Notes On The Front

The Contrived Centre

The comment by Garda Commissioner that there were far left elements in the anti-lockdown riots in Dublin yesterday has produced considerable social media debate and raised a number of questions.  Who or what are these elements?  What does ‘far left’ mean, anyway? 

Away from the particulars of the riot, it also provides an insight into an ideological discourse aimed at limiting political options.  The association of far left and far right is promoted by those seeking to occupy a contrived centre ground.  For instance, Paschal Donohoe articulates the politics of a ‘radical centre’ (a phrase was used by Liam Cosgrave so it’s not new).  This is more than just branding.

And it is about more than just isolating a handful of parties and activists – a so-called ‘far left’.  It is about constructing a series of associations which can, at its extreme, smear all progressives.  Where do the boundaries begin and end:  from soft left to mainstream left to hard left to far left?  Throw in the term ‘populist’ (which has lost all meaning when it is just used to attack ideas that one doesn’t like) and you have a purposeful strategy.

This blurring has the potential to dismiss all politics with solidarity at its core as being outside the frame of ‘honest, decent’ politics.  And it warns parties and activists not to stray too far from an imagined centre.  Technical questions are allowed; transformative ones are, well, ‘populist’, ‘idealistic’, even ‘dangerous’ or whatever some desultory thesaurus throws out. 

It can become comical when listening to a Fine Gael TD (I forget who) recently describing his party as ‘centrist’, Fianna Fail as ‘centre-left’ and all others further on the scale – all the way to the far left.  How blessed must we be not to have a party of the ‘Right’ in our politics.

But it can have devastating effects when, during the last crisis, politicians claimed to take ‘tough’ decisions (i.e. austerity) with all others being cowardly or irresponsible.  Unfortunately, we couldn’t get the debate to consider the wrong decisions.

In this fantasy world of a donut-shaped ideological spectrum, to go too far down a transformative path risks linking up with the far-right.  Safer to stay cosseted in the centre.  Anything outside is darkness and wolves.

How do we confront this?  To deny a language is to be trapped in its vocabulary.  We must construct a new language, one that articulates policy options as both desirable and feasible (one without the other only pulls us back to the ‘centre’).  In other words, we must speak a common sense.

In an oligopolistic market, doesn’t it make sense for the state to retain its majority holding in a major bank, even transform it into a fully public bank?  Doesn’t it make sense to build public housing on public lands and rent units out at cost?  People shouldn’t lose their wage if they become ill – is that centre-left, far-left?  Progressive politics is the new common sense.  In this language descriptors such as ‘centre-common sense’ or ‘far-common sense’ make no sense.

Then it becomes a small step to describe Harris’ comments – and all those who propagate a contrived centre - as so much gobbledygook. 

* * *

NOTE:  The Garda Commissioner has 'clarified' his remarks this morning. 

'. . . despite initial indications, following further investigations, there is no corroborated evidence of extreme left factions being involved.'

Initial indications?  Corroborated evidence?  While the clarification is welcomed, it raises even more questions.

 

 

Low, Unequal and Going Backwards

Ireland is a low-earnings economy. 

There’s Ireland – at the bottom of our peer group table.  Median wages would have to increase by 16 percent to reach our peer group average (median earnings are that point where half of employees earns less and the other half earns more).

When compared to the entire EU, Ireland doesn’t fare well either.  We are only a small percentage (3 percent) above the overall EU average.  And that includes much poorer economies such as Poland, Romania, Greece, Portugal and Bulgaria. 

Not only are we a low earnings economy, we are a highly unequal economy.

In Ireland, employees the 9^th decile earns nearly four times more than employees in the 1^st decile.  The peer group average is less than three times while in Sweden it is twice.  We’d have to cut earnings inequality by half to compete for best practice.

We can get a further insight into our earnings inequality by comparing hourly earnings in the 1^st and 9^th deciles.

In the lowest-earning decile, Irish earnings are at the bottom of the table.  However, when we come to the 9^th decile, Irish earnings rank second.  This helps explain our high inequality ratio.  For a contrast, note Sweden’s rankings:  2^nd highest among the lowest earners and bottom in the 9^th decile.

