Funding limits will define social welfare goals

THE Irish Government is discovering that social welfare and war have some features in common! It is easy to start a war but very difficult to end one! It is also easy to launch, or expand, welfare programmes but when welfare funding capacity tightens beneficiaries are likely to declare war on government if their entitlements are cut, which was the case in Dublin when pensioners revolted in October 2008.

The 2009 Exchequer Statement for Ireland reveals that the national debt had increased by €25 billion in a year to cover a deficit of €24.64 billion.

Irish social welfare spending in 2009 amounted to €21.26 billion, an increase of €3.5 billion (+19.8%) over 2008 and the 2010 Budget provides for the spending a further €660 million in 2010.  This trend is largely attributable to the number on the Live Register increasing from 227,070 to 413,505 and unemployment exceeding 12.5%. There are now approximately 1.8 million welfare beneficiaries in Ireland.

Some €10.7 billion of the welfare expenditure relates to social insurance which is funded by Pay Related Social Insurance (PRSI). The PRSI fund, which had a balance of €3.2 billion at the beginning of 2009 accumulated over the past decade is likely to be now in overall  deficit because of rising unemployment and increased claims for jobseekers allowance and benefit.  The social insurance fund recorded a deficit of €244,718,000 in 2008.  Any shortfall has to me met by the Exchequer through borrowing.

Irish welfare spending increased exponentially in the decade to 2009. The Irish population increased by 19% to 4.45 million but total social welfare spending increased by 183% compared to a rise in the Consumer Price Index of 42.4%.  Expressed as a percentage of gross current government expenditure, social welfare spending increased from 25.9% to 33.4% in 2008 and from 7.5% to 11.4% of GDP in 2008.

Short-term welfare rates of payment have increased  by between 112% and 122%.  Long-term rates have increased by over 100% in the period between 1999 and 2008 – more than double the Consumer Price Index.

Old Age Pensions

A decade ago 75% of all individuals aged over 65 received an old age pension – either contributory, or non-contributory. By 2009 91% of this age cohort qualified for a pension.  The number receiving the contributory State pension has increased from 76,241 persons  in 1999 to 250,117 person in 2008.

Child Benefit and Maternity Benefits

Child Benefit payments have grown four-fold in a decade and are now paid in respect of 1.14 million children.  Maternity Benefit payments have grown 6-fold.

Carers’ and Disability Sufferers’ 

Much of the additional spending went to carers’ or recipients with disabilities. A total of 11,416 individuals received a Carer’s Allowance in 1998 at a cost of €72.89 million. A Carer’s Benefit was introduced in October 2000 for individuals who gave up work to look after an ailing relative. Some 50 individuals received this in 2000 at a total cost of €36,000 By 2008 some 45,818 qualified for the Carer’s Allowance or Carer’s Benefit at to total cost of €483.97 million – an increase in cost of the two programmes in a decade of 563%.

Another are which experienced huge increases related to disability and invalidity. There were 147,158 qualifying individuals for a range of benefits in 1998 but this number increased to 237,651 individuals in 2008.

There is a medical assessment process in place. 43% of applicants were called for assessment in 1998 but in 2008 only 18% of a larger number of applicants were called. Approximately 53% of those assessed are typically deemed incapable of working while the percentage deemed capable of working was of the order of 16-18%. This would imply that if a larger percentage of applicants were medically assessed fewer might qualify for allowances or benefits.

Impact on the Exchequer

Between 1997 and 2007 the cost of social welfare was the equivalent of 26-31% of government revenue.  But in 2008 social welfare spending increased to 43%  and in 2009 to 63% of government revenue.  How can this be sustainable?  Where are the savings to be achieved?  Will political mayhem ensue?

The Minister for Social and Family Affairs refers to welfare funding as ‘an investment to reflect real social progress’  Current spending is not actually investment; it is simply spending.  Ireland’s wage competitiveness is the second lowest in the EU (ahead of Slovakia), according to data provided by the European Central Bank.  The objectives of ‘real social progress’ and ‘inclusiveness’ can only be sustained if the economy manages to sustain an appropriate level of vitality and the capacity to generate output that has value.  The objectives spoken of are not otherwise really achievable.  Where exactly is the country heading if social welfare spending exceeds the Consumer Price Index by a factor of 4?

