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Who are the “squeezed middle”? It is an important question because Fine Gael in particular is building its election campaign around support for this supposedly most put-upon section of society.
Minister for Finance Michael Noonan defines the “squeezed middle” as those earning between €32,800 and €70,000 per annum. If this refers to individual incomes, then a couple with a household income of €140,000 falls within the definition, Nat O’Connor pointed out on the website of the think tank TASC.
As interpreted by O’Connor, data from the Revenue Commissioners shows that the real middle-level taxpayer in Ireland is somewhere in the €20,000-to-€30,000 income group.
And remember that this is based on income-tax returns – the very poorest do not pay income tax at all, though they are hardest hit by rising consumption taxes (such as VAT), flat-rate taxes such as water charges, and rising living costs generally (such as accelerating house-rental costs and the recent hike in Dublin Bus fares).
Nor, as Tom Healy of the Nevin Economic Research Institute notes, is there any evidence that austerity has hit this supposed “squeezed middle” hardest over the last several years.
Which is not to say that many people earning more than €30,000 are not worse off than they were before, nor to deny that many are experiencing problems such as unemployment and high levels of indebtedness. An ESRI report finds that “there is clear evidence of a squeeze for the precarious and lower middle-income . . . groups” for precisely such reasons. But these are only a small proportion of the people Noonan and Kenny are referring to.
The concept of the “squeezed middle” in the expansive way the government deploys it is statistically ridiculous, but, crucially, politically useful.
A November 2015 analysis (also from TASC) of the government budget for 2016 tells us who, in both absolute and relative terms, will gain most money from, in particular, reductions in the Universal Social Charge (USC), and – lo and behold – it turns out to be a person earning €70,000 a year.
That person is close to the €75,000 figure that would put them in the top 10 percent of the income distribution, but in Noonan’s Alice-in-Wonderland world, he or she is not at the top at all, but rather in the middle.
More broadly, the TASC report documents how, under this government, inequality has significantly worsened. The total income of all people liable for income tax was €77 billion in 2011 (when this government came to power). In 2016, when its term of office comes to an end, the Revenue Commissioners estimate that it will be €98 billion.
Of that €21 billion in additional money, a startling €12 billion (over half) has gone to the top 10 percent of earners. And €14 billion (two-thirds of the increase) has accrued to people earning in excess of €70,000.
The bottom 50 percent? They got just 6 percent of the increase, while the middle 60 percent (the real middle) received less than a third of the extra cash.
This government claims to have protected the very poor by maintaining the basic rate of social welfare at 2011 levels – but TASC emphasizes that the value of this has been eroded by inflation and that it is €20 a week below the poverty line. Meanwhile, many specific groups – such as job-seekers aged under 25 – have seen their allowances cut.
The government might also highlight the €0.50 increase in the hourly minimum wage in the 2016 budget, but this still leaves it 25 percent below a real “living wage” and will do little for the 350,000 workers enduring multiple deprivation. (The Taoiseach, by the way, thinks the minimum wage is €35,000 a year when, in fact, it is less than €20,000.)
It is those dependent on various social welfare payments and the “working poor” who have suffered most from austerity. And alongside them are those who rely on community-development programmes, drug-prevention initiatives, family support, youth and other services – all these have been savagely cut in recent years, and Budget 2016 leaves those cuts in place, while reducing both Capital Acquisitions Tax and Capital Gains Tax.
Under the guise of helping the “squeezed middle”, the government is funneling money upwards to the elite while deepening deprivation for those on the bottom rungs of Irish society.