Social welfare cannot fill the gap when pandemic payments end

Prior to the current public health crisis, one in every eight people in Ireland lived with an income below the poverty line – about 630,000. Looking ahead, this number is set to rise as the very uneven impact of the Covid-19 crisis unfolds.

The pandemic has highlighted many of the long-standing vulnerabilities and challenges facing Irish society. For example, the importance of low-income workers to the basic functioning of our society has been given great prominence, yet many are classified as the “working poor” and continually struggle to make ends meet.

Lockdown, temporary layoffs and associated emergency State income support have introduced many families to the reality and challenges of life on a low income, even though these incomes are above the poverty line and core welfare support payment values.

The challenges of making ends meet with limited resources, coupled with the uncertainty of future income opportunities and ongoing unpredictability, has been new, and understandably challenging, territory for large proportions of the Irish population.

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Many now face the prospect of moving to a substantially lower level of income support when the Pandemic Unemployment Payment (PUP) and the Emergency Wage Subsidy Scheme (EWSS) are set to discontinue in June. One-fifth of those in receipt of Covid-19 income support payments, either the PUP or the EWSS, do not expect to return to their previous employment.

In the absence of other employment opportunities, this suggests the potential for a transfer of these individuals to jobseeker payments. Based on the most recent figures available for Covid-19 income supports, it is not unreasonable to assume an additional 130,000 people or more will move to a jobseeker’s payment – a weekly income which is more than €80 below the poverty line – by the end of the summer.

Poverty line

To date, the Covid-19 income supports have meant there has been little or no discussion about the adequacy of social welfare rates. This will surely change as a significant number of people move onto a weekly income well below the poverty line, with potentially very limited opportunities for alternative employment available to them. It is the social welfare system that will pick up the slack for the uneven recovery, and those unlucky enough to be employed in sectors most impacted by the pandemic.

As political attention considers how to move those who are on the PUP to the basic jobseeker’s payment of €203 a week in advance of October and the budget, maintaining adequate levels of welfare is essential. Rather than focusing on reducing the PUP to the basic unemployment payment, Government should take this opportunity to reform the social welfare system and benchmark core welfare rates to wage rates.

Just over a decade ago Budget 2007 benchmarked the minimum social welfare rate at 30 per cent of Gross Average Industrial Earnings. This led to reductions in poverty rates. Updating this benchmark to 2021, to income statistics for a broader set of Irish employment sectors, it is equivalent to 27.5 per cent of the average weekly earnings, €222.08 a week. This is the appropriate benchmark for minimum social welfare payments at this point.

Given the importance of this benchmark to the living standards of many in Irish society, its relevance to anti-poverty commitments, and a potential post-pandemic unemployment rate of over 10 per cent, Government should commit to increasing the minimum social welfare rate over one or, at most, two budgetary cycles to meet this benchmark.

Budgetary policy

One of the key tools at Government’s disposal to reduce poverty is social welfare. Our research shows that prioritising low-income welfare-dependent families in budgetary policy works and leads to reductions in poverty. There has been a welcome decline in the level of poverty risk since 2016. Looking at the 2017-2021 period, budgetary policy resulted in all household types recording an increase in their disposable income.

The larger gains experienced by welfare-dependent households explain much of the reasons why poverty and income inequality have fallen in recent years. Social Justice Ireland warmly welcomes this progress. Our consistent message in advance of these budgets was to reverse previous regressive policy choices and to prioritise those households with the least resources and the most needs.

Worryingly, the two most recent budgets have shifted away from this approach. Much recent progress will be reversed unless Government reasserts a focus on welfare increases and supports for those households on the lowest incomes.

The phenomenon of widespread unemployment looks set to return. Its emergence will frame many of the policy choices Government makes in the coming months. A lesson from past experiences of economic recovery and growth is that the weakest in our society get left behind unless welfare increases keep track with increases elsewhere in the economy. In 2021, as we plan future budgetary priorities, it is important that adequate levels of social welfare are maintained. Put simply, if poverty rates are to fall in the years ahead, core social welfare rates must increase.

Michelle Murphy is research and policy analyst at Social Justice Ireland