Is Ireland’s social welfare system not simply seamless but superb!

There were 2,166,700 persons in the labour force the first quarter of 2007 of whom 1,922,400 were Irish nationals. The total labour force in September 2009 was 1,922,400.

Live Register

Citizen of	Jan 2007	Sep 2009	% Change
IRELAND	139,610	346,076	148%
UK	7,545	18,062	139%
EU 15 other than UK and IE	1,517	4,073	168%
EU 15 > 27	4,198	42,675	917%
Other nationalities	5,882	12,709	116%
TOTAL	158,752	423,595	167%

 

Unemployment

Citizen of	Jan 2007	Sep 2009	% Change
IRELAND	76,900	225,200	193%
UK	2,300	9,500	313%
EU 15 other than UK and IE	1,700	2,400	41%
EU 15 > 27	6,100	29,600	385%
Other nationalities	4,800	13,200	175%

 

The number of persons aged 15, or more, who are not economically active, increased by 8,400 in the case of Irish nationals and 39,900 in the case of non-Irish nationals. The estimated population of persons aged 15, or more, declined by 29,200 in the case of Irish nationals but increased by 197,200 in the case of non-Irish nationals between the first quarter of 2007 and the third quarter of 2009. The total estimated population in this age cohort increased by 2.4% to 3,526,500. The consequence of the foregoing is that Irish nationals now account for 88% of the labour force having accounted for 91% before the onset of the recession.

The 2006 Census of Population indicated that there were 420,000 non-Irish nationals living in Ireland in April 2006 who were from 188 countries. The top-10 of these countries accounted for 82% of the total. 20% married persons from the category EU 15 > EU 27 were married but not living with a spouse at the time of the Census.

Profile of non-Irish nationals

· ⅔ of all Chinese were living in the Greater Dublin area compared to 20% of all Latvians, who favoured large and medium sized towns.

· ½ of the UK and ⅓ of all German resident nationals were living in rural locations.

· The number of single persons was highest among the Chinese and French (72% and 73% respectively) while ⅔ of Nigerians and Filipinos were married

· 13% of Latvian females were divorced and 8% of British males were remarried following divorce.

· Polish males had the highest percentage at work (91%) while 20% of Nigerians were unemployed.

· The Lithuanians had the highest percentage at work in the construction sector (32%) while the US had the greatest proportions in the higher socio-economic groups of professionals and managers.

Irish-national population declining

The population of adult non-Irish nationals living in Ireland is increasing. Despite the number of non-Irish nationals on the Live Register increasing from 19,142 in January 2007 to 77,519 in December 2009, the number of non-Irish nationals aged 15 years and over in Ireland increased from 319,800 in the first quarter of 2007 to 433,000 in the third quarter of 2009. The population of adult Irish nationals is decreasing. There was also a reduction of 29% Irish nationals in this age cohort during this period.

Citizen of	Q1 2007	Q3 2009	% Change
IRELAND Employed Unemployed Labour force Not economically active Total population aged 15+	1,845,000     76,900 1,922,400 1,200,300 3,122,700	1,659,000   225,200 1,884,800 1,208,700 3,093,500	-0.94%
UNITED KINGDOM Employment Unemployed Labour Force Not economically active Total population aged 15+	37,800     2,300   40,100   24,900   65,000	44,100   9,500 53,600 36,000 89,600	+37.8%
EU 15 other than UK and IE Employed Unemployed Labour Force Not economically active Total population aged 15+	24,000   1,700 25,700   6,100 31,800	28,200   2,400 30,600   9,200 39,800	+25.1%
EU 15>27 Employed Unemployed Labour Force Not economically active Total population aged 15+	106,300   6,100 112,400   11,700 124,100	122,100   29,600 151,700   30,300 182,000	+ 46.0%
Other nationalities Employed Unemployed Labour Force Not economically active Total population aged 15+	61,300    4,800   66,100   32,800   98,900	68,500   13,200   81,700   39,900 121,600	+22.9%
TOTAL PERSONS, aged 15+	3,442,500	3,526,200	83,700     +2.4%

Are the foregoing trends evidence that, from an international perspective, Ireland’s social welfare offering is especially generous? Has the time arrived for policy makers to adapt it to ensure that it has the capacity to foster self-reliance rather than dependency? Social welfare expenditure will cost €22 billion this year. The social insurance fund, having incurred a deficit of €244.7 million is now reportedly insolvent, possibly to the extent of several billion euro. What steps will be taken to match expenditure with available resources?

