Wednesday 26 October 2016

Don’t hold your breath for Enda to ‘make work pay’

Published 11/10/2015 | 02:30

Enda Kenny’s plan has all the hallmarks of a good election manifesto ‘new idea’
Enda Kenny’s plan has all the hallmarks of a good election manifesto ‘new idea’

Expect to hear a lot more about Enda Kenny’s ‘Working Family Payment’ in the next few months. The Taoiseach mentioned it on Thursday night as a new idea that would promote work over welfare for families.

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The problem is that too many people have no incentive to take up low-paid jobs because they would lose a range of welfare and other entitlements.

It is an old problem and one that successive governments have talked about but done little to resolve.

It was even a pledge in Fianna Fail’s election manifesto way back in 1997 that people should be 20pc better off working than they would be if they were on social welfare. The OECD has also been on about it for years.

Kenny’s solution, which sounds wonderful on paper, is simply to make a welfare-type payment to a family where someone takes up a job.

Actually fixing the problem is very difficult. One way would be to introduce a massive re-alignment of welfare and taxation across a large number of headings. It is a worthy goal but not one that will be fixed any time soon, despite what the Taoiseach has announced.

Enda Kenny appears to want to adopt a more straightforward approach, namely to make something like a wage top-up payment.

So somebody who is currently on the dole is offered a job, which would on paper be a better thing for them and their family. However, they find they would be financially worse off by working. The loss of various social welfare entitlements negates the financial wisdom of taking the low-paid job. 

If the plan is simply to top-up their wages with a payment, and they still lose the welfare benefits, then how big would that payment need to be?

Furthermore, is this not replacing a State social welfare payment with a new State working family payment?

Employers could use it to keep wages low.

Kenny’s plan could prove to be of very limited value if the payment is too low, or incredibly expensive for the State if it is too high.

Research conducted by the ESRI back in 2012 found that a staggering 19pc of working parents would be better off on the dole. Tax benefits from last year’s Budget and those expected in next week’s Budget might help that number, but it is hard to know by how much.

Social welfare figures show that the vast majority of people on the dole claim only for themselves. Only around 9pc of those on the register are couples with two or more children. This is the group Kenny wants to target. It’s a sort of ‘Annie from Ashbourne’ who isn’t working and would be worse off if she was.

There is a sense in which the Taoiseach knows that, for this to actually work, it might prove extremely expensive. That might be why he announced during the week that Fine Gael was committed to “rolling out” a new Working Family Payment. This suggests its introduction might be gradual.

And there is another problem.

It could provide an incentive for employers to pay less. The Labour Party has been complaining that too many employers are paying too little in wages.

Business and Employment Minister Ged Nash has complained that the State is paying out €500m in “corporate welfare” through family income support. The Fine Gael plan might just add to the bill.

Kenny’s plan has all the hallmarks of a good election manifesto ‘new idea’. It appeals to a lot of people and seems to have its heart in the right place.

But taking it from manifesto leaflet to working policy in a new programme for government will be difficult. 

Lidl shows up rivals with living wage move

On the subject of low-paid jobs, Lidl set the cat among the pigeons by opting for a living wage payment of €11.50 per hour for its staff.

The move will affect around 20pc of its workforce who currently earn less than that amount. It isn’t at all clear how much the move will actually cost Lidl or even what its profits in Ireland are.

A similar move by the company in Britain was said to cost it around £9m.

Lidl, which has 143 stores and three distribution centres in Ireland, already pays staff better than most of its rivals, with entry-level grades starting at €10.50 an hour.

The company said all staff will now earn a minimum of €11.50, rising to €13 an hour incrementally within two years.

It certainly looks good and the positive publicity alone is worth more the cost of the higher wage bill. It shows how the discounters can be very adept in how they position their business reputation and not just adept at selling groceries.

The move puts it up to other large employers to ‘look into their hearts’ and see what they can do. But don’t expect a rush.

Employers group Ibec is quick to point out that around 45pc of the Irish private sector are employed by employers with less than 50 employees and 21pc with less than 10 employees — with such a high labour intensity in terms of our labour market structure, the rate “would actually be a very, very significant burden on Irish employers.”

It has also suggested that signatories to the living wage charter in the UK were mainly public service bodies, financial institutions and consultancies which had few, if any, low-paid staff.

The move will always be voluntary given that the Lidl rate is about 30pc higher than the minimum wage.

Tanaiste Joan Burton wants to see more companies adopt the living wage charter —but perhaps the Government could do more for the low-paid by solving the housing and rental crisis which is devouring so much of people’s income? 

Banking Inquiry becomes a dead man walking

The Banking Inquiry has now become a political football in relation to the timing of a general election.

Its chairman Ciaran Lynch was pleading on radio on Friday morning to allow it to finish its business, as if its publication would be the one thing that would prevent another banking crisis in the future.

That may be over-stating its value just a little. However, it does seem bizarre that after seven years of delays, the public inquiry into the €64bn financial crash might be canned before it gets a chance to report.

The inquiry has been hampered by time delays, legal constraints and its inability to make findings of fact against individuals. Once the decision was made to go ahead with a ‘flawed’ inquiry model, then surely it should be completed.

The problem is the inquiry hasn’t really caught the public imagination. It was delayed for far too long. The idea of holding off on the timing of a general election — just to wait for its publication — is almost as bizarre as binning it after the hearings have been finished, but without a report.

If Kenny goes to the country early, it will simply confirm the rather casual attitude adopted towards finding out what went wrong in the crash.

If he waits, it won’t be for the sake of the Banking Inquiry report but simply because it makes sense for a whole load of other political reasons.

Either way the Banking Inquiry exercise has been diminished further in the public eye.

Sunday Independent

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