Why it sometimes pays better not to work
Published 11/06/2014 | 02:30
Being on the dole is soul-destroying and depressing.
But for families that have children, it is sometimes a better bet financially than taking up a low-paid job.
Take a family where there is no one at work.
If a job becomes available paying €40,000 a year, the after-tax income will come out at around €31,580.
But to take up the job the unemployed parent will have to fund travel costs and other bills associated with joining the workforce.
However, low-income families do qualify for family income supplement, an incentive to boost the incomes of the low paid.
Staying on the dole will mean the family is entitled to €372.40 in Jobseeker's Benefit payments a week. This is made up of an adult rate, a dependant adult rate, and €29.80 a week each for the two children. This works out at €19,364 a year. A jobless family should also qualify for an electricity allowance of €35 a month, and a fuel allowance of €20 a week for 26 weeks of the year.
The big one is rent supplement. This is as high as €975 a month in Dublin. If the family is in Meath, the rent supplement is €600 a month.
Then there is a medical card. It is very hard to put a value on this, but with GP visits typically €50 a go, the card could be worth up to €1,000 a year for a family. All of this amounts to around €30,000, if we assume the family lives in Dublin.
In this example, there is not much of a financial incentive to take up a job when you consider that there is extra cost involved in heading out to work, and the likely loss of a medical card and rent supplement.
Having said that, many of the non-financial benefits of having a job hugely outweigh the economic ones.