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?

Ireland’s soaring social welfare bill

The 2009 Exchequer Statement for the Irish Government was issued this afternoon indicating the following:

	2008 €000	2009 €000	Change %
Government Revenue	41,624,097	33,879,322	-18.6%
Welfare Spending	17,815,282	21,260,000	+19.3%
Government Deficit	12,713,821	24,640,971	+93.8%
National Debt	50,400,000	75,152,000	+49.1%

 

Tax revenue for 2009 was €1.357 billion less than forecast last April.  There was some silver lining – corporation tax was €160 million higher than anticipated and this is attributable to foreign direct investors.

Welfare Trends 1989 – 2008

The 20 years between 1989 and 2008 have seen Ireland’s welfare bill grow from €3.38 billion to €17.81 billion.  Expressed as a percentage of gross government expenditure, welfare has grown from 27.3% in 1989 to 33.4% in 2008.

During the decade from 1989 to 1998 the Index of Welfare Expenditure increased by 78.9 percentile points – compared to an increase in the Consumer Price Index of 23.6%

The comparable figures for the decade from 1999 to 2008 saw the Index of Welfare Expenditure increase by 183.5 percentile points in a period when the Consumer Price Index increased by 42.4 percentile points.

 

Welfare Trends 1999 – 2008

The Irish population increased from 3.7 million in 1999 to 4.4 million in 2008, an increase of 19.4%.  This compares to an increase in total welfare spending from €6.28 billion to €17.81 billion.

The pattern of welfare spending has evolved:

 

	1998	2008
Older People	23.6%	24.1%
Widows, Widowers and 1-parent families	18.0%	14.0%
Child Related Payments	9.7%	15.7%
Illness, disability and caring	14.1%	18.5%
Employment support	3.3%	2.3%
Miscellaneous	8.7%	22.1%
Administration	4.9%	3.3%

 

Maternity Benefit changes

Increases in the maximum duration and maximum payment of Maternity Benefit have resulted in significant increases in this category of expenditure.  In March 2006 the maximum duration of Maternity Benefit, Adoptive Benefit and Health and Safety Benefit  claims was increased from 18 to 22 weeks, with a subsequent extension of Maternity Benefit in March 2007 to 26 weeks.

The cost impact of changes in these three categories of benefit is reflected in an increase from €48.79 million in 1998 to €318.09 million in 2008 (+551%).  The number of beneficiaries during this decade has increased from 5,483 to 23,558.

1-Parent Families

The number of beneficiaries of this benefit has shown a significant increase – from 170,927 who received €307 million in 1998 to 233,620 who received €1,067 million in 2008.

Free Schemes

The cost of ‘free schemes’ have also increased significantly

	1998 €000	2008 €’000
FREE ~ fuel, electricity, bottled gas, natural gas, television licence, telephone rental	153,358	584,674

 

 

Funding Welfare

	1998	2008
Exchequer	56%	52.9%
Social Insurance Fund	44%	47.1%
Components of Social Insurance Fund
Employer PRSI contributions	71%	73%
Employee PRSI contributions	23%	20.1%
Self-employed	6%	5.0%
Investment income		2.0%
Population of Ireland	3,703,100	4,420,000
Number of welfare recipients	854,000	1,208,800
Number of beneficiaries	1,414,119	1,799,875
Percentage of population receiving welfare	38.1%	40.7%