Michael Taft: Abolishing Income Poverty

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From top: Minister for Employment Affairs and Social Protection, Regina Doherty (right), with Minister for Finance and Public Expenditure and Reform, Paschal Donohoe, is seeking to provide a minimum income for all: Michael Taft

The Minister for Social Protection, Regina Doherty, wants to guarantee everyone an adequate minimum income. Good.

This would entail substantial redistribution to those on the lowest incomes. Fine.

Hopefully she can convince her Cabinet colleagues. If she can, great.

According to The Irish Times:

‘Signalling an intention to end traditional across-the-board welfare increases on budget day, the Minister said she wanted a far more targeted approach to guarantee a minimum basic income for everyone . . . Ms Doherty argued that the welfare system should guarantee a minimum essential standard of living (MESL) for everyone.’

Obviously the Minister has been poring over the Vincentian Partnership for Social Justice’s new release of their Minimum Essential Standard of Living (MESL), a detailed survey of what constitutes an income floor.

The MESL is the minimum needed to live and partake in society, meeting the physical, psychological and social needs of individuals and households. It calculates the actual weekly cost of over 2,000 items (goods and services) needed to enable a socially acceptable minimum standard of living.

Much attention has been devoted to the Minister’s discussion of the gap between the living standards of pensioners in different parts of the country, but this misses the main point (I’ll return to the pensioners below).

The Minister’s ambition would greatly expand the social protection budget.

Let’s look at how much additional expenditure might be needed. The VPSJ lists 7 household types (of which two are pensioners), sub-divided into urban and rural.

They then estimate the MESL required (the minimum level of expenditure), calculate the social protection income and show the ‘adequacy gap’.

If the gap is negative, then that is the increase needed to reach the MESL.

Out of the 10 household types, only two have a minimum essential standard of living – none in the rural areas.

For instance, a couple with two children (in primary and secondary school) in an urban area would need a €61 weekly increase to reach the minimum essential income (or €3,200 annually); in a rural area they would need an additional €112 per week (or €5,700 annually).

A lone parent with two children, similarly in primary and secondary school, in a rural area would need an additional €142 per week (or €7,400 annually).

These are massive sums. The Minister said she wants to move away from the €5 weekly across-the-board increase to one that targets household types in order to bring them up the MESL.

This would entail significant increases for most categories.

An across-the-board increase of €5 would mean a 2.5 percent increase. Compare that to the percentages needed to bring households up to a minimum living standard.

The Minister referred to ‘targeting’ households. If that is her approach, then the Government would be targeting just about everyone.

Even the two household types with an adequate income – they’re not overly adequate. For an urban couple or single parent with two children in pre-primary and primary school – they are only 2 and 1 percent above the minimum living standard level respectively.

Another aspect that comes through in these household types is the difference between costs in the urban and rural areas. This was especially highlighted by the Minister in her references to state pensions.

Again, the Irish Times reports:

‘It is not “fair” that some older people receive State pensions that are more than they need while others on the same amount live in poverty, Minister for Social Protection Regina Doherty has said.’

Let’s look at this ‘unfairness’.

Pensioners in the urban areas have incomes above the minimum essential though for a single pensioner, but not much above.

For those living in rural areas, single pensioners are below the minimum essential living standard while couples lag considerably behind their urban counterparts. The Minister homed in on this disparity.

‘The same payments for similar households in different parts of Ireland may not be appropriate,’ she said, adding that political and public “buy in” would be needed to explain to the “lady in Donegal” why she was going to get “more, or less” than “the lady somewhere else” in the State.’

Clearly, all rural households are disadvantaged. Is that because ‘costs’ are higher in the rural areas? Not really, not in the plural.

There is only one significant cost difference.

The overall cost difference is €73 weekly of which transport makes up 72 percent. VPSJ assigns no transport cost in urban areas since there are easily accessible public transport systems (with the Free Travel scheme).

These systems do not exist in the rural areas. If we exclude transport, the difference falls to less than €20; or 6 percent higher costs in the rural areas – a gap but not a significant one.

The Minister appears to be seeking to equalise treatment among pensioners. The simplest way is to provide a €50 supplement for those with a car in the rural areas. This would significantly close the gap.

Distinguishing between urban and rural areas would not be new. As late as 1988, rural recipients of basic social protection payments received 4 percent less than their urban counterparts – probably based on an old logic that people in rural areas could provide food from their own plots.

What would be the cost of bringing all households up to a minimum essential living standard?

Let’s assume a 20 percent increase. Excluding pensioners, this would cost €1.4 billion (using Social Justice Ireland’s calculation for a 4.4 percent increase in 2020). That is significant but feasible.

