May 25th Afternoon: The Recession Diaries

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Boy, was Senator Fergal Quinn taken in. Or was he? In his recent column, ‘Getting people work a priority’ he attempts to make two real-life comparisons – one based on a letter he received and one from what he read in the paper. Senator Quinn forgot the first universal rule of life: don’t believe everything you read in the paper. And certainly don’t be drawing policy lessons from what could be mere fiction. It leads you down all the wrong roads.

Senator Quinn had received a letter from a recently qualified solicitor who had been let go from work. She found part-time work in a dairy business but offered to work free in a small legal firm. She was so successful that the firm hired her. Sen. Quinn rightly praises the persistence and success of the young solicitor (though his contention that ‘supply creates its own demand’ doesn’t’ quite translate to the larger economy which is suffering from a lack of demand regardless of the growing supply of unemployed).

The problem, however, starts when he compares this with another ‘real-life’ situation:

‘Compare this . . . to that displayed in a recent letter to the Irish Independent, in which the letter writer spoke of a friend who had recently been made redundant. Far from being spurred to seeking a new job, the friend said he was better off on the dole: by drawing on various welfare payments available to him as a father of four with a mortgage, he said he now received the equivalent of €39,000, a sum well in excess of the €35,000 he had been earning before losing his job. This allowed the newly unemployed man to spend most of his greatly expanded free time on the golf course, all at the expense of the taxpayer.’

This story has been doing the rounds. The letter writer claims his unemployed friend is better off by

‘ . . €10,034 per year for working on his golf handicap . . (this) could even drive our small economy to collapse as the welfare bill gets bigger and bigger as more people, including myself, ask: why should I bother to go out to work when it is basically costing me money to work? Unless something radically changes, I will be joining my mate on the golf course very soon.’

I wouldn’t start polishing those golf clubs just yet, though; at least not until we examine this story a little further. For the story is riddled with mistakes and misconceptions. First, the golfer’s work income.

He had a net income of €28,854 according to the letter. Not a whole lot, certainly not with four children and a dependent spouse. But here’s the first problem: if this were real life, the golfer would be in receipt of Family Income Supplement (it seems clear he was a PAYE worker – working overtime, losing his salary, etc.). In general, the golfer would have been entitled to €147 per week, or over €7,600 per year. He would also have been entitled to €8,856 in Child Benefit, if his children were under 18. In other words, his net income could have exceeded €45,300 per year – not the €28,854 as the letter writer assets.

[As well, the letter-writer didn’t think this situation was a little curious – that with less than €29,000 net income, the golfer was apparently paying a mortgage of €18,000 per year. This can happen in extremis – such as when a partner loses their job. But there’s nothing to suggest our golfer was hit with this double-whammy.  Rather, he still managed to get his 18 holes in, despite the fact that, after housing costs, this family of five would have been living on €211 per week before paying for utilities, telephone, medical bills, etc. How did this golfer afford the green fees?]

Now the golfer is unemployed and working on his putting. What’s his income now? The letter claims he’s on Supplementary Welfare Allowance (though an insured PAYE worker would probably be on Jobseekers’ Benefit or, at least, Allowance). But let’s go with it. SWA is a tough means-tested gig. And you have to register for work with FAS. But if you satisfy the conditions, you will get, as the letter claims, €23,083.

In addition, as the writer correctly calculates, the golfer would be eligible for other schemes (Back-to-School allowance, medical card, etc.). However, another problem – and this is a big one – is the claim that

‘As he also has a mortgage, he is entitled to mortgage interest supplement which pays all the interest on your mortgage. In his case, this was €1,200 per month of his €1,500 mortgage, or €14,400 per annum.’

Is our golfer being paid over €14,000 a year in Mortgage Interest Supplement (MIS)? This is another means-test, tough and complicated. If you don’t believe me, get your head around this. However, the guiding rule is:

‘Generally the Community Welfare Officer will ensure that your income after paying the interest on your mortgage does not fall below than a minimum level. This level is the Supplementary Welfare Allowance minus €18 (€24 from 1 June 2009).’

Even at a minimum, with the weekly write-off, MIS doesn’t pay all the interest, despite the letter’s claim. It is difficult to calculate what the supplement might be (even the Social Affairs Department claims ‘calculating your Mortgage Interest Supplement can be difficult’). Assessed means (savings, investments, etc.) will reduce payments further.

But the Annual Statistical Report reveals that the average MIS payment was €60.22 per week. No doubt, average payments are rising, as more mortgage holders are being made unemployed. It’s a big jump, however, from an average payment of €60 per week to the letter’s claim of €277 per week, which is incorrect anyway. Look at this discussion where someone with far less income was entitled to nothing. Though the situations aren’t completely comparable, it shows how difficult it is to get MIS – even with people on low incomes.

Where does all this lead us? First, the letter is incorrect, to the point of fiction. I’m not suggesting the letter-writer is making it up. He may well have a friend in the situation he has described – but between the mistakes relating to social welfare entitlements, in both work and in unemployment, and the very real likelihood that his friend is not being completely forthcoming on all aspects of his situation, you have the makings of an urban myth.

It’s not unlike those myths from the 1980s, when people ‘knew for certain’ that single mothers were getting free colour TVs from the health board. Or the myths from the 1990s when ‘non-nationals’ were given cars from that same generous health board.

But it suits Senator’s Quinn agenda just fine:

‘The welfare state that this golf lover is relying on has been one of the greatest achievements of developed countries in the 20th century. It has mitigated some of the worst side-effects of capitalism, by assisting the unemployed and ensuring that access to health and education are not based solely on inheritance or family income.’

Doesn’t that just make you feel fuzzy all over? But now the sting:

‘But it is also right and proper that the State makes it attractive and financially worthwhile for people to take a job rather than live off the State, whatever their personal situation. This means that the State must modify our benefits system to ensure that it is always more worthwhile to work than to stay inactive.’

Of course, Senator Quinn could be referring to how the state could intervene to help raise low wages (introduce right to collective bargaining, pressure IBEC in social partnership talks, raise minimum wage and JLC rates,etc.) but I doubt it. Rather, it’s the ‘modify our benefits system’that Senator Quinn is getting at; making it tougher to get basic payments, reducing welfare rates, confiscating golf clubs, tennis rackets and football boots from those made unemployed. This argument works, after a fashion, if you first buy into the notion that people are somehow living high on the hog on welfare.

But that isn’t the case. With high rates of low-pay and, compared to other EU countries, low social welfare rates; combined with a woeful level of social protection measures and universal services (free health, low-price public transport, etc.) – it’s tough and getting tougher for a lot of people whether in work or on the dole.

Senator Quinn may be easily misled. But maybe he wants to be. It serves a simplistic and wrong-headed politics. This is one more contribution to the ‘most generous social welfare rates in the EU’ argument, sizing up those on low incomes for cuts in their living standards, preparing to rain a deluge of golf balls upon them.


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