Home > Banks and the Economy, Croke Park Deal, Public Service, TUI > Some facts about the recession (In no particular order) Eddie Conlon

Some facts about the recession (In no particular order) Eddie Conlon

Some facts about the recession – Drafted by Eddie Conlon TUI

The Public Sector
Far from what the government would have us believe the Irish Public Sector is not bloated. The 2008 OECD Review of public services showed that spending on public services in Ireland in 2005 was third lowest of 25 OECD countries.
CSO data show s that current public spending dropped from 33.6% of GDP in 1996 to 28.5% in 2005.
According to CSO between December 08 and Sept 09 public sector numbers have fallen by 12,400. In education the reduction was 7,800.
Recent EU data shows that spending on social protection in Ireland was 18.2% of GDP in 2006 compared to an EU average of 27%. Welfare rates are the fifth lowest in the EU.

Pay
In response to a Dail Question from Joan Burton on 21 Oct 2009 the following information was given in relation to the incomes in the public sector and more generally
Income Tax Year 2007

Public Sector Employees All Employees
Range of Gross income Total Number Total Number
€0 – €10,000 49,747 414,298
€10,001 – €20,000 64,116 392,697
€20,001 – €30,000 69,766 379,180
€30,001 – €40,000 69,954 263,576
€40,001 – €50,000 55,586 167,904
€50,001 – €60,000 34,562 103,273
€60,001 – €70,000 22,555 67,776
€70,001 – €80,000 15,635 45,237
€80,001 – €90,000 10,379 29,668
€90,001 – €100,000 7,045 19,868
Over 100,000 15,278 46,794
Totals 414,623 1,930,271

In addition, the number of all PAYE workers earning less than the average industrial wage of €32,730 in 2007 was 1,267,865, of which 201,727 were public sector employees.
We can see from this that:
Many workers are very are very poorly paid:
67% earn less than the average industrial wage (compare this with the top earners below)
49% of public servants earn less than the average industrial wage. 75% earn less than 50,000
High Earners
Of those who earn over 100,000
33% are in the public sector while 67% are in the private sector. That’s 31,516 in the private sector.
According to the Revenue Commissioners there were 20,840 self employed people earning over 100,000 in 2004
Its hard to argue that all public sector workers should take all the pain while those on over 100,000 in the private sector are asked for nothing.

Tax and High Earners (2008) (see Vincent Browne Irish Times 18 March 2009)

The government has been arguing that the top 6% of earners pay almost half of all income tax and therefore it cant be increased but:
The top 6% with over 100,000 get 28% of total income, an average of 190,699 each: That’s 13 times the average for the bottom 50% of earners
The top 6% pay on average 27% of their income in tax
24,000 earn between 200 and 500,000: an average of 204,207 (14 times the average of the bottom 50%)
3946 earn between 500,000 and 1 million: average = 464,452 (32 times…)
1447 earn 1m + : average = 1.6m (110 times the average…)
If you were to increase the proportion of their income they pay in tax from 27% to 32% (and why stop there) you would raise 1.5b (all the pay cuts for the public sector or all the cuts in services)
In a later article in the Irish Times (Com Keena 20/3/2009) it emerged that the Revenue figures on which Brownes analysis was based were based on taxable units (in many cases couples) rather than individual taxpayers.
The data for individuals shows that far from the top earners with over 100,000 paying half of all tax they only pay 31.4%. Further
Those between 30 and 100,000 pay 57% of income tax
Those between 30 and 50,000 have 30% of income and pay 28% of all income tax.
9,129 people (0.3% of earners) earned 6.7b (6.6% of all income)

The Super Rich

In 2007
5% had 40% of all wealth
That’s 320b or an average of 4.2b per household
There were 33,000 millionaires
UNITE has estimated that their assets are probably now worth about 250b and have called for a levy on them.
ICTU say in their 10 Point Plan For A Better Fairer Way
“We know that the top 1 per cent of the population made about €75 billion during the boom era. Specifically, it can be computed from revenue data that a minimum of €66 billion was made by individuals between 2002 and 2008 – almost €10 billion a year. The top 1 per cent in 2007 held 20 per cent of the wealth, the top 2 per cent held 30 per cent and the top 5 per cent held 40 per
cent. How can this money have disappeared because for every developer who paid over the odds for land there had to be an owner who received the money? “

The rich list printed in the Sunday Independent at the end of March shows that the top 300 have €50 billion between them

The most recent budget in December took €73m off millionaires but €760m of social welfare recipients.
ICTU claim that in 2009 the share of wages in national income fell by €5b while the share of profits from trade, farms and rent increased by €3 billion.

