Skip navigation

Tag Archives: inequality of income

On Sunday morning April 23rd 2017 Joanna Tuffy put a proposal to the Irish Labour Party Conference and it was adopted. If this decision is ignored, the Party can go on as before but if it is implemented, the Party will be changed.

Here’s the text:

“That Labour make measurable reduction of income inequality our basic objective. All policy proposals are then to be at least compatible with this objective and a year-on-year, measurable reduction in income inequality is to become a precondition for any talks on participation in government or on support for minority government. It is accepted that alterations in pay structures within the public service and/or within companies and organisations dependent on the state for finance or contracts may be implemented before more general changes in the wider economy.”

This conference decision has opened up a divide between Labour and all other Irish parties. It signals a refusal any longer to share their support for a meaningless “fairness” and to tolerate the restriction of equality to social concerns. It is a clear decision to move at last against the inequality that offends decent people day in, day out: the extraordinarily stable structure of income inequality – not the safely distant 1% but the gap between those on a minimum wage and those on high salaries.

The decision has three components.

The first changed the position of the Labour Party not to anything revolutionary but nevertheless to the start of something very different and radical: the reduction of income inequality. The reduction will at last become a topic of public controversy because this small party has made it its basic purpose and crucially has linked it to measurable change.

The second component addressed voting and the fraught question of coalition or support for a minority government. It says to potential voters that if you are offended by income inequality, Labour wants to begin reductions, that regardless of other compromises, without a commitment to have a year on year, measurable decrease in inequality of income, there will be no talks on government formation.

The third component is a matter of anticipating the whatabouters, the conservative messers who will try to prevent change by claiming that each and every move is “unfair”, that the whole nasty structure from, say, 15,000 per annum to 300,000 per annum must be maintained because to change any part of it would be – as usual – “unfair”.

So that’s it. It means change. Anyone who has been out talking to citizens knows that it is time to do this. There’s been obfuscation over the degree to which taxation is progressive and over the various methods of calculating inequality but it’s time to stop messing. The Labour Party’s basic aim is now the reduction of income inequality.

Thanks Joanna.

Dear Brendan,

When it comes to Labour’s approach to the next general election, I disagree profoundly with you. However, let me be clear from the outset that in the next election I will vote Labour and then transfer to Fine Gael. I will do so for the reasons that you outlined in your Irish Times article.* It is very important not to risk what has been achieved. So, how then do I disagree with you? I disagree on a more fundamental level. I disagree with your political outlook – your view of Labour’s purpose in entering coalition. In brief and I don’t mean to offend, I find you unnecessarily liberal and insufficiently socialist.

You see three main reasons for Labour being part of a new government: i) that proportional to its strength in the next Dáil, Labour will push FG in a leftward direction mostly to do with tax relief and improving state services; ii) that Labour has a particular interest in increasing employment; and iii) that Labour will try to have the 8th amendment to the constitution rescinded.

With the possible exception of i) these three are not specifically socialist and could be championed by any half decent liberal party. Indeed if the tax relief is given to middle earners as “middle” is currently understood and if income relativities within state employment remain unchanged, none of the three is specifically socialist.

Before looking at the three in a little detail it would be right to say why liberal as opposed to left ambitions are just not enough. The first reason is that we’re talking about the Labour Party and if it doesn’t have explicitly left ambitions, it has very little purpose. It becomes a caring liberal party among a number of liberal parties all of whom exist to advance liberal ambitions. Secondly, if Labour doesn’t offer left ambitions to the electorate, left voters have no one for whom to vote. No leftist would be attracted to FF or FG and no decent person would vote SF.** There is a group of small left parties but they offer no more than protest. Indeed their function in Ireland is to act as a lightning conductor for unhappiness and dissent.***

Turning now to your reasons for entering government, when Labour talks in clichéd terms about tax relief for low and middle earners, it sounds like every other party in the country. This is because “middle” is not to be taken literally. In Ireland and indeed in Britain “middle income” includes the majority of the rich.**** I can say this because I regard the top 10% of earners as rich and their inclusion within “middle income” as a distortion of public discourse.

When Labour talks about expanding state services without expressing an intention to change pay structures within state employment, the party again sounds like every other party. Worse than that, it expresses an intention to maintain the practice of becoming rich – entering that top decile – through public service. It also shows disdain for those who object to rich public servants along with ludicrous pensions and for those who take seriously the notion that apart from a good standard of living, being a public servant is not primarily about maximising income.

