Households with two adults and children have suffered the most under austerity measures introduced in successive budgets since the downturn in the economy in 2008.
A study by the Economic and Social Research Institute shows that families with children have experienced almost a 12% decrease in income over the past four years. In contrast, a single, retired person has only seen a 1.6% reduction in their income over the same period.
The ESRI research also reveals that people on low income suffered a disproportionate reduction in their earnings than those on high incomes in the last budget.
However, the same research reveals that low earners experienced the smallest decline in income as a result of austerity measures imposed in recent years.
Losses imposed by tax and welfare policy have been greatest on the rich who have seen average earnings drop by 12% on average over the last four years.
In contrast, the least impact has been experienced by low earners who suffered just a 4% decline on average in income over the period.
Increases in income tax, the elimination of the PRSI ceiling and the introduction of the Universal Social Charge, coupled with increases in old age pension rates contributed to the results.
The ESRI paper entitled "Distributional Impact of Tax, Welfare and Public Sector Pay Policies 2009-2012" shows a combination of indirect taxes and welfare cuts in the most recent budget resulted in an average reduction of 2.5% in income for low earners compared with just a 0.75% drop for high earners.
"These results reflect the fact that increases in indirect taxes are regressive, and that cuts in welfare have a greater impact on low income groups," said the report.
Among welfare measures cut in the budget were child benefit payments to families with three or more children, the rent supplement scheme, the one parent family benefit, as well as reduction in the fuel allowance and back to school scheme. There were also increases in VAT and carbon tax as well as the introduction of the household charge.
Although public sector pay cuts including the imposition of a pension levy for state workers had little impact on low income households, they had a more notable effect on high income families.
A study of austerity measures imposed in five other EU countries, including Spain and Greece, show that their impact in Ireland has been among the most progressive — (those on lower incomes suffer the least).
In Greece, pension cuts were a big feature of cuts in Government funding and older Greeks have fared worse than most other groups. In Ireland and most other countries, the opposite has been the case with households with children having fared significantly worse than average, while pensioners have experienced the least proportional drop in income.
a d v e r t i s e m e n t
This appeared in the printed version of the Irish Examiner Friday, February 24, 2012
