Christopher T. Whelan (QUB & UCD), Helen Russell & Bertrand Maître (ESRI), Irish Economic Policy Conference,

25 February, 2015

Economic Stress & the Great Recession in Ireland: Polarization, Individualization

or ‘Middle Class Squeeze’?

Capturing the Impact of the Great Recession

on Material Deprivation and Economic Stress

• Widespread interest in the impact of the Great Recession on living conditions and

economic conditions.

• Particularly so in the case of the “peripheral” counties of the EU15 which have

been among those suffering the most severe effects

• For sociologist key issues that arise relate to the potentially changing pattern of

class effects and whether these are best captured by notions of individualization,

polarization or ‘middle class squeeze’.

• Related issues concern the life course distribution of risks and the shifting balance

between ‘new’ and old social risks

• Use Irish case to explore these issues do so both because of the availability of

superior measures to those in the EU-SILC comparative data set and because both

the scale and nature of the impact of the recession in Ireland, particularly in

relation debt, makes it a particularly instructive case.

The Impact of the Great Recession in Ireland

• Severe Impact of the Great Recession on households standard of living.

• Focus on period 2004 to 2011 due to availability of SILC data

• Labour market income fell by 11% over the period 2004 to 2011

• Social welfare rates affected from 2010 budget onwards.

• Callan et al (2013) showed major losses on real income at the bottom and the top

income distribution for 2008-201. Tax/benefits generally progressive until 2011 but

direct employment effects greatest for bottom decile.

• Peak to trough comparisons differ significantly from period comparisons

New and Old Social Risks and the Distribution of Economic Stress (i)

• Polarization along traditional class lines with burden disproportionately borne

by the most vulnerable. Austerity necessarily regressive (Social Justice Ireland,

TASC, NERI).

• Individualisation thesis (Beck, 2007) of more even distribution of social risk

due to erosion of traditional social structure. Life course perspective

(Vandecasteele, 2010) “new” risks arise from the individualisation of life

trajectories. Salience increased by role of debt – particularly in relation to

housing.

• Alternative thesis supporting the view of redistribution of risks across social

class “middle class squeeze”; erosion of earnings, wealth (Kuz, 2013) strong

resonance in public debate (Irish Times, 2012)

New and Old Social Risks and the Distribution of Economic Stress (2)

• Life course factors and the Great Recession:

• burden of the recession greater for younger households HBS

(Gerlach-Kristen, 2013). Higher labour market vulnerability for

under 25 (McGinnity et al 2014)

• CSO financial effect survey, households headed by under 55

more likely to have reduced spending (CSO, 2013).

• Focus in popular discourse on working families with children -

earning cuts, tax increases, rising costs of services traditionally

consumed by middle class families (Muhlau. 2014).

Measures of Poverty, Material

Deprivation & Economic Stress

• Previous work show the limitation of conventional measures such as the relative

income measure while functioning relatively well in conditions of equilibrium

perform very poorly in boom conditions

• Current measures of material deprivation & economic stress have important

limitations.

• Comparative European Analysis show that the scale of such changes is not

captured by the EU poverty measure focusing on falling below 60% of median

equivalised household income (see next slide).

• EU measure of 3+ out of 9 deprivation performs rather better (but suffers from a

number of important limitations (Maître et al , 2014, Whelan & Maître, 2012, 2013)

• Having documented the limitation of such indicators we use the Irish cases to

address the issue of the extent to which improved measure can facilitate more

productive exploration of key sociological issues

Poverty, Deprivation & Stress: The

Impact of the Great Recession

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

IE EL IT SP PT EU27

IE EL IT SP PT EU27

IE EL IT SP PT EU27

2005 2012

Material deprivation

(3+/9 items)

Great difficulty & difficulty making ends meet

At risk of poverty

(60% pov line)

Developing Multidimensional Perspectives:

Lessons from the Irish Case

• Appetite for new measures – given the demonstrated limitations of income

measures in both bust & boom.

• Current analysis focuses on the Irish Case.

• Instructive because of the scale of the recession.

• In particular the dramatic increase of personal indebtedness; credit card (€102 in

1996 to €707 in 2008), rate of mortgage/rent arrears highest in EU in 2011 at 12%

(EU average of 4%), almost 20% experience arrears on utility bills/hire

purchase/mortgage-rent compared to 12% in EU28 (Russell et al, 2012).

