In this blog and its associated NERI inBrief (see here) NERI Co-director Tom McDonnell calls for radical reform of welfare policy in order to deliver decent incomes for all.
Last week I set out NERI’s view on the urgent need for reform in the areas of productivity and employment. This was in the context of the European Semester process and the National Reform Programme. But of course the need for reform goes well beyond this.
The latest NERI inBrief makes the case for a fundamental reform of how we do welfare policy. The current ad hoc system of annual increases needs to be overhauled and replaced with an evidence based approach. The key guiding principle should be adequacy and the key tools should be benchmarking, tapering and a coordinated policy regime. This approach is in line with the recommendations of the Commission on Taxation and Welfare. Unfortunately, the report’s recommendations remain just that. As a consequence we had no capacity to coherently respond to the cost of living crisis and the accelerated structural uplift in prices. Instead, we got tax cuts and temporary universal supports carrying enormous deadweight.
The failure to index welfare rates lead to an increase in deprivation rates in 2023.The CSO’s Survey on Income and Living Conditions shows that enforced deprivation in the population increased from 13.7% in 2021 to 16.6% in 2022 and 17.3% in 2023. These higher rates reflect the failure of incomes to match the rising cost of living during the course of 2021 to 2023 and shows the imperative to benchmark and index welfare payments and ensure adequate wage rates in the economy. Deprivation rates vary significantly by age and by other characteristics.
Children have a more than one in five probability of deprivation (21.4%). This is exactly twice the rate for people aged 65+ (10.7%). Young adults also have a high risk of experiencing deprivation at 19.3%. Certain cohorts are particularly vulnerable to enforced deprivation. This includes persons living in one-adult households with children under 18 (41.4%); persons unable to work due to a disability or health problem are at 44.7%, while renters are at 36.5%. The prevalence of bad jobs in the economy is illustrated by the fact that households with one person working have a 21.8% deprivation probability and households with two persons working have an 11.6% probability.
The widely divergent deprivation outcomes for the various cohorts in Ireland show the need for a more evidence-based and targeted design of the welfare system. We are failing and we need to change our approach.