Download The Impact of Social Protection Payments on Income Distribution

The Impact of Social Protection
Payments on Income Distribution
John FitzGerald, TCD and ESRI
Composition of Government Expenditure
80000
70000
60000
€ Million
50000
40000
30000
20000
10000
0
1995
1997
Transfers
1999
2001
2003
2005
Government Consumption
2007
2009
Other expenditure
2011
2013
Government Transfers as % of GDP
Change
2007
2008
2009
2010
2011
2012
2013 2007-2011
Germany
16.0
15.8
17.4
16.7
15.7
15.6
15.7
-0.3
France
17.4
17.6
19.2
19.2
19.1
19.5
19.9
1.7
9.7
9.7
10.7
11.0
11.1
11.5
11.9
1.4
UK
12.1
12.6
14.3
14.2
14.2
14.6
14.5
2.1
Ireland
11.5
13.8
17.7
17.6
17.5
17.5
16.3
6.0
Greece
14.6
16.1
17.6
17.8
19.3
19.8
18.5
4.7
Spain
11.5
12.3
14.4
15.1
15.3
16.0
16.3
3.8
Portugal
14.1
14.6
16.4
16.4
17.0
17.5
18.4
2.9
Netherlands
Source: EU AMECO database. GNP is used for Ireland, not GDP.
Revenue Commissioners’ Data, Change
between 2007 and 2011
Income Range
100-150
150-200
200-275
275+
100+
All Taxpayers
Number of Taxpayers
-12.6
-13.0
-15.7
-28.4
-14.7
-13.4
Average Income
-0.3
0.0
-0.2
-15.3
-9.3
-0.6
Total Income
-12.8
-13.0
-15.9
-39.4
-22.6
-13.9
Gini coefficient before tax and welfare payments
59
57
55
53
51
49
47
45
2005
2006
2007
France
2008
Ireland
2009
Spain
2010
Portugal
2011
UK
2012
Gini coefficient after direct taxation and welfare
payments
39
37
35
33
31
29
27
25
2005
2006
2007
France
2008
Ireland
2009
Spain
2010
Portugal
2011
UK
2012
Conclusions - 1
• Big fall in everyone’s income because of crisis
• Governments decided to increase expenditure
on welfare, especially relative to GDP
• For those on high incomes: numbers fell
dramatically; their tax rate increased.
• A consequence of the fall in tax take from high
income earners was that the rest of those with
taxable incomes had to pay more tax
Conclusions - 2
• A consequence of the changes was that:
– Without tax and welfare payments there would
have been a big increase in inequality, but
– Because of the increase in welfare expenditure
and taxes there has been a small fall in inequality
– This has not been enough to prevent a rise in
those at risk of poverty
– Unemployment has had a major impact, which
public policy on welfare has only partially offset
Conclusions - 3
• While individual policy changes announced in
successive budgets, taken together have not
been particularly progressive, the overall
impact of government policy on expenditure
and taxation has had a progressive impact,
reducing inequality