Slí Eile: Economics is a neutral science - don't you know. ESRI authors Anne Jennings, Seán Lyons and Richard Tol have just completed a working paper 'Price Deflation and Income Distribution'. Writing, today, on irisheconomy.ie Richard Tol sayings that declares that:
A 3% cut in nominal benefits would therefore mean that the poorest people in Ireland would see a rise in their real income.They argue that:
Therefore if one wishes to justify a reduction in social welfare rates by falling prices, a 3% reduction might be more appropriate.Just - if one wishes - here is our best advice like. No doubt we will hear about 'research by the ESRI shows...' for the coming months as the ground is prepared for a cut in welfare payments in December (by 3% mind you instead of 5%).
They acknowledge, however, that price deflation has been less for lower income groups than for higher income groups but the extent of price deflation in the 12-month period ending June 2009 is such that a cut of 3% in nominal benefits allied to income-related adjustments to public authority rent would leave welfare recipients better off - just a tiny bit but enough to exceed 0% by a few decimal places when the adjustment is factored in. charming.
How many readers of this site and irisheconomy are in the bottom income decile? Could we hear from such persons about what it is like to live on something like €200 to €500 per week?
A major deficiency in the timely approach by the ESRI authors is that nobody knows for sure how incomes have evolved over the last 12 months. We have a measure of price inflation (or deflation) across 13 household spending categories but we don't have up to date measures of income - wage and other sources - over the last 12 months. Another major deficiency is that no account is taken of the existing distribution of income. Is it just, acceptable, workable? And who is to say that a 3% reduction for the bottom decile is the same as a 3% cut for the higher top income decile?
I regard any suggestion of a cut in social welfare payments to be an immoral 'haircut' - especially coming from sections of society who haven't got a clue what it is like to live in income poverty already.
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