On the Generosity of Ireland's Welfare System
Posted on April 23, 2014 by Micheál Collins
Earlier this week, the OECD launched their preliminary review of the Government’s Action Plan for Jobs. The review rightly complements the significant labour market progress of recent years – a point we highlight in the most recent NERI Quarterly Economic Observer. There we anticipate unemployment will continue to fall reaching 10.2% by 2016.
Although the document itself (link below) does not point towards the Irish welfare system as being ‘generous’, some media reports have suggested it does. However, it is worth examining any such claim on the basis of the data available to us.
Indicator 6.1 of the latest NERI Quarterly Economics Facts (QEF) document uses OECD data to compare the generosity of unemployment benefits. It does so using the OECD’s measure of replacement rates which compare income prior to unemployment with income from welfare after unemployment. Across the OECD these rates range from 20% (UK single person) to 96% (Slovenia two-earner married couple). Given the variation in individual country replacement rates, reflecting the nature and composition of welfare entitlements in these countries, the data shows the futility of making simple cross country comparisons based on one particular type of individual/household.
As the data in the indicator shows, the Republic of Ireland possesses the fifth lowest replacement rate for single unemployed people with no children within the OECD (50%), only the UK, Australia, New Zealand and Greece possess lower rates. Of the six household types examined by the OECD (see table and chart in Indicator 6.1) four Republic of Ireland types record replacement rates below the OECD and EU median values and two above these median values.
Despite measurement challenges, relative to other OECD and EU countries, the data does not suggest that Irish welfare benefits are generous.
Photo credit: Samuel Beckett Bridge from Michael Foley Photograph Flickr creative commons page: https://www.flickr.com/photos/michaelfoleyphotography/