This doesn’t include costs for all household types. For instance, it is reasonable to assume that people with a disability or long-term illness would have additional expenditures above average households.

There are still the cuts to young people’s social protection benefits that are waiting to be restored. When all the myriad household types are accounted for, the social protection budget may need to expand even further.

One can’t help speculate whether the Minister is seeking to challenge the Taoiseach’s proposed tax cut, which would cost €3 billion over the next five. If only half of this were assigned to social protection benefits, the Minister’s ambition could be fulfilled.

However it is to be paid for, the goal of raising everyone up to the Minimum Expenditure Standard of Living would be a great stride towards eliminating poverty and redistributing income in society. If that is the Minister’s intention, she should be fully supported.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.

Leah Farrell/ Rollingnews

14 thoughts on “Michael Taft: Abolishing Income Poverty

  1. Pip

    “Obviously the Minister has been pouring over the Vincentian…..”
    Isn’t the word ‘poring’?
    Mind you, full marks for using myriad correctly.

  2. Joe Small

    We already have a social welfare system that is notable across the EU for it redistribution of income and reduction of inequality and poverty. A guaranteed minimum income is an unaffordable pipe dream. Mr. Taft is better off focusing on increasing the minimum wage, strengthening employment rights and acknowledging that employment is the best route out of poverty – not a guaranteed government hand-out for life.

    1. Michael Taft

      Joe Small – I would just point out that this isn’t my focus. It appears to be the Minister’s, however. I fully support raising minimum wages, introducing collective bargaining, reforming our largely voluntarist IR system, etc. With more than one-in-ten people at work experiencing multiple deprivation experiences we have a lot of work to do to make sure that employment is the best route out of poverty. However, reform of employment relations and social protection are not mutually exclusive – they are part of the same drive to raise the living standard floor for everyone.

  3. Jake38

    We already have the most progressive and redistributive tax system in the OECD.

    I suggest we focus on incentives to work rather than more handouts.

    1. Michael Taft

      Jonjo – it’s workers who benefit from the social protection system; from the half-a-million retired workers on social insurance pensions (which they paid for their whole lives), to workers with children, to workers who become injured at work or ill, The only problem is that there is not enough income support to all workers, especially the kind of in-work benefits that EU workers benefit from.

  4. curmudgeon

    Mr Taft would th govt not be best investing into state run old age care & retirement facilities. As it stands now old folks are getting fleeced on their care home “fair deal”, and the families that decided against this option often dump their parents into hosptial because they wouldn’t get the family home as inhertitance. Just giving elderly pensioners more money is not the answer, financial abuse by relatives is a problem as is sibling infighting but aging and declining physical and mental ability is absolutely guaranteed so we need a defacto safeguard. IMO care homes not cash should be it, and if done correctly in could well be the more econonimcal choice.

    1. Michael Taft

      curmudgeon – absolutely. The Minister was referring to income poverty and I was working on that basis. But we will also need investment in support services and community supports (and not just for pensioners – e.g. those with disabilities). However, this doesn’t exclude raising all people – those on social protection and those in work (through a Living Wage) – to a minimum adequate income. The two should go hand-in-hand – and should include rewiring the social protection system to provide in-work benefits, similar to those that exist in other EU countries; especially family supports. Granted, resources are limited so we need to target the most urgent services and income supports. But we should work to a long-term agenda.

  5. Weekend hermit

    People who say that ‘employment is the best way out of poverty’ are wrong.

    The reality is that wage growth has been lagging gdp growth all over the world since the 80s and there has been a precipitious break since the year 2000.

    Labour simply isn’t a key economic driver anymore. There has been too much technological disruption. Unions are in decline, precarity of employment is becoming the norm, a new model has emerged and it is one we had best learn to adapt to as we will become increasingly uncompetitive with our labour-is-king approach. In Ireland barely 30% of the tax take comes from income related taxes, which says a lot.

    FG (and previously Labour) have a track record of making welfare more and more difficult to receive so I have little faith in this effort or in other window dressing efforts like the artists’ scheme with its extremely difficult requirements and consequently risible uptake.

    Welfare sanctions and hostile ‘intreo’ offices are destroying lives.

    In short we can choose between Universal Basic Income or staying a Republic of Suicide.

    It might be other people today but it will be you tomorrow.

    1. baz

      try writing with a smile on your face, it could help change your outlook. give it a shot.

    2. curmudgeon

      Labour market would be better off immediatley if the govt taxed land and property that is not a primary residence (ie someones home). As Churchill noted a century ago land is the primary source of wealth, and if the workers earn more the more the rent goes up in lockstep. And when infrastructure is paid for by sociiety it is the land in proximity which gains value for its owner, desite conntributing nothing. Land value tax/ /property tax/ hoarding tax can tackle this imbalance.

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