PUP scheme may have acted ‘as significant disincentive to work’, report says

The pandemic unemployment payment (PUP) may have acted as a significant disincentive to people to return to work because of the high rates paid, the Department of Public Expenditure has warned.

Nearly 81,600 of those still remaining on the PUP have received the welfare payment for 52 weeks or more, out of the 80 weeks it has existed.

Of this number, 50,300 have been in receipt of the payment for more than 76 weeks, or over 95 per cent of the total number of weeks the PUP has been in operation, said the department.

“There is early evidence that the PUP may have caused a disincentive for work, and therefore, some element of expenditure could have been considered a deadweight loss.

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Simultaneously, there is evidence that the length of time out of work has caused “scarring”, which may require “additional targeted intervention to support the [employment] activation of these persons”, it warned.

The charge that the high rate of PUP deterred some people from going back to work is evidenced by the number of construction workers who have claimed it, even though construction has been “reopened for an extended duration”.

Many longer-term PUP claimants would by now be regarded as long-term unemployed if they were on the regular Live Register, said the department’s document which forecasts employment trends. Nevertheless, substantial numbers of people on social welfare are expected to leave behind all State supports next week “as the last of the economic restrictions are removed and as the economy returns”.

Minister for Social Protection Heather Humphreys said on Monday that her department had, since the scheme was introduced in March 2020, paid out €8.8 billion in pandemic unemployment payments to almost 900,000 people.

Initially, under the scheme, all recipients received a flat rate of €350. However payments more recently range from €203 and €300 based on the claimant’s pre-Covid earnings

The department’s report said the numbers receiving the benefit for a year or more demonstrated that a significant proportion of pandemic unemployment payment recipients have had little movement from the scheme “implying that they were unaffected even by the previous changes in sectoral restrictions and have moved further from the labour market”.

“This may indicate that many of these recipients will likely require significant support through targeted activation measures once they are transitioned off the pandemic unemployment payment.”