grew by 16 per cent. The top one per cent enjoyed growth of 62 per cent, while for the remainder of the population it was just 6.7 per cent. The top percentile captured 65 per cent of the real per capita growth of the US economy. During the period 1978 – 2007, the income share of the bottom half declined from 26.4 per cent to 12.8 per cent. Meanwhile, that of the top one per cent rose from 8.95 per cent to 23.5 per cent (a 2.6 fold increase).
It’s a similar story in China. During the period 1990 – 2004, the income share of the bottom half declined from 27 per cent to 18 per cent, while that of the top tenth rose from 25 per cent to 35 per cent. In Ireland, TASC’s HEAP research demonstrated a more equal distribution of incomes in 1987 compared to 2005 and the analysis also found that 5 per cent of the population control 40 per cent of Ireland’s wealth, and the top 10 per cent have a disposable income 11 times the bottom 10 per cent. The trends are similar across the developed world, and point to growing income inequality.
In terms of fiscal policy, the point was made that countries with the biggest deficits are low tax economies such as the USA, Ireland, the UK and Portugal. Higher spending countries have a better track record in controlling their deficits. They also tend to have smaller income differentials as a result of progressive taxation. The World Economic Forum has consistently shown that the most competitive economies are high spending economies, particularly in areas such as education and training, innovation, infrastructure. High spending economies have also weathered the crises much better than low spending economies, and are proving more capable of recovery.
It could be argued that the scale of the crises has also threatened democracy: you can change your government, but you can’t change the policy as this is set elsewhere. We have direct and very recent experience of this here in Ireland. Also, liabilities have been shifted from corporations to states as in the case of our banking debts. In the current context of what was described as “permanent austerity”, fiscal policy requirements determine the level of welfare state retrenchment policies and social policies have been de-nationalised and Europeanized in reaction to the debt crises across Europe.
In order to reverse the trends of growing inequality and minimise the chances of the same happening again, we need to put the global economy on a different trajectory. As we can see the problems are numerous and complex, and progressive solutions will need to be sophisticated and address systemic failures that have brought us to where we are today. A number of solutions were put forward and debated during the conference, including debt restructuring, and there was consideration of policy measures to allow the exit and re-entry to the Eurozone. Other progressive solutions included the consideration of social policy as a growth sector, since it contributes percentage points to GDP, provides jobs and the creation of new business opportunities.
The need for institutional reform was also identified with an emphasis on redesigning public institutions to be equality-focussed. In Ireland the debate on (public) institutional reform has focussed on creating greater efficiencies and achieving ‘more with less’, alongside greater transparency and accountability. While these reforms are necessary there has been no discussion on the link between public sector reform and equality. However, the link between public institutions and equality was made very strongly at the conference, whereby “high quality government institutions will increase the level of social trust, which will make reciprocity turn into solidarity, which in turn increases equality”.
These are just some of the ideas that were discussed and they reflect some of the complexities that need to be grappled with if we are to emerge from the crises on the path to more equality. ‘The Good Society’ creates a forum for debate on the problems and the solutions. Let’s hope that our politicians, their advisors and policy makers are tuning into the debate..
That’s why events such as the recent conference in Stockholm on ‘Dimensions of Equality in a Good Society’, and the accompanying online debate at the Social Europe Journal, are so important. The conference was organised by two think tanks, Germany’s Friedrich Ebert Foundation and the Swedish labour think tank, Arbetarrörelsens Tankesmedja.
The aim of the conference was to analyse the concept of inequality and to locate it within a wider framework of a new social and democratic political agenda.
The focus was on four dimensions of equality: the philosophical, economic, social and integration dimensions. I’m going to focus on the economic dimension, where the conference attempted to broaden the boundaries of the discourse on equality beyond “marginal debates on a couple of percentage points up or down in a progressive tax system”.
