The Irish Times today carrys a report that the Department of Social Welfare will soon contact all 400,000 people on the live register to explain that they would be better of working. Which seems fairly obvious
The report is interesting in that it first of all was and is still in the print version headlined “75% would be better off working” but was amended to “only 3% better off not working”. I wonder why. The report, says the Dept in a response to me (reproduced below) is not new. It is this report.
Now, that report is excellent. It looks at replacement rates (ratio of what you get on welfare to what you get on work). The 75% statement seems to come from the analysis of table 3 where the authors state “about three quarters of the recipients on Jobseeker’s payments face a replacement rate of less than 60 per cent”. In english this means that in the simulated labour market they develop someone on Jobseekers would get 60% of the predicted wage they would get.
The welfare situation is complex. The replacement rate is a fine and dandy tool to benchmark what you get in position A vs B. The problem is that the report and the letter campaign will be spun as “get of yer asses and get a job” . In a classic case of transference the (nominally) socialist Tainiste suggested young people should not be “in front of flat screen TVs”, echoing Norman (assuredly not socialist) Tebbitt and his exhortations to the unemployed of the 1980s to “Get on yer bike”
Here however is the problem..are there JOBS for these layabouts to drag themselves to instead of watching Jeremy Kyle and reruns of Americas Top Model? Focusing on the replacement rate is a classic case of supply side initiatives. But the other half of the issue is Aggregate Demand. From the Budget 2014 we see that domestic demand, which will drive jobs more than hoped for hightech exports, is calculated to be at best sluggish, at 1.4% to 1.1% pa for the next few years. It would be nice if we could have media and government that acknowledge that supply and demand work together.
The reference to ‘75% of people on welfare could increase their income by about 50 per cent by obtaining a job’ is from Live Register analysis and has been cited in a response to a recent parliamentary question (see below).
The separate research from the ESRI, is publicly available and the title of the study is “Tax, Welfare and Work Incentives’.
PQ – 17th October, 2013
Deputy Peter Mathews asked the Minister for Social Protection her plans to ensure that persons are financially better off in employment rather than on welfare; and if she will make a statement on the matter. [43140/13]
Response from Minister for Social Protection (Deputy Joan Burton):
The replacement rate for given income levels is a tool used to measure the degree to whichout-of-work benefits when unemployed replace take home income from work. While there is no pre-determined level of replacement rate, which would influence every individual’s decision to work, higher replacement rates may indicate lower incentives to take up employment. In this regard a replacement rate in excess of 70% may be considered to be excessive. The Department will shortly make available an online “Better Off in Work” ready reckoner which will give an indicative estimate of the difference between a customer’s potential in-work and current out-of-work payments based on information input by the customer. I expect this to be of significant practical help to jobseekers. Replacement rate analysis, as supported by research by the ESRI, demonstrates that the great majority of people on the Live Register have a strong financial incentive to work and significant numbers leave the Register each year.
In this regard it may be noted that almost three-quarters of the people on the Live Register are only claiming a personal rate for themselves. They are either single or may have a spouse or partner who is working. In addition, 53% of the people on the Live Register receive less than the maximum personal weekly rate.
High replacement rates are generally associated with a relatively high number of dependent children and/or receipt of rent or mortgage supplement. However, it is important to note that only some 9% of persons on the Live Register are in receipt of rent supplement, with a further 1.5% in receipt of mortgage interest supplement. The vast majority of jobseekers do not receive these additional supports. Significant moves have already been taken to address the impact of housing entitlements upon replacement rates. Arising out of commitments in the Programme for Government to review the operation of the rent supplement scheme, proposals to integrate the systems for providing rent supplement and social housing support have been advanced. It is intended to transfer responsibility for the provision of rental assistance to persons with a long term housing need from the Department of Social Protection (currently provided through rent supplement) to housing authorities using a new housing assistance payment.
The effect of this transfer and the introduction of a new form of housing assistance payment will be to address one of the significant disincentives to accessing full-time employment that exists under the rent supplement scheme. This will have a positive impact on replacement rates.