Unemployment
In the year to March 2010 there was an increase in the Live Register of 65,918 (+17.9%).
There are 433,000 people unemployed.

In 2009 unemployment increased by nearly 105,000. It has more than doubled since March 2008. It has increased by 236,000 since March 2008. It was 5.2% then and is now 13.4%.

In the 1980s it peaked at 226,000 and took four years to rise from 6% (1979) to 14% (1984).

Cutting Your Way Out of the Boom: Borrowing and Debt
While the deficit is not the key issue for us, unemployment is, it is quite clear that the policy the government is pursuing won’t even reduce the deficit. How do we know this?
First, we have had three budgets since October 08 and after each the deficit has got worse.
In July 08 the deficit was 6.7b, in July 09 it was 16.4b and in Oct it was 20b. It was 24.6 b in December 2009.
Government receipts for the first 3 months of 2101 are down by 3.9b. Tax receipts are 15% lower than for the same period last year.
Remember that the deficit in 2010 included 4b paid to Anglo Irish Bank and 3b to recapitalise AIB and Bank of Ireland. (These are the sums that are coming out of current revenue. Further payments totalling 4b are being made for the National Pension Reserve Fund)
Secondly, in April the ESRI looked at some proposals that would save the government €1b . One of them was a reduction of 17,000 jobs in health and education. This happens to be the same number proposed by the Mc Carthy Report.
The ESRI analysis showed that after two years this proposal would lead to:
1% fall in GDP (1.2b), a 1% fall in consumption (750m) and an increase in unemployment of 0.7%.
Given all this it only leads to a 0.1% fall in the borrowing requirement. A cut of 1b in fact turns into a saving of 490m but GDP goes down. We cut national income by 1.2b to make a saving of 490m.
They also looked at the impact of a 3.8% wage cut in the public sector. This lead to a fall of 0.4% in GNP. 0.9% in consumption and 0.1% in unemployment. The borrowing requirement falls by a mere 0.3%
The ESRI looked at a range of proposals (not proposals we would make) such as pay cuts, a property tax, a carbon tax and come to the conclusion that “cuts in public sector employment have the biggest negative impact on GDP and GNP both in the short-term and the long-term”.
UNITE have argued that there is a lot of scaremongering about the level of debt. EU projections produced in Spring 2009 show that overall debt as a percentage of GDP will be 79.4% in the EU (84% in the Euro zone) and 73% in Ireland. We could borrow 12b over the above the governments projections and still be below the Eurozone average.

The table (below) from the ICTU document Congress 10 Point Plan For A Better Fairer Way published November 2, 2009 shows projected level of debt in 2010 in the EU.


Some arguments

1.The problem in the economy is lack of demand not the debt. We need productive investment to create jobs and increase demand. We can barrow and raise taxes from the rich to do so.
2.Its mad to cut the income of poor people and low and middle earners as they spend most of their income. The rich don’t. That’s why we should tax their income and assets because they are not being used productively.
3.Cutting public services now will lead to long-term damage. We are still recovering from cuts in the health services in the 1980s.
4.Its completely inequitable that millionaires pay tax at the same rate as those earning modest incomes. The Standard Rate Cut Off for a single person is 36,400 while it is 45,400 for a married couple with one person working.

Eddie Conlon March 2010

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  1. noelle b
    April 21, 2010 at 11:03 am

    At last someone is telling the truth. After 3 increments and payment for prosperity rises during the tiger years I am still earning 11thousand less per anum than the average industrial wage and that was before levy s(Taxes called something different) and cuts.

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