We can’t have equal citizenship if there is a large gap between rich and poor, mainly because the rich have the means to influence the political system and public institutions. This was considered to be a systemic problem – regulatory capture with inequality spiral – whereby the richest players influence the rules and their application, thus expanding their own advantage. Public facilities come under the influence of players who are motivated by short-term profit gain – and who buy support from media and academics for this purpose. Sounds familiar? We don’t need to look much further than the Nyberg Report, as an example of how regulatory capture manifested itself in the Irish banking system.
This systemic problem is a major contributing factor to current (and future) trends of continued increases in social, political and economic inequalities. For example, during the last US economic expansion (2002 – 2007) average per capita household income grew by 16 per cent. The top one per cent enjoyed growth of 62 per cent, while for the remainder of the population it was just 6.7 per cent. The top percentile captured 65 per cent of the real per capita growth of the US economy. During the period 1978 – 2007, the income share of the bottom half declined from 26.4 per cent to 12.8 per cent. Meanwhile, that of the top one per cent rose from 8.95 per cent to 23.5 per cent (a 2.6 fold increase).
It’s a similar story in China. During the period 1990 – 2004, the income share of the bottom half declined from 27 per cent to 18 per cent, while that of the top tenth rose from 25 per cent to 35 per cent. In Ireland, TASC’s HEAP research demonstrated a more equal distribution of incomes in 1987 compared to 2005 and the analysis also found that 5 per cent of the population control 40 per cent of Ireland’s wealth, and the top 10 per cent have a disposable income 11 times the bottom 10 per cent. The trends are similar across the developed world, and point to growing income inequality.
In terms of fiscal policy, the point was made that countries with the biggest deficits are low tax economies such as the USA, Ireland, the UK and Portugal. Higher spending countries have a better track record in controlling their deficits. They also tend to have smaller income differentials as a result of progressive taxation. The World Economic Forum has consistently shown that the most competitive economies are high spending economies, particularly in areas such as education and training, innovation, infrastructure. High spending economies have also weathered the crises much better than low spending economies, and are proving more capable of recovery.
It could be argued that the scale of the crises has also threatened democracy: you can change your government, but you can’t change the policy as this is set elsewhere. We have direct and very recent experience of this here in Ireland. Also, liabilities have been shifted from corporations to states as in the case of our banking debts. In the current context of what was described as “permanent austerity”, fiscal policy requirements determine the level of welfare state retrenchment policies and social policies have been de-nationalised and Europeanized in reaction to the debt crises across Europe.
In order to reverse the trends of growing inequality and minimise the chances of the same happening again, we need to put the global economy on a different trajectory. As we can see the problems are numerous and complex, and progressive solutions will need to be sophisticated and address systemic failures that have brought us to where we are today. A number of solutions were put forward and debated during the conference, including debt restructuring, and there was consideration of policy measures to allow the exit and re-entry to the Eurozone. Other progressive solutions included the consideration of social policy as a growth sector, since it contributes percentage points to GDP, provides jobs and the creation of new business opportunities.
The need for institutional reform was also identified with an emphasis on redesigning public institutions to be equality-focussed. In Ireland the debate on (public) institutional reform has focussed on creating greater efficiencies and achieving ‘more with less’, alongside greater transparency and accountability. While these reforms are necessary there has been no discussion on the link between public sector reform and equality. However, the link between public institutions and equality was made very strongly at the conference, whereby “high quality government institutions will increase the level of social trust, which will make reciprocity turn into solidarity, which in turn increases equality”.
These are just some of the ideas that were discussed and they reflect some of the complexities that need to be grappled with if we are to emerge from the crises on the path to more equality. ‘The Good Society’ creates a forum for debate on the problems and the solutions. Let’s hope that our politicians, their advisors and policy makers are tuning into the debate..
Friday, 11 March 2011
Reviewing the Universal Social Charge
Tom McDonnell: The new Programme for Government is, perhaps understandably, light on detail in many areas. The document is highly aspirational in nature and it remains to be seen whether the numbers stack up in the short or medium term. Making the numbers ‘fit’ will undoubtedly determine the fate of the numerous policy goals stated in the Programme and will also condition the decision-making process around the existing policies up for review in the next few months.
