Income inequality increased dramatically during the previous government’s five-year term, with the gap between high and low earners expanding by €963 annually, according to a new analysis by Social Justice Ireland.
The comprehensive report reveals that while middle and low-income households saw their income gap narrow by €204 per year, the divide between the wealthiest and poorest households grew significantly, raising concerns about Ireland’s commitment to reducing inequality.
Tax Policy Favored Higher Earners
The widening inequality was driven by what Social Justice Ireland described as “skewed income reduction choices” that disproportionately benefited higher earners while offering minimal gains to low-income workers paying standard rate income tax.
Budget 2025 particularly contributed to this divide through substantial income tax cuts for wealthier households and the ending of most temporary cost-of-living supports that had previously helped lower-income families.
Temporary Measures Mask Permanent Changes
The report highlighted how temporary budget measures were primarily targeted at welfare-dependent households and low-income workers, representing 47-62% of income gains for pensioners but only 11-16% for couples earning over €100,000.
However, once temporary supports such as electricity credits and one-off welfare payments expire, the permanent tax changes will continue to favor higher earners, further entrenching income inequality.
Low-Income Workers Left Behind
Workers earning between €30,000 and €40,000 annually, just above minimum wage, gained little from income tax changes as their earnings fell below the thresholds for most reductions. This group, along with households below the standard income tax threshold, benefited least from government measures between 2020 and 2025.
The stark disparity in weekly income gains illustrates the policy impact, with couples earning €30,000 receiving just €3.34 additional per week compared to €110-€120 for couples with incomes above €100,000.
Expert Warns of Troubling Trajectory
Michelle Murphy, Research and Policy Analyst with Social Justice Ireland, expressed serious concern about the policy outcomes, stating that “as a society we can ill afford to see the incomes of those with the most resources drift further away.”
She warned that the decline in the relative position of low and middle-income households presents a troubling picture where progress on income equality risks being reversed by recent policy decisions.
“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,” Murphy explained.
Challenge for New Government
The findings pose significant challenges for the incoming government as it prepares its first budget. Murphy emphasized that reversing these growing income gaps will require careful consideration of future budgetary policy.
“The commitment to run progressive budgets in the programme for government is the context in which these income gaps must be addressed,” she noted.
Social Justice Ireland continues to advocate for refundable tax credits as a more equitable approach to supporting low-income earners, arguing this would better address the systemic inequality revealed in their comprehensive analysis.
The report underscores growing concerns about Ireland’s direction on income equality, particularly as temporary pandemic-era supports are withdrawn and permanent tax changes favor those already in stronger financial positions.