Inequality in Ireland: 1987-2019

Abstract

This report provides an in-depth analysis of wage, earnings and income trends and inequalities in Ireland over a three-decade period, spanning from 1987 to 2019. One of the significant findings of this research is the reduction in the gender employment gap. Specifically, the employment rates for women aged 25–64 have seen substantial growth, contributing to a narrowing of the gap between men and women. Furthermore, during the Great Recession, median hourly wages declined more for men than for women, resulting in a notable decrease in the raw gender wage gap from an average of 16.4% prior to 2010 to just 3.3% by 2019. Nevertheless, a gender pay gap in earnings endures at 17.7%, primarily driven by differences in working hours. Education has played a pivotal role in this evolution. The data reveal a substantial increase in educational attainment, particularly in tertiary education. Notably, a sharp rise in tertiary education has been observed in both men and women. Gender differences in educational levels persist, with men having lower rates of tertiary education but narrowing disparities in upper- secondary education. Employment rates have fluctuated, particularly for those with tertiary education, with women's employment rates on the rise, while men, especially those without tertiary education, have faced more volatility and challenges, notably since the Great Recession. Median hourly wages of employees increased between 1987 and 1994, remained stagnant during the 1990s, peaked in 2010, and then declined sharply during the Great Recession. Notably, the gender wage gap narrowed during this period, primarily due to a greater fall in male wages. Additionally, the analysis demonstrates that while, conditional on education, wages are still below 2010 levels, the gender wage gap has decreased across all education groups, although it remains most significant in the lowest education category. Income inequality, as measured by the Gini coefficient and 50:10 wage ratio, has increased over the entire period, with differing trends for men and women. Overall, wage growth was stronger for women in the bottom three-quarters of the wage distribution, while for the top percentile men's wage growth was more pronounced. We also consider inequality in the individual earnings of employees: the product of hourly wages and hours worked. Earnings patterns reveal initial growth, followed by stagnation in the mid- to late 1990s, a resurgence throughout the 2000s until the financial crisis, and a subsequent recovery. While men and women both experienced these trends, women encountered more stable and robust earnings growth. However, despite these gains, the gender earnings gap remains substantial, surpassing the gap in hourly wages, largely due to differences in hours worked, particularly pronounced among those without tertiary education. The earnings stagnation of less-educated workers contributed to persistent earnings inequality, with measures such as the Gini coefficient and percentile ratios showing a sustained rise in earnings inequality during the 2000s. Following the financial crisis, these inequality measures stabilised and even declined from 2015 as the labour market recovered. Examining the impact of labour market institutions, this report delves into coverage of the minimum wage in Ireland which was introduced in 2000. The minimum wage has consistently remained at around half of gross median hourly earnings since its inception. However, the proportion of employees covered by this wage has fluctuated significantly, reaching its peak at 15.7% in 2007 after several incremental increases. Subsequently, the minimum wage experienced freezes, cuts and reversals, leading to coverage dropping to 10.5% in 2011. With the post-2012 labour market recovery, particularly for lower-paid workers, coverage rebounded to 17.3% by 2019. Additionally, there has been a decline in trade union membership and collective bargaining coverage, which aligns with broader international trends. Ireland's tax, transfer and social welfare system has achieved significant redistribution at the household level. Cash benefits are most significant for the lowest net-income quartile, comprising 60% of gross household income on average. These benefits have fluctuated over time and increased for all quartiles after the Great Recession before falling with economic recovery. Tax payments, as a share of gross income, increased for higher income quartiles post-recession, offsetting earlier declines. The rise in average tax rates for the highest income quartile contributed to a drop in the disposable-to-gross income ratio. Ireland, like many other countries, has experienced significant changes in family structures with implications for inequality. The percentage of the working-age population who are married or cohabiting has decreased. Education plays a substantial role, with a clear divide in marriage rates between different education groups. Higher-earning men are more likely to have working partners and higher-earning women have seen increased assortative matching. Household compositions have also shifted, with a notable increase in lone-parent households and couples without children. The rise in lone-parent households is concentrated among women, with the largest increase being among those with tertiary education. For men, the most striking change is the rise in the share of single adults, particularly among men without tertiary education. The data reveal a strong association between education and the likelihood of being in a working household, with over 90% of those with tertiary education consistently in working households, while the share for those with lower-secondary or less education remains below 80%. Income levels are closely linked to household work status. However, the gap has narrowed over time, with the median disposable income for working households falling from twice that of non- working households to 1.6 times. The gap between gross earnings and net disposable income has decreased over time, with disposable income growth outpacing gross earnings growth, particularly at the bottom of the distribution. This was influenced by changes in government transfers and personal taxation. Finally, the report examines income inequality across all households, accounting for working and non-working individuals. The findings reveal that income inequality has generally decreased over the years, particularly in the Gini coefficient, 90:10 and 50:10 percentile ratios. These trends suggest positive developments in reducing income disparities in Ireland, although further research may be necessary to understand the dynamics at the very top of the income distribution. Our data do not cover the period of the COVID-19 pandemic due to data limitations and availability. However, work by Beirne et al. (2020) and Whelan et al. (2023) suggests that although the pandemic had a greater impact on lower-paid employees and employment in more disadvantaged areas, the scale of the policy response was sufficient to largely offset the initial effects of this on household income inequality. Roantree and Doorley (2023) point to more recent sluggish household income growth despite a strong labour market recovery which has contributed to a rise in household income inequality, raising questions whether the progressive and inclusive growth seen over the past few decades in Ireland will be sustained.