The Economic Impact of the Recession on Women
Paula Clancy, Director, TASC
TASC is an independent think tank working for a more equal society. It does research to develop evidence-based policy proposals that we think will make Ireland a more equal society. We particularly focus on policies to improve economic equality.
Economic equality and gender equality of course are two sides of the same coin. Right now, the primary focus of our work is to identify solutions to the present economic crisis. But to do so in a way that shows how to achieve recovery with equality.
I would like to begin by saying a couple of things about the broad macro- economic context.
We have had two years of austerity, taking €14.5 b out of the economy. All the evidence shows that this hasn’t worked but in fact has made things worse. Economic growth has shrunk and unemployment has grown. And, as the other speakers have made clear, women are deeply affected by both.
TASC’s analysis of the 2011 budget shows that we are now moving to not just austerity but to extreme austerity. The four year plan promises us much more of the same. And Ireland has now signed up to an unsustainable deal with the EU and IMF, which at best is likely to mean economic stagnation for decades to come and at worst we could be heading for what is being called a ‘disorderly’ default down the line.
And for all this pain, the Four-Year plan offers little in the way of either economic growth or an increase in jobs any time soon. The European Commission has issued a growth estimate for next year of less than 1per cent – much less than government projections. Government’s own estimates show that unemployment will be at 10% in 2014.
Even this unemployment level conceals the real story because it estimates an emigration level of 100,000 people over the period. 100,000 is huge. It is the population of the city of Limerick. Building your plans around this assumption is in itself a terrible indictment. But, in fact, others predict that emigration is already at this level and will be much worse in the years to come. For example, take Mobile phone figures which are a very good barometer of emigration. This year, mobile phone usage in Ireland decreased by 79,000.
There is an alternative. TASC argues that we can tackle the deficit and do it in a way which helps to get us back to economic growth and to jobs growth. And we can do both of these in a way that gets us on a path to a more equal society.
I will elaborate on what should be done. But let me start with why it should be done.
The first reason we need this alternative is, that although we had a decade of economic growth, with many people doing very well, income inequality in Ireland was relatively high as we went into this recession.
The top ten percent had a disposable income that was more than 11 times that of the bottom ten per cent. TASC, along with ICTU produced the HEAP chart at the end of 2009 which analysed income inequality. It demonstrated very clearly that women dominate among the lower paid and men are better represented at higher levels. This of course is pre-recession. The situation is now likely to be much worse, particularly when we factor in the effects of this budget.
Consider just three facts:
Consider that for the self employed, the gap between those on €10k and those on €1m has widened by 11%.
This is because of the way in which the new universal social charge is structured. Once you hit 200 thousand euro and if you are self employed (and many of those earning at this level are) then you start to gain in income rather than lose.
And consider that as a result of the budget changes the income gain for one person on an income of €1m euro is equivalent to the loss that 28 people on the minimum wage will have to bear. We all know that there are very few people earning €1m and even fewer women. We also know that around 50,000 people earn the minimum wage, the majority of whom are women.
And then consider the much touted reduction in the Taoiseach’s salary. This reduction of 6% is just half the 12 % reduction of those on the minimum wage. In fact, in 2010, the Taoiseach’s salary was 13 times the minimum wage and will be 14 times in 2011.
The second reason for an alternative is that, throughout the boom, Ireland followed the low tax/low spend, neo-liberal model.
Take tax.
Throughout the boom, Ireland’s level of tax receipts was around 10 percentage points lower than the E.U. 15 average. Now, even this low level of tax revenue has collapsed. – we have lost a massive one-third of revenue in just 2 years.
Now we are starting to address this. But in ways that are damaging to the economy and to equality. The focus in this year’s budget is on income tax and the introduction of the new social insurance charge . Income tax is a tax on work and this is one of the taxes with most impact on economic growth.
And the way in which the budget changes disproportionately targets lower paid people means that this will take us backwards in terms of equality
Take public spending. Ireland has consistently had the third lowest average level of public spending in the OECD. It is true, that this is in part attributable to low social welfare spending, because of full employment and fewer pensioners. And, it is true that we also had low debt interest repayments and defence spending.
However, we also failed to use this positive situation to allow us to invest adequately in any number of socially desirable ways – for example, childcare – comes to mind as a particularly glaring gap. And now, with budget 2011, we have for the first time a charge on primary school children using school buses and a reduction on child benefit.
Public expenditure in Ireland has, of course, dramatically increased since 2008.
But, when the huge rise in unemployment payments is stripped out, the level of public spending is considerably reduced.
Putting the elements of this picture together a few things are clear.
Clearly we have to increase tax revenues if we want to maintain even the current level of public services, let alone get to European levels. This is important for equality in society as a whole and particularly for women who benefit most from public services.
Clearly, also, the way in which we increase revenue matters enormously, for equality as well as for economic recovery.
TASC’s proposals set out how this can be done. TASC argues for a budget package that would start to handle the deficit through progressive tax increases in the first instance rather than through cuts. For 2011, for example we proposed a progressive residential property tax and closing down tax breaks that primarily benefit the wealthy.
And we would also spend some of the little money left in the National Pensions Reserve Fund on a package of measures to maintain the jobs we have and to invest in new jobs.
Unfortunately Budget 2011 takes us in the wrong direction on both counts.
I would like to finish by saying that I think there is no doubt that we are in extraordinary times. The potential for new ideas to inform massive political change is real. Why do I think so? Because it has happened in other places.
Much has been said about how we got into this present crisis, but at the risk of over-simplification, I think it can be summed up as short term decision-making in the interests of those who have power and wealth .
And, who are the decision-makers? Well we all know that they include very very few women.
Earlier this year, TASC published a report called Mapping the Golden Circle. This was the first time in Ireland that the question of how many directors hold multiple positions on the boards of 40 of Ireland’s top private companies and state-owned bodies was examined empirically.
A small number of people – a network of 39 individuals – held multiple directorships on at least two boards across 33 of the 40 companies examined. The study showed that although only a small group of people, they tie together more than three-quarters (33) of the top companies we looked at.
The facts uncovered by the report allowed us to illustrate much of what had gone wrong with corporate governance in Ireland in the past.
One of the most striking facts is the small number of women on Boards – only 1 in 14 in the private sector; 1 in 5 in the public sector.
Not only have male dominated decisions got us into recession, but the political and business decisions about how we get out of recession continue to be made mostly by men.
We can do something about this. By using quotas through legislative change, Norway has increased its representation of women on boards of privately-owned companies from six per cent to 44 per cent in six years.
This is the kind of positive action can transform fear into hope. It’s the kind of positive action we badly need much much more of.
