Wednesday, November 30, 2011

Income inequality in Ireland: bounces WAY back up

I wrote here before the surprising observation that income inequality seemed to have been falling in Ireland since 2006. I now see the preliminary results from the Central Statistics Office's Survey on Income and Living Conditions has another surprise:
There was an increase in income inequality between 2009 and 2010 as shown by the quintile share ratio. The ratio showed that the average income of those in the highest income quintile was 5.5 times that of those in the lowest income quintile. The ratio was 4.3 one year earlier.
That seems a stark shift in direction! Further results show that the Gini coefficient, which had fallen year on year until 2009, shot back up in 2010, to its highest level that these results - dating back to 2004 - show. So my talk about falling inequality rates that nobody seemed to be noticing is turned on its head: inequality seems to have bounced back.
The general look in this report is gloomy. The consistent poverty rate was up in 2010 to 6.2%, though oddly this is lower than it was in 2006, at the height of the boom. The deprivation rate (that individuals have experienced two or more types of listed forms of deprivation) is way up to 22.5%, from 17.1% in 2009 and a recent low of 11.8% in 2007.

It's not surprising, perhaps, to see rising poverty rates in a climate of high unemployment. The jump over a single year in inequality is a strange one, though. Any thoughts on explanations? Did the rich mostly get richer, or the poor mostly get poorer?

Some people were amazed, others annoyed, when I pointed to the drift towards greater equality. I suppose many had an instinctive sense that inequality was increasing, and I dismissed that instinct in the face of CSO's data. But maybe the instincts were right, the data simply too dated (back to 2009) to be relevant.

2 comments:

  1. "The consistent poverty rate was up in 2010 to 6.2%, though oddly this is lower than it was in 2006, at the height of the boom".

    This is most likely due to how consistent poverty is calculated (See below). Basically, as average income falls, an individual or household income can find itself above the relative income poverty line. For example, family A on X income in 2006 were below 40% of the national average and therefore were in relative income poverty. The same family on the same income in 2010 could find themselves now above the 40% cut-off as the national average income fell and therefore no they are no longer considered to be in relative poverty. 'Relative' is the key factor!

    Below is taken from the Combat Poverty Agency......
    Consistent Poverty
    This is also known as the combined income-deprivation measure of poverty. It combines relative income poverty with relative deprivation. People whose income falls below the relative income poverty line and who also experience relative deprivation are regarded as living in consistent poverty.

    Relative Income Poverty
    This is also known as relative poverty, income poverty or risk of poverty. It is measured by setting a relative income poverty line, which shows how an individual's or household's income compares to the average. This line is usually set at a level between 40% and 70% of the average income.

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  2. Hey, thanks for that and good point. I should have double-checked that, I'd wrongly assumed that a measure called 'consistent' poverty would have no association with relative poverty at all.

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