A recently published working paper by the ESRI on assessing the actual costs associated with joining the Irish workforce has received massive media prominence in the last few days. It has become a report that has proven to be as controversial in its content as much as in its withdrawal. The title The Costs of Working in Ireland makes one think of how that title applies in the widest sense in securing and keeping a job in Ireland at the moment.
The problem in dealing with a report like this, even if it is/was a working document as stated by the ESRI, is that it will be used by certain advocates as a means of seeking further reductions in the basic Social Welfare payment rates, arguing that Ireland’s overly generous’ social welfare is causing 14% of the working population to sign on. This of course is a fallacy; it is unemployment which causes people to seek state support not a more comfortable lifestyle. As one lady commented on radio the other day, you exist on social welfare, you do not live.
The Report sets out clearly the barriers for people to enter the workforce and finds that when one examines the true costs of working, people with children in particular are better off not working. The report main finding is that 41% of working families are better off not working. To their credit however, the authors acknowledge that more than financial motives determine people’s choice to go out and work. The fact that the 41% is not the reality only emphasises how this report is looking at but a small aspect in the determinants that motive people to choose work over welfare.
The reported results (even if the foundational data is questioned by some) however shows up not that social welfare payments are so good but that the disposable take home wage is so low. The authors note that low income households facing high taxes will have more disposable income if one chooses to stay at home and mind the children a choice that sounds like a pretty rational to most people. Noah Coffey, Anne Pentecost and Richard SJ. Tol, the authors, note that the main barriers to returning to work are Childcare and Transport.
They have set out that Childcare costs in Ireland are the highest in Europe, that we do not have a national unified structure in place to facilitate high quality and affordable childcare ad due to this failure we are losing out in improving access to work for in particular low & middle income families along with reaping the social advantages of early educational and socialisation that has been demonstrated to come from pre-schooling.
One easy way of tackling this issue could be achieved by making childcare costs tax deductible, however this would have the downside, and raise the political ire of many, by removing the incentive for some people to use a family relation of neighbour to mind the children.
Weak public transport infrastructure in our urban centres along with almost non existent rural public transport the report found that employed people face travel costs of €106.30 per week versus an unemployed persons travel costs of €23.93. Using the simple example of a person working in a 39 hour a week job that pays minimum wage a person that person would after the reports transport costs are applied be only €40 better off than a person on Jobseekers Benefit. Something is not adding up about Ireland Inc.
Results for Minimum Wage @ 39 Hrs & ESRI Transport Costs
*Deloitte 2012 Budget Calculator
|Vehicle BIK (1)||€0.00|
|Health Insurance BIK||€0.00|
|Qualifying Pension Deduction||€0.00|
|Tax @ Lower Rate||-20%||€3,508.40|
|Tax @ Higher Rate||-41%||€0.00|
|Universal Social Charge||-€547.00|
|Annual Net Income||€16,995.00|
|Monthly Net Income||€1,416.00|
|Weekly Net Income||€327.00|
|ESRI Transport Cost||€106.30|
This reports serves to highlight that after sixty years of switching our country’s economic policy from agriculturally to industrially focused, Ireland has still not figured out a simple and affordable way to get people to work and home again and to mind children while doing it. Funnily enough our Europeans partners and economic competitors have.
The key issue that emerges from the discussion and analysis of this report is the large share of taxation we currently pay for our public services which do not provide much in the way of services for the entire community. This could be that we do not pay enough for what we want, or more worryingly as a State it has never been explicitly stated what kind of services we want & need and how they should improve people’s lives while at the same time allowing us to be economically competitive.
That discussion and vision is meant to come from our policymakers, politicians and civil servants, but to date seems to be part of the job description they are not very good at fulfilling. Until that lack of a plan is clarified Ireland will continue to be held back from reaching its social or economic potential.
This report while helpful is not the smoking gun as to why we have 440,947 people out of work but it does make us think a bit more about how we work and what it is costing us.
PS. The figures that the report is based on come from the CSO Household Budget Survey 2004/2005. From my reading of the report I cannot see an averaged income figure stated.