Ireland’s Welfare Provision: A European Perspective

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The European Anti Poverty Network (EAPN) Ireland) recently published a factsheet for members on ‘Social Welfare: How Ireland Compares in Europe, which challenges some of the myths and misinformation on social protection spending in Ireland. In this article, Niamh O’Grady, Research Assistant, challenges the view that Ireland’s social welfare and protection levels are among the highest in the European Union. The factsheet is available at www.eapn.ie

Two of our long-term residents, inequality and poverty, might be here to stay. Indeed, there is a distinct possibility that those twin social ills may be further institutionalised in the next budget. Despite claims to the contrary, the Irish social welfare system still lags behind its European counterparts. As the government attempts to plot a course to economic recovery, it is vital that the most vulnerable members of society (those who depend on social welfare payments) are not left behind.

Comparing European social welfare payments poses a considerable methodological and statistical challenge. Social welfare mechanisms in European Member States differ greatly from one another in their design and delivery, with some welfare systems linking pay to unemployment benefit. Similarly some member states do not grant supplements for dependent children/spouses. There are other significant differences between EU member states. For example, in Ireland, redundancy compensation of two weeks’ pay per year of service, reimbursed to 60% from social welfare, is paid to workers laid off after more than two year’s employment with the same employer. In unionised sectors higher levels of redundancy compensation, paid by employers, are the norm. Redundancy payments thus compensate workers to some extent from the drop to flat rate benefit on becoming unemployed. However, most employees do not receive more than the statutory entitlement and workers who have been less than two years in the same employment do not qualify at all. Given the complexity of comparison, EAPN Ireland took the case of a single claimant as a case study.

Contrary to popular belief, Irish social welfare rates are not the most generous in the EU. In fact an Irish single unemployed claimant receives the third smallest amount in benefits in the EU15. It is possible to compare the amount of benefits people get based on the same wage using the OECD Benefits and Wages database. If the Irish average industrial wage in 2007 (€32,747) is used as a benchmark, we see that a person, who loses their job in Ireland, can expect to receive €9,662 in social welfare income. In Luxembourg, a person earning €32,604 per annum previously would collect €21,346 in unemployment benefits and in Portugal; a person who had earned €32,288 would receive €14,323 in social welfare assistance. However, the Irish rates are significantly more than in Northern Ireland and Britain. However, the latter’s comprehensive system of “cradle to grave” social insurance and health care with its principles of universal provision and flat rate contributions have to be acknowledged.

In 2007, Ireland’s spending on social protection was the lowest in EU15. While EU member states were spending an average of 26.9% of GDP (Gross Domestic Product) on social protection, Ireland spent 18.2% of GDP. Even in terms of GNP (21.4% of GNP) Ireland’s spending on social expenditure still stands out as being below the EU average.  When social protection expenditure is expressed in terms of per capita and Purchasing Power Standard (PPS), the differences between countries are more pronounced. In 2006, the UK government spent 17.2 per cent more per person on social expenditure than Ireland did.

Social transfers have proven to be effective tools for reducing poverty – indeed over the last decade, the Irish government has made progress in bringing down poverty levels, notably among children and older people. In the absence of social transfers other than pensions (such as unemployment, family and housing benefits), the percentage of Irish people living in poverty would be considerably higher than it is in reality. The results of a CSO analysis shows that without the social welfare system Ireland’s poverty rate in 2007 would have been 41 per cent. The actual poverty figure reflects the fact that social welfare payments reduced poverty by 24.5%.

In Ireland, equality has long eluded those who tried to ensure that economic and social development moved in tandem. In 2007, when 16.5 % of the population were ‘at risk of poverty,’ and 5.1 % were living in consistent poverty, the top 5% of the population held 40% of the wealth in Ireland. If the focus shifts to financial wealth alone, the concentration of wealth increases. In this instance, 1% of the population accounted for around 34% of the wealth. Compare this to the 19.9 % of children who were living in relative poverty and the 7.4% of children who were living in consistent poverty for that same year.

Recent research conducted by British academics Richard Wilkinson and Kate Pickett (2009) has shown that societies characterised by high levels of inequality are likely to suffer a drop in the standard of education; increased levels of physical and mental illnesses; higher rates of drug abuse; more imprisonment; less social mobility; a deterioration of trust and community life; the proliferation of violence; more cases of teenage births and obesity; and a significant decline in child well-being. The symptoms of inequality do not confine themselves to certain social strata.  All of the symptoms of an unequal society will cost the state more money in the long-term.

The government has much to consider in the coming weeks and there are certainly hard choices to be made. However, before the government decides to cut the cost of social welfare, they should consider the immediate and long-term costs of these cuts.

EAPN Ireland is a network of groups and individuals working against poverty and is the Irish national network of the European Anti Poverty Network. We aim to put the fight against poverty at the top of the EU, national and local agenda.  EAPN Ireland is one of a number of charities, trades unions and community organisations which have joined forces to form the Poor Can’t Pay Campaign, which is campaigning to make sure that:

  • there is no cut in the basic social welfare payment for adults or children
  • there is no cut in the Minimum Wage
  • that the traditional Christmas Payment gets paid
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Niamh O’Grady is Research Assistant at the European Anti-Poverty Network (Ireland).

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2 Responses

  1. Bert McCann

    October 5, 2009 5:10 pm

    It’s marvellous that we have commentators like Niamh O’Grady willing to take on the myths perpetrated by the right. Getting mainstream coverage of progressive analysis of the same intensity and volume as that afforded to the Friedmanites et al is the difficult part.

  2. laura

    October 5, 2009 6:06 pm

    Its so awful to see Ireland being incorrectly touted as having a “generous” welfare system. Unfortunately the problem is that there is a small perpetual claimant class who are low-skilled, limited in experience and often have high health/jhousing/childcare needs, but are unlikely ever to earn much more than the minimum wage. Many of these are particularly found in the private rented sector and so have little likelihood of ever earning higher wages in the world of work than they currently receive in welfare. Most of them don’t consciously “choose” welfare, it becomes an inevitable way of life as better opportunities are not available.

    There are two key problems:
    1. the drop from an average wage packet to welfare is far too high thrusting people instantly into real poverty
    2. the difference between welfare as a “package” and the minimum wage for SOME people is non existent, or possibly higher – this is almost entirely due to the combined value of rent subsisides in an evironment where social housing for many is but a pipedream and the medical card – this creates a massive disincentive to work – and indeed punishes many low paid workers to effectively have to “compete” with rent subsidised tenants in the rented sector out of their own pockets