Irish immigrant population hit very hard by slump

The Irish Live Register for April 2009 recorded a record of 384,448 individuals, an increase of 188,850, or 97%, since April 2008, according to data from the Central Statistics Office. All immigrant groups have been hit hard but those who immigrated to Ireland from the states that joined the European Union in May 2004 have been hit especially severely.

There are 349,300 non-Irish nationals in the labour force. They comprise 15% of the 2.2 million Irish labour force. The April Live Register includes 77,850 non-Irish nationals – 22% of the total on the Live Register.

Some 44,727 are from those states that joined the EU in May 2004 – Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania and Slovakia (collectively known as the Accession states EU15 to EU 27). These immigrants account for a labour force of 167,800, of whom 26.6% are now on the Live Register. They were attracted to Ireland by a minimum wage of €8,65 ($11.57) per hour from 1 July 2007 that is guaranteed under the Irish National Minimum Wage Act 2000. The corresponding figure in the UK is £5.52 (€6.21 or $8.31).

The Live Register is not a direct measure of unemployment. It also includes part-time workers who work up to 3 days each week, seasonal and casual workers eligible for a Job Seekers Allowance or Benefit.

However, overall unemployment in Ireland has also risen sharply from 93,400 in February 2007 to 170,600 November 2008 and 40,500 or these are defined as long-term unemployed. The number of unemployed from the Accession states is 16,900, a rate of over 10% and an increase in the number unemployed of 7,500, of 80% more in twelve months.

It is estimated that 210,000 people from Accession states arrived in Ireland since 2005. Three quarters of those who found work were employed in construction, manufacturing and service sectors, such as retail and hospitality. The total number employed in the public sector, education and health is low in comparison. The largest immigrant cohort is from Poland, but there are significant numbers from Latvia, Lithuania, Czech Republic and Estonia. Lithuania and Latvia are currently recording the highest levels of unemployment in the EU. Unemployment in Lithuania increased from 4.3% to 15.5% in the 12-months to 30 April 2009 while unemployment in Latvia increased from 6.1% to 16.1% over the same period. Unemployment levels in Poland has remained relatively stable moving from 7.4% to 7.7%.

This group comprise people predominantly aged in their twenties and thirties and tend to be male with the gender disparity most pronounced among the younger age group. There are relatively few children, or elderly people, among this immigrant group. Despite their relative youth, 42% are married compared to the 46% marriage rate of the native Irish. But almost 20% of the married non-nationals are not living in Ireland with their spouses. Their spouses have typically remained in their native land and this replicates the emigration pattern from Ireland over the decades before economic self-sufficiency. The majority of the immigrants from the Accession states have a secondary school education and slightly over a quarter have a third-level qualification.

The largest decline in employment in Ireland has been in the construction sector and the professions that serve it –(- 45,900) jobs lost in one year. But there have also been significant job losses in wholesale and retail (-18,200), financial and business services (-11,600), hotels and restaurants (-10,500).

Non-Irish nationals are obliged to be habitually resident in Ireland to qualify for social assistance payments in Ireland. The term ‘habitually resident’ is not defined by either Irish or EU law. However, it is intended to convey a degree of permanence – a regular physical presence enduring for some time beginning at a time usually in the past and intended to continue for a period into the foreseeable future. Length and continuity of residence are vital considerations

Non-Irish nationals resident in Ireland can qualify for social insurance payments (e.g. state pension, jobseekers benefit), means tested payments (e.g. jobseekers allowance) and universal payments (e.g. child benefit). 300 extra staff have been transferred from within the civil service to the Department of Social & Family Affairs to deal with the extra welfare claims.

Research published by the Economic and Social Research Institute indicate that non-Irish nationals are facing discrimination when responding to job advertisements with similar creden tials as an Irish native.