Economic structure and Policies

Countries that are relatively rich in natural resources tend to have slower economic growth. In rich societies, the distribution of income is expected to be more concentrated and market forces will be less effective making GDP reduce poverty. the expected result then is that the growth of income of poorest groups to be slower in resource rich economies. Ireland has natural resources but we also have a capital intensive market, we produce capital intensive goods. As the past few years have shown, Ireland's economy is a resource rich economy and will hopefully continue on in this way. evidence on poverty and economic structure is provided but Deninger and squire (1996) who use data to investigate the impact of both economic structure and economic strategies on the incidence of poverty.

Their findings were - Higher investment rates have a positive and significant impact on income. - Initial distribution of land also has an impact on future income growth. - The initial distribution of income has no statistical significant impact on the incomes of the poorest. These results imply that gains in investment rates may have a more powerful impact on poverty that changes in the distribution of land. Government policies to decrease poverty are also being implemented. The most obvious being the aid given by social welfare.

The Irish state devoted considerable resources to the alleviation of poverty through the social welfare system. It guarantees 'a standard basic minimum income and special benefits to those entitled.' Alleviating poverty is not the sole objective of the social welfare system, other objectives include the redistribution of income above the poverty line as well as the provision of a temporary replacement income for those experiencing illness or temporary unemployment. General in Social Welfare is in line with or slightly above inflation. Social policies at community level has had limited scope, but social policy has had a significant influence on developing Ireland. Most noted is the equal treatment of men and women in the social welfare. But in designing policies in Ireland, the European Community dimension is of central importance. EU membership effects the socio-economic variable and the amount of poverty in Ireland.

The EU has three main methods of tackling poverty - the programmes to combat poverty, EU social policy and structural funds. The programmes specifically directed towards combating poverty and social exclusion within member states have been brought about by area-based projects. Expenditure on these and the impact have not been very substantial. But the very substantial resource transfer to Ireland helps greatly in the narrowing of the income gaps In the past there have been many proposals for tax reform. The first report of the Commission on Taxation in 1982 agreed on the "broadening of the income tax base, rate reductions, and simplification of the tax rate structure. They believed that in order to cater for the poor, they shouldn't exempt them from taxation, but to ensure by means of income maintenance payments that they have an adequate income. It also proposed that tax reliefs be given in the form of tax credits rather than tax allowances. Many of these proposals were never envisaged.

Today also, there is no shortage of proposals to reform the tax and welfare systems in Ireland. For example the proposals for a first phase of direct tax reform by the Commission of taxation and the proposals of the Commission of Social Welfare. Using the ESRI tax benefit model it can show the gains and losses from the tax and welfare changes across income distribution. The argument to broaden the tax base to reduce taxes on employment is very important but it is also important to reduce disincentives to work, the greatest disincentive being the high unemployment benefit and the benefits for unmarried mothers. Job creation schemes, temporary and permanent and training programmes are always high on the list of priorities.