Income gap widened significantly under previous Government, new report finds

Irish Examiner

3 days ago

Income inequality rose sharply during the previous Government's term, according to a new report.
Over the course of the five budgets introduced by the coalition, the gap between rich and poor widened by €963 a year, or €18.45 a week.
In contrast, the gap between middle-income and low-income households narrowed by €204 annually, or €3.92 weekly, according to analysis by Social Justice Ireland.
This narrowing was driven by the 'skewed nature of income reduction choices,' which the report said favoured higher earners and offered relatively little to low-income workers paying income tax at the standard rate over the five years.
The divide between rich and poor grew significantly in 2025 due to the end of most temporary cost-of-living supports and substantial income tax cuts for wealthier households.
Temporary measures in Budget 2025 were primarily targeted at welfare-dependent households and low-income workers. For example, these measures represented 47–62% of income gains for pensioners, but only 11–16% for couples earning over €100,000.
Once temporary supports—such as electricity credits and one-off welfare payments—expire, the impact of permanent measures will persist and further widen income inequality, the Tracking the Distributive Effects of Budget Policy – 2025 Edition report said.
Low-income workers earning between €30,000 and €40,000 a year—just above minimum wage—gained little from income tax changes, as their earnings were below the thresholds for most reductions.
Households earning below the standard income tax threshold benefited least from Government measures between 2020 and 2025.
During this period, weekly income gains ranged from €3.34 for couples earning €30,000 to €110–€120 for couples with incomes above €100,000.
"Overall, our results suggest that budgetary policy over recent years has reduced the gap between people/households of working age in the bottom and middle of the income distribution while opening a greater gap between them and those with the highest incomes," said Research and Policy Analyst with Social Justice Ireland, Michelle Murphy.
"Social Justice Ireland regrets that policy outcome, as a society we can ill afford to see the incomes of those with the most resources drift further away."
Ms Murphy said the decline in the relative position of low- and middle-income households paints a troubling picture, where much of the progress made on income equality risks being undone by recent policy decisions.
"Looking ahead, reversing these growing income gaps will pose important challenges for future budgetary policy of the new Government particularly as it prepares for its first budget," said Ms Murphy.
"The commitment to run progressive budgets in the programme for government is the context in which these income gaps must be addressed."
Social Justice Ireland continues to advocate for refundable tax credits as a fairer way to support low-income earners.
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