There are some who believe the reason why wealthy people are wealthy is because they’re smarter and work harder. The corollary is that the poor are not so smart and are lazier. And for those in the middle – smarter than the poor but lazier than the rich or some such variant. Not many are so explicit but it is certainly arguable that this attitude is implicit in many political and social observations.
The CSO has been tracking the income earnings of the population in ways that we can now reliable make year-on-year comparisons. Examining the figures under ‘Direct Income’ between 2003 and 2005 (direct income refers to ‘earning power’: how much people make in the red-in-tooth-and-claw market place – PAYE, self-employed and capital income) gives us the following for households:
- Upper income groups (the top 30%) saw their income rise by €226 per week, or 15.4%.
- Lower Income groups (the bottom 30%) saw their direct income rise by €3 per week.
This shouldn’t be too surprising. We all know the gap between the rich and poor is high by EU standards and is growing. In particular, the lowest income groups contain a disproportionate number of pensioners, unemployed, disabled, lone parents out of work, etc.
But what about the middle 40% income group – how did they fare? Well, their direct income actually fell by €11 per week. That’s right – it declined by 2.2% in the two-year period. If you want to really get wonkish over the numbers, in real terms (i.e. after inflation), the middle-income group suffered a drop of over 6%.
So what’s the story? Are these middle-earners getting dumber, lazier? Why the drop in the earning power of a significant proportion of the population? There is no single reason. It could be as a result of increased out-sourcing, enforced self-employment, causalisation, reduced working hours, increasing under-employment, or more temporary absences from the labour force. It could be the downward pressure on wages and salaries in the name of competitiveness and profit. Whatever the reasons – which surely deserve more investigation by policy makers – the short-term indicators are that whole swathes of the population are falling back in terms of earnings.
So does that mean that middle-income earners have seen their living standards cut? Not necessarily. Credit is a likely source for boosting living standards – the house extension, the new or first car, furniture, holidays. But of course there is a limit to this and there will be a payback.
Another saving factor is the welfare state itself. When we factor in ‘Social Transfers’ (e.g. social welfare payments, Child Benefit and other family-related allowances, housing allowances, etc.) we find that the middle-income groups found their total income increasing by €40 or 6%. In real terms, it meant they kept ahead, but only slightly: 1.1% over the two-year period. Not much, but without the increase in social transfers they would have been much worse off – social transfers made up 30% of middle-income earners total income.
That the rich really do get richer is not much of a surprise. Not is the fact that the gap between the rich and the poor is increasing. In earning power
- The gap between upper income and lower income groups grew by 6.6%.
- Between the upper and middle-income group it grew by 17%.
- On the other hand, the gap between the poorest and middle-income groups actually closed slightly.
Applying the dumb and lazy school of economics, the majority of us must, ergo, be getting a little bit thicker while a minority are working all that much harder (or some such variant). And it looks to get worse.
For the frightening thing is that, when measuring earning power, the top 30% took almost the entire increase in the economy between 2003 and 2005.
A lot of us will have to set our alarms earlier. Much earlier.
Notes on the Front 
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