Out-of-pocket expenses for workers are far too high in Ireland

HIGH PRICES AND the rising cost of living are topics of conversation in every home across the country.

Ireland was already the second most expensive country in the European Union before the current inflation surge. In 2020, when the inflation rate was below 0%, the price of a sample basket of 2,000 daily consumer goods and services was more than a third higher than the EU27 average.

Housing costs, which include utility and energy bills, were higher than anywhere else in the union, at 78% above average. Public transport was 37% more expensive. The average child care costs of a working couple with two preschoolers ate up one-fifth (20%) of their joint income.

Combined with higher wages as a means of offsetting the effect of rising prices, improving the social wage can lower the cost of living for workers and their families.

The social wage is a measure of the benefit you get from government social spending on support and services.

A new study by the Irish Trades Union Congress shows that the value of social pay for full-time workers in Ireland is exceptionally low by EU standards.

The social wage

Free or very low-cost public services reduce people’s out-of-pocket expenses. They act as a virtual income supplement to people’s cash income from work or social assistance.

But Ireland is unusual among wealthy EU member states in ways to test access to state-funded essential services like housing, healthcare and childcare.

Because the maximum income threshold is so low, few full-time workers qualify. Public services in Ireland are reserved for those on the lowest incomes unable to meet their basic needs from their own resources. The exception to this rule is free education for all children and free travel for anyone over 66.

In other EU countries, access to public services is based on need. If you have a child and a job, you need childcare. You are therefore eligible for heavily subsidized public childcare services, regardless of the amount of your salary envelope.

As a result, a worker in Ireland earning a very modest wage must pay market prices for basic necessities which workers across the EU can freely access.

For example, a full-time worker in rural Ireland who does not earn much more than the minimum wage is not entitled to social housing. While only one in seven of all working people aged 18-64 hold a medical card and only one in 28 hold a GP visiting card.

The government can alleviate this unnecessary pressure on wages by increasing the value of workers’ social wages.

Low tax economy

If the government wants to increase social spending, it must generate more tax revenue.
Ireland is a low-tax economy and there is significant scope to raise revenue to pay for more public services without putting tax rates above the EU average and without erode national competitiveness.

Readers will naturally balk at the idea that we are a low-tax economy. We certainly don’t feel like we’re in a low-tax economy when we look at your payslip or checkout. It’s true. The tax levy on employees and consumers in Ireland is above average. Where we under tax is in relation to property and employers.

Irish employers pay the lowest social contributions in the European Union after Cyprus, Lithuania and Malta. The state could have collected €8.3 billion in additional revenue in 2019 if it had taxed employers at the average tax level of wealthy member states. To put that into context, free childcare could be offered for 2 billion euros.

Protect the standard of living

The pandemic has caused unprecedented disruption to our economy and people’s livelihoods. It exposed the weaknesses in our threadbare social safety net to protect workers’ living standards and garnered broad public support (70%) for the government to do more.

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Now is the time to radically change the role of government in protecting the standard of living of the general population from social risks, including expanding access to affordable housing, child and adult care, free health care and education, heavily subsidized and sufficient public transport.

Just as the welfare system was built on the ruins of World War II, a positive legacy of this otherwise hopelessly unfortunate experience may be more generous social wages for workers and public services for all.

Dr Laura Bambrick is responsible for social policy and employment affairs at the Irish Trades Union Congress. The ICTU is the umbrella body of 45 unions representing together the interests of some 700,000 island workers in all sectors of the economy.

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