• And because data allows us to compare income poverty, material deprivation and

subjective economic stress over a time period that allows pre & post recession

comparison.

Data and Measurement

• Irish SILC) 2004 to 2011.

• Household disposable income (income from work, social transfers

less tax). National equivalent scale (1, 0.66, 0.33). At Risk of Poverty

Measure (ARP) 60% of median

• Material deprivation 11-item measure prevalence weighted measure –

Chronbach alpha 0.80 : exclusion from participating in activities

which are considered the norm

• Economic Stress 5-item prevalence weighted measure - Chronbach

alpha 0.73

Irish Measure of Material Deprivation

Household & Household members can not afford

Two pairs of strong shoes

A warm waterproof coat

Buy new rather than second-hand clothes

Eat meals with meat, chicken, fish (or vegetarian equivalent) every second day?

Have a roast joint (or its equivalent) once a week

Go without heating during the last 12 months through lack of money (ref pers)

Buy presents for family or friends at least once a year

Keep the home adequately warm

Replace any worn out furniture

Have family or friends for a drink or meal once a month

Have a morning, afternoon or evening out in the last fortnight, for entertainment

(reference person).

Prevalence weighted and normalised to vary between 0 and 1.

Measure of Economic Stress

• (H) “Thinking of your household's total income, is your household able to make

ends meet”. Answers ‘great difficulty’ or ‘difficulty’=1, else=0.

• (H) Household experienced arrears on their mortgage or rent, utility bills or hire

purchase instalments (in the past 12 months). Yes/No answers.

• (H) Extent to which housing costs (including mortgage repayment or rent,

insurance and service charges) is a financial burden. Answers ”heavy burden” or

“somewhat of a burden” =1 else=0.

• (H) “Has the household had to go into debt within the last 12 months to meet

ordinary living expenses such as mortgage repayments, rent, food and Christmas or

back-to-school expenses?” Yes/No answers.

• (I) “Can you save some of your income regularly? Yes/No answers.

• prevalence weighted and normalised to vary between 0 and 1.

Measure of Economic Stress

• (H) “Thinking of your household's total income, is your household able to make

ends meet”. Answers ‘great difficulty’ or ‘difficulty’=1, else=0.

• (H) Household experienced arrears on their mortgage or rent, utility bills or hire

purchase instalments (in the past 12 months). Yes/No answers.

• (H) Extent to which housing costs (including mortgage repayment or rent,

insurance and service charges) is a financial burden. Answers ”heavy burden” or

“somewhat of a burden” =1 else=0.

• (H) “Has the household had to go into debt within the last 12 months to meet

ordinary living expenses such as mortgage repayments, rent, food and Christmas or

back-to-school expenses?” Yes/No answers.

• (I) “Can you save some of your income regularly? Yes/No answers.

• prevalence weighted and normalised to vary between 0 and 1.

Mean level of Income Poverty (60% Med) &

Prevalence Weighted Material Deprivation and

Economic Stress, 2004–2011

.21 .21 .20 .19 .21

.24

.27 .29

0

5

10

15

20

25

30

.00

.05

.10

.15

.20

.25

.30

.35

2004 2005 2006 2007 2008 2009 2010 2011

5 item prevalence weighted economic stress

11-item prevalence weighted material deprivation

AROP

Income Class and Social Class

Measurement

European Socio Economic Classification (ESeC): based on

Goldthorpe (2006), opportunities and constraints associated with

employment relationships underlying class positions.

Income Class: Decile/Quintile approaches involves no change in

size and as with EU measure inequality (top20/bottom

20)=>”lost 60%”. Alternative approach based on ratios of

median (Atkinson & Brandolini, 2013)

Income categories and corresponding household

equivalised income thresholds for 2011

Income ranges Income classification Corresponding income

thresholds for 2011

< 60% of median

equivalised household

income

Income poor Less than €10,903

60–75% of median

equivalised household

income

Precarious income class €10,903 to less than

€13,628

75–125% of median

equivalised household

income

Lower middle income class €13,628 to less than

€22,714

125–166% of median

equivalised household

income

Upper middle income class €22,714 to less than

€30,164

167% of median

equivalised household

income

Affluent class €30,164 and above

Household income distribution by household income categories, 2004–2011

19 16

13 16

32 37

19 16

16 18

0

10

20

30

40

50

60

70

80

90

100

2004 2005 2006 2007 2008 2009 2010 2011

Affluent class

Upper middle class

Middle income class

Precarious income class

Income poor

Mean economic stress by income categories and

increase over time, 2004–08 and 2009–11

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Income poor Precariousincome class

