Economic growth and distribution of income

 

The persistent problem of poverty in developing Ireland has led to the question of poverty relating to economic growth. If policies are focused on interventionist means to alleviate poverty rather than promoting economic growth, this in turn will lead to an increase in poverty. Most economists believe that economic growth benefits all citizens, even not equally , and reduces poverty. the extent of these benefits naturally depends on the distribution of income. If economic growth raises income equally for everybody, then income distribution will not change. There have been some arguments against this. One being the Kuznets curve hypothesis by Simon Kuznets (1955), which says that as income grows in early development, increased distribution at first worsen and then improve as more people's income rose. But it was later contradicted as a valid argument because it did not hold for currently developing countries. 

The second argument is the question of the reliability of the economic growth to actually reduce poverty. Measuring poverty by income distribution gives a relative amount of poverty in a country. The simplest form is represented in a frequency distribution. This shows income share and income groups. Other methods are using a cumulative frequency distribution ie. the sum of the shares in each group, the Gini Coefficient which is and indicator of the relative equality of in come distribution in a given country. The purpose of attaining these measurements is to show how well of one section of society is and the difference in the amount of poverty because of this difference. Ireland's economy is growing stronger and stronger so we would expect income per head to go up. In the public sector the wages have gone up but only under duress. The long hours of talks and strikes made it possible for the wage increase. In the private sector the wage rates are also improving. If income is increasing, poverty must be decreasing.