OECD Economics Department Working Papers No. 1578

Yours inclusively? Income mobility in Ireland, 10 years of tax record microdata

Authors:

Seán Kennedy, David Haugh and Brian Stanley

Abstract:

While policymakers are rightly concerned about evidence of rising income concentration at the top, it is often wrongly assumed that the same rich individuals stay rich. In reality, the membership of this group are in a state of constant flux. This new study, based on more than 20 million tax records over 10 years, examines the highest income earners in Ireland but also who moves up and down the income ladder over time. While income inequality has increased in most OECD countries, in Ireland it has been broadly stable for most of the income distribution. The top 10% of income earners receive 1/3 of total income and pay around 2/3 of all income tax. Unlike other OECD countries, the top 1% has not expanded its gross income share, partly due to long range downward mobility during the recession for those with the highest incomes. Moreover, more progressive taxation has also reduced the top 1 per cent’s share of disposable income. This paper finds that income inequality increases with age and differs dramatically across economic sectors – the difference between the top 1% and the median is greatest in the professional, financial and health sectors. In the professional sector for example, the top 1% threshold is 12 times the median compared to 3 times in the public sector. The share of employment in these sectors has grown contributing to greater income inequality but also higher upward income mobility. Indeed, the analysis in the paper shows upward income mobility is higher for those working in finance, professional and technical occupations and among the young, those living in Dublin, and those changing jobs. Finally, there is also evidence that economic mobility has declined among median income classes over the past 10 years in Ireland – relatively fewer workers are now moving up or down the income ladder than before.

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