Income Inequality: Does Austerity Promote Income Inequality?

Abstract

The purpose of this study is to investigate what kind of effect austerity had on income inequality. Many experts criticize austerity, as it does not fulfill its intended purpose. Here for, Ireland has been selected as a case to show the change of income inequality as a consequence of the austerity measures taken in 2010. The study builds on theories of income inequality, and more specifically how to measure changes in equality based on specific indicators, like the Gini coefficient. Data has been retrieved, mainly from Eurostat, in most cases for the period 2005 to 2014 to give a full picture of the development before and after the financial, the economic and the debt crisis, as well as before and during the austerity measures were taken. The findings of this study show, that in contrast to what experts claim, in the case of Ireland income inequality has decreased as a result of austerity. However, the level of social welfare indicator suggests that inequality of social welfare has increased between the employed and unemployed.