It is hard to be critical of a Labour Party minister being enthusiastic about job creation. Indeed in present circumstances it might be hard to be critical of anyone being enthusiastic about job creation. That’s the point: everyone is in favour of job creation. Liberals are very much in favour of job creation; they call it trickle-down economics. You and every party member know that that creates inequality and that it would be quite simply evasive to say that redistribution and/or labour law must wait until near-enough full employment is reached.

Having opposed Labour’s involvement in liberal objectives, it might seem strange that I would support your ambition to rescind the 8th (“pro-life”) amendment to the constitution. Labour has, however, considerable history on this, being the one party right at the outset to refuse extreme Catholicism its demand to insert a ban on abortion into the constitution. Opposition to this and the sorry, cruel mess it created has been a feature of the Party’s recent history. That campaigning to delete the 8th amendment might attract liberal voters is a bonus but fundamentally it is the moral thing to do.

This amendment then should be the one point of contact between liberal Ireland and the Labour Party, a shared ambition.

What then of your two other ambitions? They are liberal and could be decent. The problem is that in themselves they support, if not promote, economic inequality, specifically inequality of income.

Labour could turn firmly left by stating a modest ambition to reduce inequality of income. This would also drive a left-right wedge into Irish political discourse and at the same time give voters who dislike the existing structure of inequality something for which to vote.

What then of coalition? Few journalists seem to realise that Labour cannot enter coalition without the approval of a full delegate conference. Regardless of what happens by way of voting pacts or suggestions, if the numbers after an election suggest a coalition which includes Labour, there will be negotiations to reach an agreed programme for government. In other words, journalists are failing to emphasise that Labour is precluded by its own rules from doing other than campaigning alone.

However, it is no longer credible to ask for voter support for a whole raft of policies and say that implementation will be proportional to whatever numerical strength the party achieves at election. Voters need to know in advance that if Labour enters coalition something particular will happen no matter how many or few Labour TDs are returned.

We are therefore talking about preconditions. They have to be few and focussed – and this is crucial: they have to be divisive.

The liberal one is already chosen: a government supported referendum to remove the 8th amendment from the constitution. Alone that’s neither sufficient nor leftist. The problem with the other ambitions, remember, was inequality. A second pre-condition should be a programmatic reduction – year on year over the lifetime of a government – of inequality of income.

There’s no reason to be side-tracked in controversy over measurement. Of course there is a number of measurements of inequality from which to choose but let’s not mess about; we all understand the basic objective.

The reduction demanded cannot be big or coalition could be refused by any liberal partner. Each year’s target for reduction will have to be modest. The point is to set Ireland on a radical new path to reduce inequality of income, to make the totality of government policy subject to this modest ambition, to place income inequality at the core of public discourse, to divide Irish society on the question of inequality and to give socialists and mild egalitarians something for which to vote.

Brendan, I’m not dismissive of this government’s achievement in restoring a liberal economy. I’m very aware of the threats to that progress. I’m not opposed to coalition; on the contrary I see it as the only route to leftward reforms. However, it’s time now to set out on that route: nothing revolutionary just a noticeable change in direction.

_______________________________________

* http://www.irishtimes.com/opinion/brendan-howlin-labour-and-fg-can-provide-state-with-vital-stability-1.2342504?fb_action_ids=10206995868311751&fb_action_types=og.recommends&fb_ref=.Ve1SQV6jS3M.like

** This might seem merely provocative. That is not the intention and I will argue it at length in a later blog.

*** Lightning conductor is an apt metaphor because these parties function along with media, activists and advocate groups to attract and conduct dissent harmlessly to ground, and maintain the structure of inequality.

**** https://colummccaffery.wordpress.com/2009/10/09/middle-income-and-a-distortion-of-public-debate/

It’s no wonder that market liberalism is almost unquestioned in Ireland. Liberals know how to use state power and institutions. Socialists in government need to watch them and see how it’s done.

Have a look at this: “The National Competitiveness Council was established by Government in 1997. It reports to the Taoiseach on key competitiveness issues facing the Irish economy and offers recommendations on policy actions required to enhance Ireland’s competitive position.” – http://www.competitiveness.ie/aboutus/

The establishment of a state council has institutionalised competitiveness as a permanent objective of government.There’s a lesson to be learned: The establishment of a state council is a way to institutionalise X as a permanent objective of government.

