This is a link to an excellent summary by Richard Layte on why we should be worried about income inequality in Ireland.
Ireland has a high level of income inequality when compared to other OECD and European countries. It is in the same bracket as the UK, Baltic countries and southern regions of Europe. But, not quite as high as the UK.
This begs the immediate question as to why we have high levels of income inequality but simultaneously why it is not as high as the UK. I think a strong case can be made that the minimum wage, increased social transfers and wage setting institutions explain this difference. All of which were associated with the Irish Sisyphean attempt to construct a quasi corporatist political economy, locally known as social partnership (i.e. an industrial relations system that is more like Europe than the UK).
The paper by Richard Layte is the ESRI at its best (I cannot quite comprehend their analysis of the current recession i.e. no focus on investment and growth or their orthodox approach to analysing the labour market). It shows that there is a direct causal relationship between levels of mental health anxiety and income inequality. More unequal countries produce less social cohesion and more social insecurity. The sense of being ‘inferior’ to others creates a tension that leads to increased mental health problems.
In more unequal societies children from poorer social classes are less likely to achieve or succeed in their life ambitions. In this way, inequality is a structural barrier that can only be tackled by compressing the difference between income. This means designing wage policies that are egalitarian.
A pure labour mrket cannot reduce wage differentials. Hence, there is a contradiction between favoring pure markets for the allocation of labour and wages and the social objective of reducing income inequality. In the Irish case this would require a national incomes policy that is explicitly social democratic in design. But, the present government appear to be committed to an industrial relations policy that encourages a market based approach to wage coordination (i.e to encurage competition).
Social partnership in Ireland, despite all its problems, was an attempt at a national incomes policy (albeit based on reducing income taxes and hence increasing individual wages over a collective investment in public goods). If Ireland wants to reduce income inequality it will require egalitarian wage coordination that is non-market in design and a fiscal policy that is explicitly aimed at closing the gap between rich and poor.