A life of luxury on the dole

Michael Taft: Every now and then we get an outbreak of misinformed commentary and calculations on the income relationship between work and social welfare; stories about how life is better on the dole than in a job. The latest outbreak comes courtesy of Jobordole.com. It purports to present an objective calculation of how much you would get on the dole as opposed to work. Go on – have a go. Just remember, it is a deeply flawed, highly misleading set of calculations. You won’t get the actual facts – but then what’s new?

On the website, it highlights the Irish Independent story about how an employer purported to offer a ‘good’ wage (€28,000) but couldn’t get anyone to accept it because people could get more on the dole. When you click on this link you get shock-horror calculation for a one-income couple with one child earning €28,000:

‘You could get €342.60 per week on the dole with €190.62 in rent allowance for a total of €533.22. You get €497.41 net per week working.’

Notice the subtle word-play here. You ‘could get’ x on the dole. But you ‘get’ x working. In short, this calculation claims ‘you could get’ €1,862 more per year on the dole.

But this is highly misleading. Let’s go through the above calculation.

1. The income from work is €497 per week. But this site (and many other calculations I’ve come across) conveniently omits income from Family Income Supplement for a family with a child. For this household this would be worth an extra €1,020 a year. Okay, it’s only a €20 a week difference – but if you’re in a low-paid job, that €20 is extremely helpful. And, yes, there is a low take-up rate (estimates from 35 to 55 percent). Therefore, we will use the website’s subjunctive ‘could’ in a consistent manner.

So income from work ‘could be’ €517 per week (and this doesn’t count income from Child Benefit and Back-to-School Allowance, which this household would qualify for – but as a household on social welfare income would get this too, it doesn’t change the differential).

2. The income from social income is way off target. The basic rate for a couple with one child is correct: €342.60. However, a real sleight-of-hand is used to increase this amount to €533.22. How is this done? The website uses ‘hand waving assumptions’. What a great phrase. It assumes in the calculation that the person earning €28,000 and losing their job will obtain a Rent Supplement of €190.62. In reality, this assumption waves away the substantial majority of unemployed.

How many people on Jobseekers Allowance and Benefit get Rent Supplement? Not many. The latest Statistical Information on Social Welfare Services 2009 shows that:

• 6.7 percent of those on Jobseekers Benefit get Rent Supplement
• 13.5 percent of those on Jobseekers Allowance get Rent Supplement

The overwhelming majority of unemployed do not get rent support, but the artful ‘hand waving assumption’ gives the impression they do. To be fair, the website does link to the Department of Social Protection’s explanation of Rent Supplement. If you read it, you will see why so few unemployed get this support, it being so means-tested and conditional.

And here’s the kicker. The website uses a rent figure of €930 a month for this family of three. This is the maximum level of rent paid allowable under the Rent Supplement scheme in Dublin (households paying rent above this level may be denied any Supplement at all by the Department). However, according to the latest Daft Rental report, average rents for a two-bedroom let is €993. So renting an average two-bedroom in Dublin could mean no Rent Supplement at all. Outside of Dublin, a household paying this rent would be well above the thresholds: in Cork the maximum threshold is €705 per month; in Limerick €605 per month.

But there’s more. Let’s say you happen to be in the small minority of unemployed who do qualify for rent supplement. How much would you get? Of course, this all depends on where you live, how much rent you pay and the application of a complex means-test; no website could cover all these contingencies. So let’s just assume the average. We can get this again by referring to the Statistical Information report.

The average Rent Supplement payment is €106 per week, not the €191 per week assumed by Jobordole.com. And this was in 2009. Average Rent Supplement has been falling over the years. In 2006 it was €125 per week, falling each year since. So we can reasonably assume that Rent Supplement will be less in 2011 – especially as the Government announced a cut of €60 million in Rent Supplement.

So what have we got?

For the vast majority (90 percent) a household of three on €28,000 income from work ‘could’ be over €9,000 better off than on the dole.

For the 10 percent on Rent Supplement, on average a household in work ‘could’ be over €3,500 better off than on the dole.

Of course, this is a just a narrow accountancy view of how people act in the real world. The fact is that almost all people want to work. Even though Ireland suffered from one of the highest levels of low-pay during the Celtic Tiger boom (over 20 percent were officially categorised as low-paid), people took up jobs. Our four percent unemployment rate is a testament to that – even though social welfare rates were increasing above the rate of inflation. When the jobs were there people took them, even if the pay rates weren’t great and working conditions were poor. So why aren’t a large number of people working now? Guess.

But there is something more insidious. This type of exercise feeds into a politics that calls for reducing social welfare payments because low-pay is so low, because our in-work benefits are so poor, because the social wage (healthcare, pension supports, other in-kind supports) is so limited. Instead of addressing the real problems in our labour market and social protection infrastructure – we go after the poor. Again.

But, assuming the best in people, I’m not suggesting that the operators of this website are being intentionally misleading in pursuit of an ideological goal. However, they should now either redo their calculations to reflect something approximating reality (though it’s not as tabloid-sexy to show that income from work is higher than social welfare income). Or they should take down the site. As it is constituted now, it only degrades an already degraded debate.

Posted in: Welfare

Tagged with: social welfare

Michael Taft     @notesonthefront

Michael Taft is an economic analyst and trade unionist. He is author of the Notes of the Front blog and a member of the TASC Economists’ Network.