ESRI study finds pandemic payments cushion income hit

ESRI study finds pandemic payments cushion income hit
ESRI report’s co-author Karina Doorley.

A large number of lower-paid workers and those paid close to the minimum wage would get less under the wage-support scheme than they would under the Covid-19 pandemic payments, according to a report by the Economic and Social Research Institute.

However, the ESRI assessment finds that the Covid-19 payments will help support the incomes of many thousands of households during the crisis.

And it finds that the wage-support scheme “is a good idea” that will prevent long-term employment damage, even though it may not benefit many thousands of people.

“The idea behind the scheme is good. It is to ensure that businesses can restart economic activity when the public health measures are lifted,” said ESRI economist Barra Roantree.

However, there is a substantial number of people who are better off taking the pandemic payment than taking up the wage-subsidy scheme “under the current design”, he said.

The report finds that the measures announced by the Government will “significantly cushion incomes” during the crisis.

“Essentially, we find that the measures the Government introduced will mitigate the fall in incomes most people will face,” said Mr Roantree, adding that, the pandemic unemployment payment (PUP) of €350 a week in particular will see much less severe falls in their incomes than if the measures were not in place.

It estimates the cost is for the exchequer is €4.9bn in a quarter, assuming 600,000 claimants.

“A central aim of the temporary wage subsidy scheme (TWSS) is for companies to retain links with their employees so they can resume activity faster once necessary public health measures have been relaxed,” said the report’s co-author Karina Doorley.

“Ensuring that both employees and employers have an incentive to take up this payment is important to ensuring it achieves this objective,” she said.

According to the report, “accounting for the Government’s policy response, around 560,000 families will be financially worse off in our medium unemployment scenario where roughly 600,000 individuals lose their job. Most of these — 400,000 — would lose by more than 20% of their disposable income.

“Accounting for the measures announced by the Government, this figure falls to between 200,000 and 300,000, depending on how many are retained in work through the TWSS, and whether employers make additional payments to eligible employees,” it said.

The report found that “most instead see reductions of less than 20% of their disposable income, some low-earning working-age families may be financially better off in the short-run. This is because the level of PUP exceeds their income from work and they are allowed to retain eligibility for Working Families Payment”.

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