The Labour Party is now in Government lumbered with political argument from a state council for competitiveness. If the left is capable of learning how to use the state, this is what we need to see before this government leaves office:

“The National Council for the Reduction of Inequality of Income was established by Government in 2015. It reports to the Taoiseach on key issues causing economic inequality in the Irish economy and offers recommendations on policy actions required to reduce inequality of income in Ireland.”

Michael Taft writing in Unite’s Notes From the Front reports favourably on Switzerland’s 1:12 initiative and other moves to reduce inequality of income.* This is really good stuff from Switzerland and it’s the sort of approach the Irish Labour Party and the left generally should be taking: Link top pay to the minimum wage or the pay of low paid staff members. Moreover, every initiative, every policy, every budget should be evaluated with reference to inequality of income. I might add that every cut in public expenditure should be similarly evaluated. Since 2012 this kind of equality audit has been Labour Party policy but it’s a well-kept secret and labour’s critics on the left show not the slightest interest in it.**

The notion of limiting top pay to a multiple of the lowest pay appears in the thinking of even the British Conservative Party.

I put forward an argument that the first cut in the public service pay bill should be a cap on pay and extras of 100k and a 50k ceiling on pensions. It was met with hostility to the extent that I couldn’t get my own branch or constituency Labour Party to put it on the 2012 conference agenda.*** How about now putting it to a plebiscite now?

There were other proposals. One was to call the bluff of those who said that increases in the minimum wage would close businesses especially in the hospitality industry. The suggestion was that the minimum wage would be payable only within companies whose top earning staff member or director had an income of less than, say, three times the minimum wage; all other firms would pay the minimum wage plus, say, three euro per hour. Another was that state contracts would be confined to companies whose top earning staff member or director had an income of less than, say, three times its lowest paid staff member or, say, four times the lowest paid staff member in any of its contractors.

The multiples can be debated and indeed changed periodically. The important point is that inequality of income becomes a matter of public controversy.
___________________________________________________________________
* http://notesonthefront.typepad.com/politicaleconomy/2013/10/a-few-referenda-ideas-that-just-might-succeed.html
** https://colummccaffery.wordpress.com/2012/10/08/inequality-of-income-can-labour-put-it-on-the-public-agenda-and-achieve-some-reduction-while-in-government/
*** https://colummccaffery.wordpress.com/2012/05/08/prioritising-public-spending-and-reducing-income-inequality-in-the-public-sector-a-motion-which-failed-to-make-the-agenda-for-the-labour-party-conference-2012/

Anyone active in collective bargaining over the past few decades will be well aware of the offer and acceptance of “allowances” when the demand was for a pay increase. It is therefore ridiculous to categorise all allowances as some kind of luxury extra that can be cut without touching basic pay.

Any restructuring of the public service which fails significantly and very obviously to reduce inequality of income in the public service is a failure for the Labour Party.*

The final details have yet to emerge but all of the indications particularly over the past week suggest that the Croke Park 2 agreement has been poisoned by the conservative doctrine of “fairness”.**

It goes like this. Because it is planned to cut “allowances” for “frontline” workers, “fairness” demands that highly paid workers who don’t get allowances have their pay cut too. In other words, we are back to “sharing the pain” and leaving the structures of inequality intact. It is certain that rich public servants will be cut by proportionately more but clearly they are much more able to absorb small reductions even when these are expressed in impressive percentages.

It is of course a matter of the Labour Party being outmanoeuvred by market liberals and failing to reduce inequality but it is also a question of leftist acceptance of enormous levels of inequality while maintaining a vestige of credibility.*** Credibility is secured by talking about merely the richest 1% and arguing that it would be “unfair” to tackle one group of rich people unless all rich people can be similarly affected. Even opponents of Labour in government and those on the left whose ambition it is to destroy Labour effectively support inequality of income.
_______________________________________________________
* I am a longtime member of the Labour Party.