One policy decision which captured much public interest in the last few months was the decision to replace the health levy and the income levy with the new Universal Social Charge.
The combined impact on gross earned income from the introduction of the new Universal Social Charge and the abolition of the Health Levy and the Income Levy are shown in Figure 1. The earner worst affected by the changes in terms of percent of gross income is the individual on €15,027 (the old income levy kicked in at €15,028). He or she will lose 2.66% of income from the combined changes.
On the other hand the biggest winners from the combined changes (other than those on very high incomes such as Government Ministers and Secretary Generals) are those on just over €26,000. This is because the old health levy kicked in at 4% on the entire amount at €26,000.
Figure 1
Combined impact as percentage of gross income (single employee aged 16-65) - winners in pink and losers in green (click to enlarge)
The overall regressive nature of the changes shown in Figure 1 is stark. Page 2 of the Programme for Government makes the laudable statement that
“Both our parties are committed to protecting the vulnerable and to burden sharing on an equitable basis”.
In page 16 of the same document the Government commits to reviewing the USC. Page 16 also promises to maintain the current rates of income tax together with bands and credits. Consequently, and in the context of the severe budgetary constraints, we can assume that any changes to the USC will either be implemented on a revenue neutral basis or (more likely) implemented in a way that increases net revenue.
Let us hope the new Government’s commitment to “protect the vulnerable and ensure burden sharing on an equitable basis” guides their thinking when they make their changes.
We watch with interest.
One policy decision which captured much public interest in the last few months was the decision to replace the health levy and the income levy with the new Universal Social Charge.
The combined impact on gross earned income from the introduction of the new Universal Social Charge and the abolition of the Health Levy and the Income Levy are shown in Figure 1. The earner worst affected by the changes in terms of percent of gross income is the individual on €15,027 (the old income levy kicked in at €15,028). He or she will lose 2.66% of income from the combined changes.
On the other hand the biggest winners from the combined changes (other than those on very high incomes such as Government Ministers and Secretary Generals) are those on just over €26,000. This is because the old health levy kicked in at 4% on the entire amount at €26,000.
Figure 1
Combined impact as percentage of gross income (single employee aged 16-65) - winners in pink and losers in green (click to enlarge)
The overall regressive nature of the changes shown in Figure 1 is stark. Page 2 of the Programme for Government makes the laudable statement that
“Both our parties are committed to protecting the vulnerable and to burden sharing on an equitable basis”.
In page 16 of the same document the Government commits to reviewing the USC. Page 16 also promises to maintain the current rates of income tax together with bands and credits. Consequently, and in the context of the severe budgetary constraints, we can assume that any changes to the USC will either be implemented on a revenue neutral basis or (more likely) implemented in a way that increases net revenue.
Let us hope the new Government’s commitment to “protect the vulnerable and ensure burden sharing on an equitable basis” guides their thinking when they make their changes.
We watch with interest.
Thursday, 7 October 2010
Benefitting all the children equally
In an Irish Times 'Double Vision' piece with Friends First economist Jim Power, TASC Head of Policy Sinéad Pentony argues this morning that the universal provision of public services or other benefits is fundamental to bridging Ireland's equality divide. You can read the full piece here.
Tuesday, 7 September 2010
Killing three birds with the one stone: education improves equality
Rory O'Farrell: While access to education is usually thought of in terms of equality of opportunity, it can also lead to equality of outcome.
The OECD has recently published data on educational attainment. Comparing this with OECD data on the Gini coefficient (probably the best way to measure inequality and present the income distribution into a single figure), we can gain an insight into how education affects inequality.
The above figure shows a clear downward relationship between the proportion of adults with a 3rd level degree and inequality before taxes and transfers, suggesting high education levels compress market incomes (the relationship is stronger when we only look at the male population). This could be due to a large supply of graduates helping to reduce the wage premium of education. Evidence from the US also shows how the increased supply of graduates can reduce the education wage premium (Card and Lemieux, 2001). This may be due to a spike in US college enrolment during the Vietnam War, in order to avoid the draft, was followed by a decline in the education wage premium (though it then recovered an inequality increased).
