In my family, you were either shanty Irish or lace Irish - lace meant money. Of course, all things are relative. If you were ever in an old tenament building, you would see that lace was used for curtains, for decorating the fireplace mantel, and wherever. I don’t think lace was particularly expensive, but it meant that you had “money” for “luxury.”
I spent a little time poking around for the phrase. A lot of it was derogatory, along the line of “poor Irish trying to make it look like they were better than their other poor neighbors.” There’s also another track that says, “we may be poor, but that doesn’t stop us from showing a little beauty and a little dignity.” After all, lace is nothing but cheap cotton thread worked in a special way. If Grandma taught you to tat, you could tat your own lace. This connection to poor Irish lace makers gives “tatters” a special twist.
Ann Landers did a warm-hearted piece on “lace curtain Irish” years ago, but my paltry web-searching skills can’t find it. It’s a pity I had to trudge through some much anti-Irish dreck looking for something positive.
I always heard it as derogatory- “look at you, trying to be better than us.” Of course, the same thing with “shanty Irish-” it was used to mean something equivalent to “white trash.”
Where I come from, and I admit that at times I and those around me are more reactionary than the general population about our heritage, either one of these phrases were fightin’ words along the lines of the “n-word.”
As a descendant of shanty-Irish immigrants, my understanding of the phrase has been closest to the third meaning. It indicated people who had been able raise themselves a bit above abject poverty and tried to show it by adopting middle class conventions.
My mother’s father was born in an Irish shantytown in the South Bronx in 1879. (That side of the family never appears in census records from around that time because I think the census takers were afraid to go in there. ) He eventually was able to buy a house in the north Bronx, which is where my mother was born and where I grew up. (He and my aunt lived downstairs.) He had lace curtains and lace doilies on every available surface.
The opposite to “lace-curtain Irish” is “pig-in-the-parlor Irish.” They were well enough off to have a parlor, but didn’t know any better than to keep the livestock there.
I have some Irish blood, and that’s how I always understood it. I never heard it used in a derogatory, “aren’t they all high and mighty” sense. It was just used in reference to an Irish family which was doing better than folks fresh off the boat.