** https://colummccaffery.wordpress.com/2012/09/18/fairness-has-become-the-conservatives-shield/
https://colummccaffery.wordpress.com/2013/01/03/how-concerned-are-you-about-horizontal-fairness/
https://colummccaffery.wordpress.com/2012/10/08/inequality-of-income-can-labour-put-it-on-the-public-agenda-and-achieve-some-reduction-while-in-government/

*** https://colummccaffery.wordpress.com/2012/05/08/prioritising-public-spending-and-reducing-income-inequality-in-the-public-sector-a-motion-which-failed-to-make-the-agenda-for-the-labour-party-conference-2012/

It’s received little attention so far but five motions to the Labour Conference 2012 which were adopted unanimously have considerably strengthened Labour’s position on equality by a) placing inequality of income centre stage, b) making its reduction an objective during the lifetime of this government, and c) deciding to prepare the data necessary to having budget discussions that focus on income inequality.

The motions were no. 28 (Donnybrook, Dublin SE,) no. 30 (Hugh Geraghty CDW, Dublin SC), no. 87 (Ashbourne, Meath E), no. 94 (Labour Youth) and no.132 (Labour Equality).

I’ve looked at these motions and found them in general agreement. There are minor differences as to which of the measures of income inequality should be used and over techniques/terminology around “equality auditing”, “equality reporting” etc. However, the position in summary seems to be this:

  1. Labour has made the reduction of inequality of income not only a short term objective but also a measure of the party’s performance in government.
  2. Labour wants all policy and particularly budgetary measures audited so as to make it absolutely clear what effect they are likely to have on income inequality.
  3. In the event of  Labour’s partners in government declining to effect equality auditing,  it is Labour’s position to press ahead using whatever resources are available and to have the information so generated inform Labour’s cabinet contributions and public debate.

 

The full texts of the motions can be found here http://www.labour.ie/conference/schedule/ If I’ve misinterpreted or made some other error, I’ll be happy to be corrected.

The essential thing that is particularly annoying citizens right now as “austerity” bites is inequality of income or, rather, hideous levels of income inequality, the very structure of inequality. Now one way that the political right seeks to maintain the structure – with all its relativities – is to talk about inequality between groups. They’ll have a go with age vs. youth, public sector worker vs. private sector worker, rural vs. urban etc. It is a conservative position; the idea is to have no change or very little change in relativities while reducing wages and welfare payments to the poor. Against that, far too many on the left advance an argument whose effect is also conservative. They identify the very rich (the 1%) as opposed to the merely rich (let’s say, the 10%) and argue that if the 1% could be soaked, then all else could remain the same. This is a conservative stance.

Minister of State, Brian Hayes has been targeting pensioners for cuts by pointing out that some pensioners are well-off. [i]  Michael Taft is a socialist economist but in responding to Brian Hayes, even he argues that rather than pursuing pensioners, a “better” target would be the management-and-professional category/interest group. [ii]  Now this comes close to demanding change but the conservative flaw remains. Most of those in this category are rich but not very (1%) rich. However, as Michael concedes, not all are rich. That’s too much like the argument that Brian Hayes makes in relation to pensioners. It diverts attention away from “rich” and towards an interest group and so implicitly supports a view of society made up of competing interest groups, a view which papers over the inequalities of income within many of these groups.

For as long as the democratic left defends or attacks the economic positions of pluralist groups, the structure remains unchallenged and the right wins. Let’s face it there are rich managers, there are rich pensioners, there are rich public sector workers, there are rich farmers etc. All that separates these groups is the proportions of rich within them.

It would be far better to call the right’s bluff on each and every sectoral target. Let’s define rich in income terms (Yes, of course I realise that income is not the only measure!) and say that below that point income will not be touched but above that point, “Go ahead, cut!”[iii]

Here’s a motion which twice failed to get the support of ordinary members of the Labour Party and so didn’t make it onto the agenda for Conference 2012.

As a first move in establishing a priority list for current public spending, Labour marks the maintenance of public sector incomes above 100k p.a. and public sector pensions above 50k p.a. as the lowest priority. That is to say, in the event of any further reductions in public spending, Labour identifies the first cut:  a 100k p.a. income ceiling for public sector workers and a 50k p.a. ceiling on public sector pensions.

Here’s the argument:

Let’s be clear

This proposal has nothing to do with taxation. If taxes were raised or if a new rate of tax were introduced and if the money so raised meant that there would be no need of further cuts in public spending, then this proposal would be redundant. The point here is this: if there are to be cuts, what area of public spending is least important, what should be cut first? This proposal answers: if there are to be cuts in public services and/or the incomes of relatively poor people who depend on the state, then those cuts should be considered only after the incomes of the rich who are on the public payroll have been capped at an affordable and sensible but generous level.