However, is it that equality leads to higher educational attainment? Comparing educational attainment and inequality after taxes and transfers show that there is no clear relationship, suggesting that the causation runs from education to equality [see note]. In the US due to inequality students will incur the expense of education (or some highly educated will migrate to the US) in order to gain the higher wages for college graduates. However in European countries, the benefit in terms of a wage premium would be lower, but the cost of education (to students/families) is also lower. Also, a more equal distribution of income before taxes boosts the social solidarity necessary for redistributive policies).
So what are the policy implications? Improving equality of opportunity is itself a worthy aim. However improving access to higher education (whether through free fees, grants, or improved primary and secondary education) can also boost equality of outcomes. So combined with promoting the smart economy, we can kill three birds with the one stone.
[note]: Card, D., and Lemieux, T., (2001). Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis, The Quarterly Journal of Economics, 116(2): 705-746
The OECD has recently published data on educational attainment. Comparing this with OECD data on the Gini coefficient (probably the best way to measure inequality and present the income distribution into a single figure), we can gain an insight into how education affects inequality.
The above figure shows a clear downward relationship between the proportion of adults with a 3rd level degree and inequality before taxes and transfers, suggesting high education levels compress market incomes (the relationship is stronger when we only look at the male population). This could be due to a large supply of graduates helping to reduce the wage premium of education. Evidence from the US also shows how the increased supply of graduates can reduce the education wage premium (Card and Lemieux, 2001). This may be due to a spike in US college enrolment during the Vietnam War, in order to avoid the draft, was followed by a decline in the education wage premium (though it then recovered an inequality increased).
However, is it that equality leads to higher educational attainment? Comparing educational attainment and inequality after taxes and transfers show that there is no clear relationship, suggesting that the causation runs from education to equality [see note]. In the US due to inequality students will incur the expense of education (or some highly educated will migrate to the US) in order to gain the higher wages for college graduates. However in European countries, the benefit in terms of a wage premium would be lower, but the cost of education (to students/families) is also lower. Also, a more equal distribution of income before taxes boosts the social solidarity necessary for redistributive policies).
So what are the policy implications? Improving equality of opportunity is itself a worthy aim. However improving access to higher education (whether through free fees, grants, or improved primary and secondary education) can also boost equality of outcomes. So combined with promoting the smart economy, we can kill three birds with the one stone.
[note]: Card, D., and Lemieux, T., (2001). Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis, The Quarterly Journal of Economics, 116(2): 705-746
Tuesday, 23 March 2010
Creating a smart society
Colm O'Doherty: The grade inflation in the formal education system controversy failed to get to grips with the critical issue around what constitutes knowledge and more importantly what is it for. The dominant thinking on education and knowledge infrastructure is that formal education is a commodity which generates economic growth through the market place. Our education system is now in thrall to a global phenomenon-building knowledge capital.
Economists define capital as that which has been invested. In the past a different type of investment generated economic growth. Investment of financial assets in physical capital - plant buildings and machinery- has been superseded by investment in human capital –education and training. Resources committed by governments or organizations or individuals to education and training are treated as investments within a capitalistic framework.
Formal education is increasingly viewed as a vehicle for investment , yielding individual wealth creation opportunities rather than social and cultural goods. Irish third level institutions are inordinately proud of the academic capitalism which not only informs their research strategies but their teaching and learning methodologies as well. Innovation and technology parks, enterprise centres, entrepreneurial boot camps and other commercialised forms of knowledge infrastructure rule the roost. The expansionist agenda of the marketeers is warmly embraced by third level institutions. Commerce has succeeded in capturing higher education by replacing educators with managers.
The essence of Enlightenment thinking is that knowledge is power but within our groves of academe the inverse relation also holds - power is knowledge. Power defines not only a certain conception of reality but all aspects of reality – physical, economic, social and environmental. Managerial power is based on ideas which have been developed chiefly in the worlds of manufacturing and commerce. There is no evidence that this approach to formal education produces smart citizens or more importantly a smart society. Students' “learning” is managed on behalf of the commercial sector by administratively tasked operatives. This process results in intellectual mediocrity rather than innovation, or enterprise or authentic learning.
