Only 3% of jobless better off on the dole
Only 3% of unemployed people would have more money if they continued to claim social welfare than rejoining the workforce, the ESRI found.
The think-tank’s report, which will be published today, finds that the vast majority of unemployed people would see their income at least double if they took a job.
The study authors have exploded the myth — created, it says, by “non-typical examples” — that most people would be better of containing to claim social welfare than taking up a job. The research shows that while the recession and the crisis in the public finances have seen unemployment rise sharply and taxes increase, this has not weakened the financial incentive to work.
“There has been concern that this combination may weaken the financial incentive to move from unemployment into employment, and selective examples have been used to support this argument,” it said.
The ESRI used its own tax-benefit model to find out what impact staying on the dole or going to work would have on a unemployed person’s household income. The potential entitlements of unemployed people to rent and mortgage supplements were taken into consideration, though the researchers said the latest figures show that only 13% of those on jobseekers’ assistance or benefit receive rent or mortgage supplement.
Their results also take into account the age and educational qualifications of the unemployed, meaning their potential earnings are likely to be below average.
The ESRI said its “comprehensive approach” found that 3% of unemployed people would earn less if working. It found about 80% of unemployed people would increase their income by at least 50% if they were to obtain a job and 60% would more than double their income.
Nonetheless, researchers are mindful of the increased pressure taxation is placing on those who are working.
The ESRI found:
- About one in six workers face a marginal effective tax rate which is 10 percentage points higher in 2011 than under the 2000 regime.
- A further one in four face marginal effective tax rates which are between five and 10 percentage points higher than under 2000 policies.
One of the authors of the report, Tim Callan, said: “Income-related taxes, such as the universal social charge, have done most of the heavy lifting in raising revenue. Future tax policy needs to look at taxes which are less directly linked to income, but still have regard to ability to pay. A property value tax could be designed to meet this criterion.”