 

The immediate background

Leaving aside revolutionary and populist posing, the bulk of expressed opposition to cuts in state spending has involved particular pleading.  Then our media – in making no demand that something constructive be said – have compounded the problem. Journalists and presenters fail time and again to ask the most obvious question: “If there must be cuts and you feel that ‘X’ has to be maintained, which areas of spending do you think are less important than ‘X’ and should be cut first?” The lack of stated priorities has ensured that cuts are spread and this has tended to copper-fasten existing deprivation and inequalities.

I have been arguing on FaceBook and elsewhere that the rich among our public servants are the least of our concerns and that income (to include pay, bonus, overtime, allowances etc.) and pension ceilings should be introduced before any other cut. While there has been negative reaction, there has also been support and some of the support has been to the effect that the proposition should be put to a Labour Conference.

 

A fundamental question for Labour at this time

Because revolution and populist posing must not feature in Labour thinking, a major and significant question looms, and it demands an answer now: What remains of Labour values when state spending must be cut? Two very old and basic Labour tenets begin to harmonise and form at least part of the answer. Firstly, while equality is central to Labour’s ambitions, the Party has been slow to emphasise the most crucial and controversial aspect of equality: equality of income or – at least – reduced inequality of income. The time is ripe to put that right. Secondly, Labour has always sought to defend the meagre incomes of the poor. Never was this more urgent.

A pay ceiling on public service incomes and pensions would

  • accept that money is tight and that we cannot have everything but that some spending is vastly more important than others, and lay down a marker that a start has been made to setting priorities for Irish public spending;
  • make savings in public spending such that vital services and the pay of poor and middle income public servants could remain untouched;
  • reduce the bizarre and shameful spectacle of rich people beside poor people on the public payroll;
  • place inequality of income on the public agenda;
  • make it clear that Labour in bad times and in good times is serious about reducing inequality.

 

Arguments against

There are of course arguments against. Actually there are basically just three arguments against:

i)             The fairness argument

ii)            The brain drain argument

iii)           The Croke Park argument

 

i) The fairness argument says that public servants should not be singled out and that nothing should be done unless all rich people are tackled. In a sense this is a “what about?” A “what about?” is very much a conservative position which hides opposition to a change by diverting attention to other – often larger – issues. In this case, limiting the income of rich public servants is opposed by diverting attention to the income of other rich people. In another sense it is a crazy distortion of the notion of equality because what it says is that it would be unfair to reduce the incomes of one set of rich people unless all rich people were similarly treated. That is to say, it is a demand that all RICH people be treated equally!

It needs to be emphasised that it is public money that is in short supply, that cuts are happening now and that clearly public sector pay can be cut. In other words, there is neither time nor compelling need to be concerned about other rich people.

ii) The brain drain argument takes two linked forms. It is said that a reduction in top pay among public servants would result in a flight of talent abroad or into the private sector. It is certain that some may flee. However, the idea of a mass flight is fanciful. There may – just may – have been a time when a dissatisfied public worker could walk and pick up a job in the private sector. That certainly is not the case today. Moreover, this is a familiar threat raised by the rich from time to time. Remember when bank bonuses had to be paid or there would be a flight of talent? It didn’t happen.

 

Another form of the argument suggests that a ceiling would prevent the recruitment of exceptional talent. This rests on an abuse of the word “exceptional”. A pay ceiling would not rule out exceptional pay for an exceptional talent in exceptional circumstances. It would control the income of numbers of ordinary, unexceptional, rich workers.

iii) It is pointed out that the Croke Park Agreement rules out a pay ceiling. This is true. However, it does not rule out talking about a pay ceiling. Moreover, the extent to which the CPA guarantees that a group of rich people stays rich needs to be discussed and addressed.

 

Summing up

  • Let’s face it: 100k or a pension of 50k would appear a king’s ransom to the ordinary people who are made to pay these rich people or whose services are cut to maintain them. No one could seriously argue that these ceilings are not generous.
  • A public servant or potential public servant so in thrall to money that they will not serve unless paid more than 100k is clearly “the wrong stuff”. Get someone who understands the meaning of public service!
  • We live today in the kind of times so strange and fraught that a proposal once thought unimaginably daring becomes ordinary and feasible.
  • While in government in a time of crisis and austerity, Labour desperately needs to rediscover its radical voice and fundamental tenets.
  • It is possible without upsetting the troika too much to use what sovereignty we have left to make a start on a less unequal society.