Welfare traps like ours are devilishly hard to get out of
The boom by-passed a huge swathe of households locked in long-term welfare dependency. It is a national scandal that is under-discussed, writes Dan O'Brien
Published 20/09/2015 | 02:30
Social welfare safety nets are among the greatest products of economic development. They prevent and alleviate human misery and give people the security of knowing that if they fall on hard times they have a safety net to fall into.
But they can also have negative consequences if they are poorly designed. People can end up trapped in the net rather than being helped to get out of it.
There is considerable evidence that Ireland's system has been particularly damaging, and that it has condemned many more people to long-term welfare dependency than is the case in peer countries.
That evidence centres on the failure of the extraordinary jobs growth recorded in the decade up to 2007 to make significant inroads into the number of households in which nobody works and which are dependent on benefits.
This is a profoundly important issue, not primarily because of the amounts of money involved (although they are significant), but because condemning so many citizens to long-term worklessness and welfare dependency is a social catastrophe, and one that could have explosive effects in the future.
But discussion of the subject is strangely muted, perhaps because talking of adapting, tweaking and reforming the welfare state can be seen as an attack on it. That is certainly not the intention here - I am a strong supporter of the northern European welfare model, which is generous in its supports but also demanding of benefit recipients in terms of taking up offers of training and employment.
Nor should there be a concern that having a debate about the subject will be the thin end of a downsizing wedge. In Ireland there is wide support for the welfare state. No political party proposes downsizing it. There is no body or civil society organisation that takes a position that it should be cut back.
Perhaps the best illustration of the political instinct that favours the welfare state is that during the bubble era, social spending grew more rapidly than public sector pay and despite welfare recipients not having anything like the sort of lobbying power of public sector unions. This, it should be recalled, happened under a government that was often called right-wing (usually, admittedly, by people who cared little for assessing the evidence).
But as too often happens in Ireland when there is a broad consensus on an issue, there is little discussion about it. This was seen last week. An international think-tank, the Organisation for Economic Cooperation and Devel- opment (OECD), published its regular assessment of Ireland. The problem of jobless households was one of the biggest issues, if not the biggest, analysed in the 114-page report. But you would not have known this from the media coverage. The only outlet to reflect the prominence of the issue in the report was the Irish edition of a British newspaper.
The importance the report gave to the issue of jobless households was to be seen by this statement on its very first page: "The solution is to intensify activation policies to get people into jobs, improve training and enforce obligations on benefit recipients to seek a job or take training."
The OECD made a large number of recommendations, including uncontentious ones such as boosting spending on pre-school childcare as its very high cost in Ireland reduces the taking up of paid work by some parents. But the aspect of the report that requires highlighting (because it is so rarely discussed in any evidence-based way) concerns the disincentives embodied in the welfare system and the manner in which the system lacks the sort of Nordic carrot-and-stick approach to moving people back to work.
The report is blunt, saying repeatedly that there are "strong disincentives for some households shifting from welfare to work"; "more needs to be done to increase incentive to work by reducing welfare and low-income traps"; and "Ireland also needs to reduce existing disincentives to work that are built in the tax and welfare system".
Every right is matched with a responsibility. That is a view shared, in theory at least, across the ideological spectrum. But Ireland is unusual in the manner in which receipt of benefits does not come with a responsibility to look for work or take offers of training or jobs.
The report says that "one of the key elements in designing policies to get people back to work is conditionality; that is, providing benefits conditional on the recipient actively searching for work, taking an available job or taking training". It goes on: "The provision of social benefits (other than unemployment benefits) is currently not subject to conditionality in Ireland, even though many of the beneficiaries could be considered fit for work."
The report acknowledges that "conditionality" has been applied to jobless benefit, but points to its absence in the past as a contributing factor to high long-term unemployment. It states that "in the 2000s, the sanction rate for refusal of active job search in Ireland was close to the lowest among OECD countries". It should be noted that the Nordic systems are strong on sanctioning because they take responsibilities as seriously as rights.
Simply saying that there is no gaming of the system because everybody wants to work is pious cop-out. Most people do want to work, but there is a very significant minority who have become so removed from the world of work that they have difficulty adapting or have become discouraged. And there are some free-riders, human nature being as it is. Any system that doesn't acknowledge that and which fails to address ways of preventing free-riding is unfair on everyone, most of all the children of free riders.
Along with benefits, another vital aspect of the way in which the State helps citizens out of the safety net is training and the way the jobless are helped to find work. Here again there are major issues.
While the report rightly acknowledges that the Government has made significant changes, such as the much-belated adoption of continental methods of helping job-seekers to find work, known as "activation". But given the scale and duration of the jobs crisis, that some aspects of it are only now getting up and running is little short of scandalous.
On increasing (what will hopefully be only short-term) capacity to give every job-seeker personalised help, the Government is rolling out its JobPath initiative, which includes private operators helping the long-term unemployed get back to work. The OECD noted that "actual service provision will only start in the second part of 2015".
Another crucial piece in the jigsaw of helping people out of the under-class is education and training. It is not only perplexing that the state-backed apprenticeship scheme has traditionally been focused on the building trade and little else; it is entirely inexplicable that the focus did not change after the crash when there was mass unemployment among construction workers.
The OECD's blunt indictment is that "the pace of reform is very slow", going on to observe that "eight years after the start of the crisis and the construction bust, the development of the new apprenticeship system is only beginning".
It also returns to an issue it has focused on repeatedly over the years - the frequent failure to even attempt to measure whether the many different training schemes designed to help people get back to work actually work, and to stop wasting money on ones that don't.
The report is blunt in calling for the Government to "reallocate resources towards programmes and training schemes improving employment prospects and shut down ineffective ones".
There are many dimensions to how the State helps, encourages and obliges people to move out of the welfare safety net. But there is little doubt that while the Irish system certainly alleviates poverty, it also deepens and perpetuates it, and on a large scale.
The is no shortage of people in Ireland who like nothing more than to portray themselves as caring champions of the downtrodden. But helping those who are most marginalised involves both generosity and Nordic-style tough love. The OECD last week provided a road map on how we might get to Denmark.
The OECD's views on budgetary matters and last week's report by the Fiscal Advisory Council are discussed in an accompanying column in the Business section of this newspaper
Gene Kerrigan, Soapbox, Page 30