Friday, August 03, 2007

Indebtedness of the Nation

Possible the most shocking statistic to come out of the CSO’s household budget summery is the inequality that exists in perms. According to the data people in the 1st Decile (the lowest) spend on average 0.19 Euro a week on perms compared to 0 in the 10th decile (richest) and the national average of 0.09 Euro. This statistic is certainly something the girls at should look into. But another aspect of the survey was that was pointed out by Conor was that many people up to 1/3 or even ½ of the population are living in debt. i.e. spending more then they earn. That is nearly as shocking and Conor points out that it is linked to the growing inequality in society. But while it might show that for most the indebtedness is not a symptom of inequality but plain old spending too much.

First lets look at the graph of difference of expenditure vs Income. As can be seen the


bottom 6 decile spend more then they earn. But before we talk about stuff that can be done about it from a government point of view. What can be done about from a people’s point of view. If we take the the expenditure of each decile from the income of the above decile. i.e. what happens if the 6th decile spend what the 5th spend. We see something interesting.

previous.JPGOnly the people in the bottom decile are in debt. All those people in the 6 groups above are now clear of debt.

But before we go eureka we have solved the problem 2 things have to be considered first. The poorest are still in debt. And secondly what level of expenditure is needed?

Labour’s Eric Byrne recently brought out a living wage bill for Dublin Corporation with a living wage in Dublin thought to be about 10 and hour. If we this as being the wage needed to survive in the entire country which compared to the rest of the country is being generous. We get for a 39 hour week. 390 euro. Now the living wage defined on wikipedia says that this is what is needed without addition income. But if anyone differs with this definition please just drop a comment. (Prefarable with all the maths done for me to save me doing this). So if we say that this 390 is the money needed to live. We have the bottom 3 decile under this with the rest above this in debt due to choice not necessity.

Now I could point out a few graphs about where money could be saved. But even though I have a few done I will not bore you with them (Saves me uploading them as well) But here is one of percentage of income spent on alcohol. That graph says a lot not just about fact that 11% of income of people in the lower decile but also the fact that the average spend on alcohol is 47.18 for alcohol and tobacco vs 42.67 for clothing.


But that is not talking about the bottom 3 groups who are under the living wage.So what can the government do to bring these people up to this living wage total. With the first decile 233 below, second 146 and third 31 Euro below.

One thing to note that each decile does not necessarily mean 10% of the population. The bottom decile has about 4% of the population. Or I guess basically the unemployed. With the major source of income of the 3 decile’s being pensions and other social welfare payments. Save for the 3rd deciels where salary is second largest source of income.

So do people on pensions need the same living wage? The National Federation of Pensioners Association were looking for about €300 Euro’s a week. So if this is what pensioners need to live this reduces the amount of people not needing €390 for a living wage.

So what about the remaining people what can be done? First we don’t want to create welfare traps where people are better off on the dole then off it. So I would be slow to suggest adding 233 Euros a week onto the dole. But other things can be down. VAT for instance effects the poor more the wealthy. Reducing VAT on many essential items would help as well. Also stuff like TV licences are regressive forms of taxation and should be noted. But increased welfare payments should indeed be considered.

But what of the other decile’s who are in debt yet are earning enough to be considered safe. What can be done about them? What can the government do to ease their debt. The question really should be if people are in debt yet earning enough to live is it any business of the government if they can’t do a household budget and stick to it?

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