Lower middleclass

Upper middleclass

Affluent class Total

2004–08 2009–11 Difference

51%

incre

ase

34%

incre

ase

16%

incre

ase

34%

incre

ase

45%

incre

ase

59%

incre

ase

Mean economic stress by income categories and

increase over time, 2004–08 and 2009–11

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Income poor Precariousincome class

Lower middleclass

Upper middleclass

Affluent class Total

2004–08 2009–11 Difference

51%

incre

ase

34%

incre

ase

16%

incre

ase

34%

incre

ase

45%

incre

ase

59%

incre

ase

Mean economic stress by HRP ESeC social class,

2004–2011

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

2004–08 2009–11 Difference

14%

incre

ase

53%

incre

ase

37%

incre

ase

6%

incre

ase

31%

incre

ase

33%

incre

ase

70%

incre

ase

16%

incre

ase

Mean Economic Stress by HRP age group and

increase over time, 2004–08 and 2009–11

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Under 35 years 35–64 years 65 years andover

Total

2004–08

2009–11

Difference

1%

incre

ase

34%

incre

ase

22%

incre

ase

40%

incre

ase

Mean economic stress by household tenure, 2004–2011

0

0.1

0.2

0.3

0.4

0.5

0.6

2004 2005 2006 2007 2008 2009 2010 2011

Property ownedoutright

Owned withmortgage

LAT purchaser withmortgage

privately rented

Tenant/subtenantto LA

OLS regression models

of economic stress (i) 1 2 3

Time period 2009–11 0.033*** -0.0223** -0.032***

Economic class (ref=affluent)

Income poor (<60 per cent) 0.274*** 0.221*** 0.108***

Precarious class 0.193*** 0.173*** 0.097***

Lower middle class 0.102*** 0.087*** 0.063***

Upper middle class 0.035*** 0.030*** 0.032***

Income poor*09–11 0.016 0.021 -0.009

Precarious class*09–11 0.053*** 0.051*** 0.003

Lower middle class*09–11 0.045*** 0.055*** 0.01

Upper middle class*09–11 0.018 0.022* 0.002

Social class (ref=high salariat)

Lower salariat 0 0.009 0.001

Self-employed in agriculture 0.036*** 0.040*** 0.018**

Small employer and self-emp -0.019 0.021 0.030**

Intermed and lower

supervisory/tech

-0.019* 0.009 0.014

Lower services/sales/tech 0.065*** 0.055*** 0.023***

Semi/unskill manual/never worked 0.068*** 0.064*** 0.022***

Self-employed in agriculture*09–11 -0.057** -0.028 -0.014

Self-emp*09–11 0.057*** 0.047*** 0.045***

OLS regression models

of economic stress (i) 1 2 3

Time period 2009–11 0.033*** -0.0223** -0.032***

Economic class (ref=affluent)

Income poor (<60 per cent) 0.274*** 0.221*** 0.108***

Precarious class 0.193*** 0.173*** 0.097***

Lower middle class 0.102*** 0.087*** 0.063***

Upper middle class 0.035*** 0.030*** 0.032***

Income poor*09–11 0.016 0.021 -0.009

Precarious class*09–11 0.053*** 0.051*** 0.003

Lower middle class*09–11 0.045*** 0.055*** 0.01

Upper middle class*09–11 0.018 0.022* 0.002

Social class (ref=high salariat)

Lower salariat 0 0.009 0.001

Self-employed in agriculture 0.036*** 0.040*** 0.018**

Small employer and self-emp -0.019 0.021 0.030**

Intermed and lower

supervisory/tech

-0.019* 0.009 0.014

Lower services/sales/tech 0.065*** 0.055*** 0.023***

Semi/unskill manual/never worked 0.068*** 0.064*** 0.022***

Self-employed in agriculture*09–11 -0.057** -0.028 -0.014

Self-emp*09–11 0.057*** 0.047*** 0.045***

OLS regression models

of economic stress (ii) 1 2 3

Age (ref= 65 years and over)