It’s bad enough that we are a low earnings, highly unequal economy.  Another problem is that we seem to be going backwards.  Whether measured in Euros or purchasing power parities (PPS), average median earnings are falling over the medium term.  Between 2006 and 2018:

• Average median earnings fell by 0.8 percent (Euros)
• Average median earnings fell by 9.6 percent (PPS)

This was during a period when average median earnings (Euros) rose by 20 to 30 percent in other small open economies (Austria, Belgium, Denmark, Finland and Sweden).

Just to note:  we have to be cautious about earnings trends due to the composition effect.  For instance, if it was low-paid sectors or occupations that suffered a faster decline in employment than the national average then the composition of the workforce that we are measuring has changed.  And with fewer low-paid, the overall average would rise.

It’s one thing to point out the fact of wage inequality; it’s quite another to construct effective policies to close that gap.  There is a tendency to see low wages and earnings through the lens of the national minimum wage.  No doubt statutory wage floors can be a significant tool in the fight against low pay. 

However, it is worth noting that the economies with the lowest levels of earnings inequality and the highest level of earnings in the 1^st decile – Denmark, Finland and Sweden – do not have a statutory minimum wage.  How do they do it?  Through extensive collective bargaining where employees in the lowest paid sectors have a voice; combined with a more egalitarian political culture.

To close inequality gap, to raise people’s earnings and living standards we need a range of policy instruments.  But clearly, giving workers – especially those in low paid sectors – the tools that enable them to fight low pay is one of the best ways to get out of our low earnings rut. In short, we need more democracy in the workplace.

The Gini Coefficient and Sushi

When Marge suggests the family go out to a newly opened sushi restaurant Bart demurs.

Bart:  ‘Sushi?  Maybe this is just something one hears on the playground, but isn't that raw fish?’

Lisa:  ‘As usual, the playground has the facts right, but misses the point entirely.’

It started with Seamus Coffey’s piece in RTE’s Brainstorm series.  This was picked up by Pat Leahy.  NERI’s Ciaran Nugent, TASC’s Robert Sweeney and Mick Clifford in the Examiner have waded in while Conor McCabe has been making provocative observations on Facebook around this issue.  Who’d have thought the Gini coefficient would cause such a debate.

The Gini coefficient is intended to measure income inequality in society.  It ranks countries on a scale of 0 (where everyone has the same income) to 1 where only person in the group possesses all the income; that is, between perfect income equality and perfect inequality.  The lower the rating, the more ‘equal’ we are.

Seamus sparked the recent debate by claiming that income inequality was falling in Ireland, contrasted with other countries where inequality is rising. 

‘ . . this reduction in income inequality in Ireland gets little domestic coverage. This is surprising given how frequently inequality features on the op-ed pages of our newspapers and in discussions of policy and social outcomes on the broadcast media. At times, it seems like some contributors are more interested in outrage than outcomes and want to ignore the impact of policies perhaps because of their attitude to the people behind them.’

It would appear that Seamus is right – the Gini coefficient has declined.

In addition, another measure of income inequality - the income quintile share ratio which measures the ratio between the top and bottom 20 percent income quintiles - shows a similar trajectory with the Irish ratio falling since the early 2000s so that now it is below (that is, more ‘egalitarian’) than Sweden and Denmark.

Here it is good to remember a fundamental rule of statistics.  Data tells you what it tells you.  It measures what it measures.  The Gini coefficient measures a part of inequality (i.e. income) it does not measure all inequality relationships: wealth, wages, education, access to public services, living standards.  No one measurement can capture all that.  Each metric comes with insights and limitations.  The Gini coefficient has been criticised by economists and statisticians (what measurement hasn’t; think GDP). One researcher stated, after reviewing a range of income inequality measurements stated that ‘income distributions cannot be perfectly summarised in a single number’.

But a more serious problem is how we measure the impact of public services on income distribution, both on income and living standards.

Public Services

There is one major flaw in the Gini coefficient and the income quintile share ratio.  They do not include all income – in particular, the income, or in-kind benefit, from public services. 