Real learning is, however, taking place outside of the formal education system. Non formal and informal learning gained through volunteering is, according to a recent EU Report, Volunteering in the E.U., promoting social and economic cohesion. The Report provides evidence that, right across Europe, volunteering is a particularly powerful means to develop citizens commitment to their society and to its political life. Not only does volunteering make a direct contribution to our economy (between 1% and 2% of GDP), but it provides education and training opportunities that deliver significant added benefits to volunteer , local communities and society in general. Volunteer work provides important employment training and a pathway into the labour force. It is also a useful way for young people to test out potential careers and therefore make an informed choice about future education and training pathways.
There is now a growing body of evidence indicating that well-being is better correlated with equality, health, work satisfaction and positive relationships than with marginal gains in income. Our crash has revealed the folly of relying on financial markets to steer and supply both economic and social development. In the education sector, the ascendancy of an economic or business model has contributed to a fragile and brittle culture of competitive individualism where what counts as knowledge is determined by economic vicissitudes. The only way to rescue this situation is through a rehabilitation of the belief in education as an expression of collective action for the benefits of interdependence and generalised wellbeing.
The state needs to discontinue its present educational policy of using third level institutions as a funding conduit for opportunist capitalism. This is not smart behaviour. On the other hand, Volunteering in the EU provides us with a framework for post crash learning based on a politics of common interest. The E.U. Report calls for the non formal and informal learning accruing from volunteering to be taken into account when measuring the well-being and the wealth of Member States. Volunteering provides a platform for pursuing both individual and collective well- being and making them mutually supportive.
It is somewhat ironic, given the evidence of the value of volunteering to the development of a smart society, that the government is disbanding 180 voluntary management boards in the Community Development Programme. An unintended consequence of our formal educational policy is the creation of a disconnect between competitive individualism and collective life. This damages the community and trust which are vital to the smooth running of an economy. A new educational agenda incorporating the values of non formal and informal learning is a better bet for post crash civic renewal and sustainable improvement in levels of collective well-being than the boom and bust possessive individualism of the so called smart economy.
Economists define capital as that which has been invested. In the past a different type of investment generated economic growth. Investment of financial assets in physical capital - plant buildings and machinery- has been superseded by investment in human capital –education and training. Resources committed by governments or organizations or individuals to education and training are treated as investments within a capitalistic framework.
Formal education is increasingly viewed as a vehicle for investment , yielding individual wealth creation opportunities rather than social and cultural goods. Irish third level institutions are inordinately proud of the academic capitalism which not only informs their research strategies but their teaching and learning methodologies as well. Innovation and technology parks, enterprise centres, entrepreneurial boot camps and other commercialised forms of knowledge infrastructure rule the roost. The expansionist agenda of the marketeers is warmly embraced by third level institutions. Commerce has succeeded in capturing higher education by replacing educators with managers.
The essence of Enlightenment thinking is that knowledge is power but within our groves of academe the inverse relation also holds - power is knowledge. Power defines not only a certain conception of reality but all aspects of reality – physical, economic, social and environmental. Managerial power is based on ideas which have been developed chiefly in the worlds of manufacturing and commerce. There is no evidence that this approach to formal education produces smart citizens or more importantly a smart society. Students' “learning” is managed on behalf of the commercial sector by administratively tasked operatives. This process results in intellectual mediocrity rather than innovation, or enterprise or authentic learning.
Real learning is, however, taking place outside of the formal education system. Non formal and informal learning gained through volunteering is, according to a recent EU Report, Volunteering in the E.U., promoting social and economic cohesion. The Report provides evidence that, right across Europe, volunteering is a particularly powerful means to develop citizens commitment to their society and to its political life. Not only does volunteering make a direct contribution to our economy (between 1% and 2% of GDP), but it provides education and training opportunities that deliver significant added benefits to volunteer , local communities and society in general. Volunteer work provides important employment training and a pathway into the labour force. It is also a useful way for young people to test out potential careers and therefore make an informed choice about future education and training pathways.