Under 35 years 0.086*** 0.100***

35–44 years 0.064*** 0.079***

Age 45–54 years 0.058*** 0.078***

Age 55–64 years 0.072*** 0.077***

Age 35–44 years * 09–11 0.026 0.019

Age 45–54 years *09–11 0.032** 0.023**

Children < 18 years in household 0.0391*** 0.024***

Children * 09–11 0.0116 0.023**

Housing tenure (ref=owned outright)

Mortgage 0.028*** 0.027***

Private rented 0.091*** 0.043***

Local authority rental 0.219*** 0.104***

Rent free 0.081** 0.013

Mortgage *09–11 0.063*** 0.053***

Social welfare (ref=Soc Welfare <=25 per cent of

income)

Soc welfare >25 per cent of income 0.058***

Soc welf>25 per cent *09–11 0.038***

Deprivation score 0.902***

Results Regression Model Economic Stress (1)

Model 1: Time (ref:2004-2008), income & social class

Income class: ref period, economic stress stratified by income class-over

time sig increase for all but greatest for precarious and lower middle income

group.

Social class: ref period, economic stress stratified by social class (highest for

unskilled manual-never worked)-over time largest change for self-employed.

Decline in stress level for self-employed in agriculture and increase for self-

employed in non-agriculture.

Model 2: Add demographics (age, children, housing tenure)

Age: ref period, stress level higher for <35 & 55-64 compared to 65+ group

but overtime largest increase for 45-54.

Presence of children: higher stress level with children but no difference in

time effect. Only when control for soc welfare and basic deprivation (model

3)

Housing tenure: highest level for social housing but over time largest

increase for mortgage holders.

Results Regression Model Economic Stress (2)

Model 3: Add basic deprivation & social welfare

dependence

Social welfare: ref period, higher economic stress for welfare dependent

and this effect increases over time.

Basic deprivation: large effect of deprivation but effect does not change

over time.

Controlling for material circumstances (welfare and deprivation) in the

first period reduces impact of income & social class (mostly worst off) but

over time effect still strong for non-agricultural self-employed=>stress

mediated through other recessionary consequences than deprivation.

OLS regression of economic stress

by HRP age

Under 35 years 35–64 years 65 years +

(i) (ii) (i) (ii) (i) (ii)

Economic class

(ref=affluent)

Precarious class*2009–11 -0.055 -0.041 0.059** 0.013 0.027 0.014

Lower middle class*2009-11

0.013 -0.015 0.064*** 0.017 0.046** 0.024*

Upper middle class*2009-11

0.018 -0.035 0.016 0.008 0.041** 0.031*

Social class (ref=high

salariat)

Self-emp*2009–11 0.001 0.066*** -0.013

Income Class & Life Course Interactions:

Predicted Economic Stress Scores by Income

Class, Age Group and Time Period

0

0.1

0.2

0.3

0.4

0.5

0.6

Income Poor(<60%)

Precarious Class Lower middleclass

Upper middleclass

Affluent Class

< 35 (2004-08) < 35 (2009-11) 35-64 (2004-08)

35-64 (2009-11) 65+ (2004-08) 65+ (2009-11)

Conclusion (i)

Strong rise in economic stress between 04-08 and 09-11. Purely

income based measure not picking up same increase.

Deprivation also recorded steep rise over period.

Strong influence of income & social class effect on economic stress

in boom and recession.

Controlling for social class sharpest increase in econ stress for lower

middle income (75-125% median income) and precarious income

(60-75% median income) groups.

Higher income class groups relatively insulated.

Income poor also saw less deterioration over period, though still

characterised by highest absolute scores.

Conclusion (ii)

Overall changing income class effects accounted for by deprivation &

resource variables.

Net effects for social class relate to self-employment categories – sector

as well as hierarchy matters.

Neither deprivation/resources or life-course factors contribute to

explaining the deteriorating situation of the non-agricultural self –

employed.

Overall analysis conceals a significant interaction between income class

& life course stage.

The sharpest increases in economic stress is observed among those at

the mid life course stage in the precarious and lower middle income

classes.

