Thursday 18 December 2014

Families who are €4,000 better off on dole than at work

Poverty trap prevents move from welfare to full-time job

Published 04/11/2013 | 02:00

A family could be €4,000 better off on social welfare - Getty Images/iStockphoto
A family could be €4,000 better off on social welfare - Getty Images/iStockphoto
Social Protection Minister Joan Burton has acknowledged that rent supplement is a welfare trap

A FAMILY could be €4,000 a year better off on social welfare than with one parent working full time in a minimum-wage job.

Figures compiled by the Irish Independent reveal the poverty trap that can still make it pay to claim state benefits rather than take a low-paying job.

The analysis shows that for a family of four with nobody working, social welfare entitlements including rent supplement would deliver an annual income of €33,185.

That includes jobseeker's allowance with additional payments for a spouse/partner and children, child benefit, fuel allowance, back-to-school allowances and rent supplement.

But if one partner took a full-time job at the minimum wage, their yearly income would amount to just €29,164.

That's because although they would receive a social welfare top-up payment to boost their job earnings of €17,414, they would be highly unlikely to receive rent supplement.

Rent supplement is paid to more than 82,000 households at a maximum rate of €823 per month, adding up to almost €10,000 a year.

However, it is overwhelmingly paid to

social welfare recipients and there are very restrictive conditions under which working families can receive it.

This has resulted in a situation where the Economic and Social Research Institute (ESRI) estimates that 8pc of the unemployed "would experience a cash loss from moving into employment" with most of this down to the loss of rent or mortgage supplement.

Social Protection Minister Joan Burton has acknowledged that rent supplement is a welfare trap and the International Monetary Fund has repeatedly called for it to be reformed.

Ms Burton told the Dail recently that responsibility for rental assistance would be transferred from her department to local authorities, with a new rental subsidy system so that people would not lose out when moving from welfare to work.

"The introduction of a new form of housing assistance payment will be to address one of the significant disincentives to accessing full-time employment that exists under the rent supplement scheme," she said.

However, the department told the Irish Independent it would be next year before the new scheme began to be rolled out, and that would be on a pilot basis in a number of local authority areas.

But just as it moves to close off this welfare trap, the Government has announced plans to reduce access to medical cards for those returning to work.

Unemployed households who have a medical card are entitled to keep it for three years after they take up a job – but in the Budget it was announced that this would be changed next year and they'll only be entitled to a GP visit card.

The department said that its Advisory Group on Tax and Social Welfare was examining disincentives to work and reform solutions such as the new rent support scheme.

"The group is also aware of the possible implications of medical card changes and will be examining this," it said.

The department pointed to ESRI research, which showed eight out of 10 unemployed people would increase their income by at least 50pc if they were to find a job.

However, the ESRI report 'Work Incentives: New Evidence for Ireland 2012' found that 8pc of the unemployed would have a lower income in work than out of work.

Taoiseach Enda Kenny has clearly indicated that the Government wants to target welfare traps.

Writing in the Irish Independent last month, Mr Kenny said a whole new approach to work activation and welfare reform was required to break the cycle of welfare dependency.

"We are still in the early phases of reforming our welfare system and there is still much to do. We are moving to put in place more jobseeker case workers from external service providers and we will target the welfare traps that prevent families taking up work," he wrote.

PAYMENTS

The latest department figures show there were over 82,000 households receiving rent supplement in August 2013, including over 38,000 on unemployment payments.

It could not give a breakdown of how many working households received this supplement, but said they would be included in the "other" category of 6,516 recipients.

To qualify for rent supplement while working, a family would have to be on their local authority's Rental Accommodation Scheme, which involves being identified as having a long-term housing need and having already been on rent supplement for 18 months.

If the family in question did meet the conditions to qualify for rent supplement, they would receive a lower rate of €625.73 per month or €7,508 a year, which would bring their total annual income to €36,372.

That would leave them around €60 a week better off than on social welfare, although part of that would be swallowed up by additional working costs such as travel.

Irish Independent

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