There is now a growing body of evidence indicating that well-being is better correlated with equality, health, work satisfaction and positive relationships than with marginal gains in income. Our crash has revealed the folly of relying on financial markets to steer and supply both economic and social development. In the education sector, the ascendancy of an economic or business model has contributed to a fragile and brittle culture of competitive individualism where what counts as knowledge is determined by economic vicissitudes. The only way to rescue this situation is through a rehabilitation of the belief in education as an expression of collective action for the benefits of interdependence and generalised wellbeing.
The state needs to discontinue its present educational policy of using third level institutions as a funding conduit for opportunist capitalism. This is not smart behaviour. On the other hand, Volunteering in the EU provides us with a framework for post crash learning based on a politics of common interest. The E.U. Report calls for the non formal and informal learning accruing from volunteering to be taken into account when measuring the well-being and the wealth of Member States. Volunteering provides a platform for pursuing both individual and collective well- being and making them mutually supportive.
It is somewhat ironic, given the evidence of the value of volunteering to the development of a smart society, that the government is disbanding 180 voluntary management boards in the Community Development Programme. An unintended consequence of our formal educational policy is the creation of a disconnect between competitive individualism and collective life. This damages the community and trust which are vital to the smooth running of an economy. A new educational agenda incorporating the values of non formal and informal learning is a better bet for post crash civic renewal and sustainable improvement in levels of collective well-being than the boom and bust possessive individualism of the so called smart economy.
Sunday, 14 March 2010
Tallaght Hospital controversy: An apposite quote
An Saoi: I recently came across the following comment from an interview with Dr. Giovanni Berlinguer, professor of Social Medicine and younger brother of the late Enrico.
I think the esteemed professor has covered exactly why the problems occurred - you cannot have a dual health system operating side by side.
“The health sector is a central actor in eliminating health inequities through universal coverage and by initiating collaboration with other sectors to address social determinants.
Medicine contributed a lot during the 20th century to the benefit of mankind, but the benefits were not equally distributed. There is an old saying: "Medicine is the science that enables the rich to be cured, and says to the poor how they could be cured if they were rich".
Today, the abolition of universal health systems has happened in some countries and it is beginning to happen in others. This trend must be reversed if we are to ensure that poor and marginalised populations have access to the health system.
Universal coverage is important to health, to human rights, but also to social cohesion and stability. Social cohesion is greater when there is not a division in society between those who suffer and those who do not.”
I think the esteemed professor has covered exactly why the problems occurred - you cannot have a dual health system operating side by side.
“The health sector is a central actor in eliminating health inequities through universal coverage and by initiating collaboration with other sectors to address social determinants.
Medicine contributed a lot during the 20th century to the benefit of mankind, but the benefits were not equally distributed. There is an old saying: "Medicine is the science that enables the rich to be cured, and says to the poor how they could be cured if they were rich".
Today, the abolition of universal health systems has happened in some countries and it is beginning to happen in others. This trend must be reversed if we are to ensure that poor and marginalised populations have access to the health system.
Universal coverage is important to health, to human rights, but also to social cohesion and stability. Social cohesion is greater when there is not a division in society between those who suffer and those who do not.”
Wednesday, 22 July 2009
Sarah Carey looks at economic inequality
Sarah Carey has been mentioned in dispatches on PE before but, leaving aside her slightly problematical historical analysis, today she’s on the right track when she notes that:
“[...] this relative equality was undone during the Tiger years. [....] Inequality made a comeback not because the poor got poorer, but because the rich got richer and the number of rich people increased enormously.”
This thesis is borne out by much of the data in TASC’s recent briefing document The Solidarity Factor, issued to coincide with the release of survey results showing that 85 per cent of respondents believe wealth is distributed unfairly in Ireland, while the same proportion – 85 per cent – believe that the Government should take active steps to reduce the gap between high and low earners.