Conclusion (iii)

Ireland one of the countries most affected by the downturn but

taxation, welfare and public sector pay changes were generally

progressive – despite widespread perceptions to the contrary

Combination of factors which respectively decreased & increased

inequality

Bursting of property market bubble resulted in significant reduction in

number of large earners

Massive increase in unemployment increased gross inequality but

maintenance of the welfare floor relatively unchanged provided a buffer

– automatic stabilisation effects crucial

Public sector wage cuts, increased tax rates, negative equity & housing

costs imposed particular burdens on the “middle class”

Conclusions (iv)

Economic stress measure picking up additional dimensions of crisis, more

subjective than income poverty and deprivation but changes in a way that

can be accounted for largely by changes in objective circumstances.

Not a replacement for poverty measures, complementary.

Potential to analyse at EU level but more limited measures.

Additional new lines of research extend multidimensional

conceptualisation and measurement by combining measures of poverty,

material deprivation and economic stress to produce measures of

adjusted head count ratios (Alkire and Foster, 2011, Whelan and Maître,

(2014) & economic vulnerability (Whelan and Maître, 2012, 2014)

Policy Choices & Recent

Developments

Analysis pre second public sector pay cuts, tax/welfare changes

post 2011 & recent labour market recovery

Likely that middle class groups will benefit disproportionately from

increased employment and a rise in property values.

Nevertheless squeezed middle and austerity as a regressive choice

discourses presents formidable challenges.

Changing electoral preferences FF/FG/Lab 52% v SF/IND/OTH

48%

No easy choices

References (i)

Atkinson, A. and Brandolini, A. (2013) ‘On the identification of the middle class’ in Gornik, J. C. and

Jäntti, M. (eds), Economic Disparities in the Middle Class in Affluent Countries, Stanford University Press

Alkire, S. and Foster, J. (2011). ‘Understandings and misunderstandings of multidimensional poverty

measurement’, Journal of Economic Inequality, 9, 289-314

Gerlach-Kristen, P. (2013) Research Notes- Younger and Older Households in the Crisis, Quarterly Economic

Commentary, Spring 2013, Dublin: Economic and Social Research Institute

Goldthorpe, J.H. (2006a), ‘Social class and the differentiation of employment contracts’, Goldthorpe, J.H.

(ed.) On Sociology Second Edition, Volume Two: Illustration and Retrospect, Stanford: Stanford University Press

Guio, A-A, Gordon, D. & Marlier, E (2012), Measuring Material Deprivation in the EU,

Lxembourg:Eurostata

Maître, B, Nolan, B. and Whelan, C. T (2014), L’indicateur EU2020 de suivi de la pauvrete et de

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Maître, B, Russell, H. & Whelan, C. T. (2014), Trends in Economic Stress and the Great Recession in Ireland,

Department of Social Protection Dublin

McGinnity, F. (et al), Winners & Losers: The Equality Impact of the Great Recession in Ireland, Equality

Authority & ESRI

Mulhau, P. (2014), Middle Class Squeeze? Social Class and Perceived Financial Hardship 2002-2012,

Economic and Social Review, 45, 4

References (ii)

Pintelon, O., Cantillon, B., van den Bosch, K. and Whelan, C. T. (2013), ‘The social stratification of social

risks: Class and responsibility in the new welfare state’, Journal of European Social Policy, 23(1): 52-67

Russell, H, Whelan, C. T. and Maître, (2013), Economic Vulnerability and the Severity of Debt

Problems: An Analysis of the Irish EU-SILC 2008, European Sociological Review, 29 (4):695-706

Vandecasteele, L. (2010) ‘Poverty trajectories after risky life-course events in different European welfare

regimes’, European Societies 12(2): 257–278

Whelan, C. T. and Maître, B (2010), ‘Welfare Regime and Social Class Variation in Poverty and Economic

Vulnerability’, Journal of European Social Policy, 20, 4, 3: 316-332

Whelan, C. T &, Maître, B. (2012) Understanding Material Deprivation: A Comparative European

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485-503

Whelan, C. T. and., Maître, B. (2013) ‘Material deprivation, economic stress and reference groups: an

analysis of EU-SILC 2009’, European Sociological Review, 29(6): 1,162-1,174

Whelan, C. T. Nolan, B. &. Maître, B (2014), Multidimensional Poverty Measurement in Europe: An

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