Take childcare for example:  childcare in Ireland is the least subsidised in the EU which results in the highest fees.  In many other countries childcare is delivered through the public sector at below-market rates, or heavily regulated private and non-profit providers.  Let’s assume that it costs €866 per month (o €200 per week) to produce a full-time childcare place.

• Irish households pay, on average, €771 a month for a full-time childcare place

• Danish households pay, on average, €282 a month

In effect, Irish households receive a cash-equivalent or in-kind subsidy of €62 a month (the gap between the production cost and household payment) while the Danish household receives a subsidy of €585 a month.  Traditional income equality measurements do not pick this up as it can be categorised as a production subsidy or public service expenditure rather than a cash-equivalent income.  Amir Shohan writes:

‘Neglecting public, in-kind benefits when measuring income might give an incomplete picture of the distribution of economic inequality because in-kind benefits such as education, health insurance, and other public services actually constitute approximately one-half of the welfare state transfers in developed countries.’

Let’s look at the impact pre and post-childcare subsidy on households.  For this exercise I assume two households with €90,000 and €45,000 disposable income in both Denmark and Ireland.

While the ratio of disposable income between the Danish and Irish households are the same (90/45 or 2.0), when we include the subsidy to childcare costs, the Danish ratio falls well below the Irish ratio; that is income inequality is reduced.   That is because the income benefits of public services are highly progressive.  This simplistic example shows the impact on household income/living standards from public consumption.

This is just childcare.  The income/in-kind benefit delivered through other services can have a real impact on equality:  GP, healthcare, and prescription medicine; education (schoolbooks, transport, ‘voluntary’ contributions, third-level fees); public transport (e.g. in Copenhagen a monthly pass costs €68, in Dublin it is €130); social, affordable and cooperative housing, etc.  Income realised, or expenditure saved, from public services have significant, inequality-eroding impacts.  There is no overall database to inform us.

Eurostat and the OECD have acknowledged this omission and have attempted to measure this but it is extremely difficult, with various methodologies being employed and caveats aplenty.  In addition, both bodies refer to ‘service quality’.  There is little advantage in providing something for free but forcing people to wait for months and years to access the service – so much so that they are forced into the private sector (e.g. Irish healthcare, housing).  

In short, the Gini coefficient is not a comprehensive measure of inequality, only income inequality – and it is not even a comprehensive measure of that.

Living Standards

That failure to measure the impact of public services may help explain our poor living standard rankings.   For instance, with a Gini coefficient close to some Nordic countries, do we achieve Nordic-level living standards?

• The Gini coefficient in Ireland is only slightly above Danish levels (28.3 and 27.5 respectively)
• The income quintile share in Ireland is slightly below Danish levels (4.03 and 4.09 respectively)

Given this, we should expect living standard measurements to be similar.  They are not.

Denmark and Ireland may have similar income inequality measurements but when it comes to some of the living standard indicators, the two are wide apart (here and here and here and here). This should cause its own debate:  if Ireland has a decent ranking in income inequality, why can’t we translate this into comparable living standards.

It may be that reduced inequality needs to be baked into the economy and society before we see significant improvements in living standards.  Or maybe traditional income inequality indicators miss key inputs (e.g. public services) so that statistical income measurements are not related to what is happening on the ground.  Or maybe there is some other factor.  This should invite us to work harder to make the connections rather than claiming a single indicator as the definitive measure.  Indeed, doing the latter can create popular cynicism when data does not rhyme with lived experience.

We could have a situation where a government de-commodifies a number of important economic and social activities (that is, provide them on the basis of need rather than income):  housing, health, education, telecommunications (e.g. broadband), childcare, etc.  This provision could substantially increase living standards across-the-board - where deprivation is suppressed and hardly anyone has difficulty making ends meet.  But conventional inequality measurements don’t include this de-commodification and, therefore, give an incomplete picture.

Yes, sushi is raw fish.  But as the wise Lisa points out, if we focus on the particulars of one ‘fact’, we are in danger of missing the point.  Entirely.