However, one can certainly quibble with Ms. Carey’s conclusion that:
“Statistics will probably show that in the next three or four years Ireland will be a more equal society than it has been for the last 10. Not because the poor are catching up, but because the wealthy are falling back.”
Given the current attacks on the incomes of those at the bottom of Ireland’s money pyramid (ranging from the proposal in the An Bord Snip Nua Report that Social Welfare rates be cut, to Finance Minister Brian Lenihan’s statement at the McGill Summer School last night that “if the minimum wage becomes an obstacle to job creation the Government will have to look at it”), it seems unlikely that the gap between high and low earners (never mind the gap in terms of asset wealth)is going away any time soon.
Incidentally, with regard to the minimum wage it’s worth having a read again of Paul Sweeney’s very first post on this blog, back in February, when he looked at the whole issue of wages and competitiveness, as well as Terry McDonough’s post illustrating why wage cuts are not a good thing.
“[...] this relative equality was undone during the Tiger years. [....] Inequality made a comeback not because the poor got poorer, but because the rich got richer and the number of rich people increased enormously.”
This thesis is borne out by much of the data in TASC’s recent briefing document The Solidarity Factor, issued to coincide with the release of survey results showing that 85 per cent of respondents believe wealth is distributed unfairly in Ireland, while the same proportion – 85 per cent – believe that the Government should take active steps to reduce the gap between high and low earners.
However, one can certainly quibble with Ms. Carey’s conclusion that:
“Statistics will probably show that in the next three or four years Ireland will be a more equal society than it has been for the last 10. Not because the poor are catching up, but because the wealthy are falling back.”
Given the current attacks on the incomes of those at the bottom of Ireland’s money pyramid (ranging from the proposal in the An Bord Snip Nua Report that Social Welfare rates be cut, to Finance Minister Brian Lenihan’s statement at the McGill Summer School last night that “if the minimum wage becomes an obstacle to job creation the Government will have to look at it”), it seems unlikely that the gap between high and low earners (never mind the gap in terms of asset wealth)is going away any time soon.
Incidentally, with regard to the minimum wage it’s worth having a read again of Paul Sweeney’s very first post on this blog, back in February, when he looked at the whole issue of wages and competitiveness, as well as Terry McDonough’s post illustrating why wage cuts are not a good thing.
Friday, 12 June 2009
Guest post: International competitiveness and the New Economy - the role of equality and diversity
Eoin Collins: This paper on International Competitiveness and the New Economy: the Role of Diversity and Equality has been prepared by GLEN as an input into the Economic Strategy for the Dublin City Region being prepared by Dublin City Council. It argues that the importance of diversity and equality in growing the advanced economic sectors critical to Ireland’s economic future means that our equality infrastructure can be viewed as a part of our economic infrastructure and a component of international competitiveness and economic renewal.
A theme consistently highlighted in a broad range of economic development and recovery strategies produced by Government and policy bodies, including the NESC and the ESRI, is that Ireland has moved to a period where competitiveness will be based on the application of knowledge, creativity and a highly skilled, creative and adaptable workforce. To develop the advanced sectors, where skill has become a more central factor of production, a key challenge for policy makers across a whole range of sectors is how to nurture, attract and retain the skills on which these sectors depend.
Supporting diversity and equality, (for example across the grounds of the equality legislation), is an important factor in meeting this challenge. For example, meeting the targets set by government for education at all levels, including lifelong learning, will be diminished if areas of education are considered appropriate for one age group or gender. Equally, creating the educational basis for critical and creative thinking and developing the personal capacity and confidence for life-long learning will be undermined if bullying or harassment on the basis of any diverse quality is tolerated and not addressed.
The economic significance of equality and diversity can be observed across other policy areas also. Many of companies in the advanced sectors of the knowledge economy have strong diversity policies which are considered essential not only for recruitment and retention, but also for creating the conditions under which innovation can thrive. These policies will be undermined if the city or country in which the firms locate is perceived or experienced by diverse workers as hostile or unsafe.
