94% would be better off working than on dole

All but 6% of Irish people are better off working than they would be on the dole — but one in seven working parents with young children are worse off.

An Economic and Social Research Institute study shows that, even after childcare, travel, and other costs, the benefits of working are greater for 94% of people.

The report, to be published today, also says income for unemployed people is not much higher than that in the UK. The comparative incomes are close when account is taken for the fact that half of unemployed people in the UK receive housing benefit.

While just one in eight unemployed Irish people receives a rent or mortgage supplement, it remains a significant factor for those who would be better off on social welfare than working.

In June, a dispute arose between the ESRI and former researcher Richard Tol over a paper he published under the ESRI banner, suggesting 44% of young parents were better off on the dole. This finding was dismissed by the ESRI, which questioned his methodology, and Dr Tol agreed to revise his paper.

ESRI research professor Tim Callan said today’s findings are based on more recent data from the Central Statistics Office, which includes the free year of pre-school education that was not in place in 2005 when the figures used by Dr Tol were collected.

Nonetheless, the report says there are greater barriers to parents — the 14% of parents who face the highest childcare costs would be better off not working.

The findings are based on a sample of 100,000 people, and took into account the potential earnings of those not working, based on education and age, which determines experience.

“We also found that, while the numbers are small, more than half of those who would be better off out of work choose to do so anyway,” said Prof Callan.

“For example, even if they have childcare costs, they might only be in place for a few years or they might not get a job back or have a chance of promotion if they left work.”

He said the findings reject troika claims that the ratio of unemployed incomes to working incomes is high compared to other EU countries. The ESRI has analysed OECD findings on this and said Ireland’s ranking on this measure is in the middle of the range for 15 EU countries compared.

The troika has highlighted the need for action on the impact of rent or mortgage supplements, and the ESRI says it needs to be looked at, but has not said if it would be better to withdraw or cut the payments, or to extend it to low-paid workers.

“Among those better off not working, it has to do with receiving one of these supplements, and the troika say there needs to be a revised housing assistance payment,” said Prof Callan.

A move to a UK-style housing benefit system is being considered by the Department of Finance, but the ESRI report says the UK’s €20bn housing benefit bill makes up 10% of its social security budget.