US economist Richard Florida has identified a broader impact of what he describes as ‘tolerance of difference’, namely that tolerance and acceptance of diversity is seen by companies and people as an indicator of an underlying culture and eco-system that is conducive to creativity, a key quality driving new economic sectors. Florida states: “Economic growth in the Creative Economy is driven by 3T’s: Technology, Talent and Tolerance….. But technology and talent have been mainly seen as stocks that accumulate in regions or nations. In reality both technology and talent are flows. The ability to capture these flows requires understanding the third T, tolerance, the openness of a place to new ideas and new people. Places increase their ability to capture these flows by being open to the widest range of people across categories of ethnicity, race, national origin, age, social class and sexual orientation.”
Viewing equality and diversity in social justice terms and as key components of our economic infrastructure is a kind of policy shift, or at least a change in thinking, that has happened in other policy areas. As Professor Frances Ruane, Director of the ESRI, has noted in relation to education:
“The notion that human capital is our key economic factor is now being acknowledged widely. I was on some government committees in the mid 1990s and expenditure on education was still being seen at that time as social expenditure. It was only when the skills shortages came to light some years later that people began to link education to growth and that led to its economic importance being appreciated”.
Eoin Collins is Director of Policy Change with GLEN.
A theme consistently highlighted in a broad range of economic development and recovery strategies produced by Government and policy bodies, including the NESC and the ESRI, is that Ireland has moved to a period where competitiveness will be based on the application of knowledge, creativity and a highly skilled, creative and adaptable workforce. To develop the advanced sectors, where skill has become a more central factor of production, a key challenge for policy makers across a whole range of sectors is how to nurture, attract and retain the skills on which these sectors depend.
Supporting diversity and equality, (for example across the grounds of the equality legislation), is an important factor in meeting this challenge. For example, meeting the targets set by government for education at all levels, including lifelong learning, will be diminished if areas of education are considered appropriate for one age group or gender. Equally, creating the educational basis for critical and creative thinking and developing the personal capacity and confidence for life-long learning will be undermined if bullying or harassment on the basis of any diverse quality is tolerated and not addressed.
The economic significance of equality and diversity can be observed across other policy areas also. Many of companies in the advanced sectors of the knowledge economy have strong diversity policies which are considered essential not only for recruitment and retention, but also for creating the conditions under which innovation can thrive. These policies will be undermined if the city or country in which the firms locate is perceived or experienced by diverse workers as hostile or unsafe.
US economist Richard Florida has identified a broader impact of what he describes as ‘tolerance of difference’, namely that tolerance and acceptance of diversity is seen by companies and people as an indicator of an underlying culture and eco-system that is conducive to creativity, a key quality driving new economic sectors. Florida states: “Economic growth in the Creative Economy is driven by 3T’s: Technology, Talent and Tolerance….. But technology and talent have been mainly seen as stocks that accumulate in regions or nations. In reality both technology and talent are flows. The ability to capture these flows requires understanding the third T, tolerance, the openness of a place to new ideas and new people. Places increase their ability to capture these flows by being open to the widest range of people across categories of ethnicity, race, national origin, age, social class and sexual orientation.”
Viewing equality and diversity in social justice terms and as key components of our economic infrastructure is a kind of policy shift, or at least a change in thinking, that has happened in other policy areas. As Professor Frances Ruane, Director of the ESRI, has noted in relation to education:
“The notion that human capital is our key economic factor is now being acknowledged widely. I was on some government committees in the mid 1990s and expenditure on education was still being seen at that time as social expenditure. It was only when the skills shortages came to light some years later that people began to link education to growth and that led to its economic importance being appreciated”.
Eoin Collins is Director of Policy Change with GLEN.
Tuesday, 9 June 2009
Culture and equality
Slí Eile: An article in the current edition of the Economist reports research on the relationship between inherent cultural norms and attitudes towards equality. Are some cultures inherently more disposed towards equality than others?
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