Brendan Burgess
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I had an article in yesterday's Sunday Independent
Dole payments should be cut, not increased
Last week the dole was increased by €5. Cue the usual howls of protests from the poverty lobby deploring the paltriness of this increase.
But let's look at a few facts.
The dole in the Republic of Ireland is €193 per week for a single person. The dole in Northern Ireland is the equivalent of €90. That is not a typo. An unemployed person in Dundalk is getting twice the dole than his cousin who lives 14 miles away in Newry. They have the same access to free healthcare, free education and roughly the same housing, although in the Republic, a person on the dole is expected to contribute €30 a week towards their housing costs.
One might assume that the hard-pressed worker in the Republic pays much higher PRSI than a worker in the North and so maybe they deserve to get a higher dole when they lose their job? Well one would be wrong to assume that. An employee in the Republic earning €40,000 pays €1,600 a year in PRSI, whereas an employee in the North pays the equivalent of €3,700!
So, a worker in Dundalk pays half the level of Social Insurance than his cousin in Newry, yet, when he loses his job, he gets twice the dole. This is completely unjustifiable and completely unsustainable.
Despite the very low levels of tax and PRSI on low-paid employees in Ireland, it's simply not worth their while to get a job. With almost-free housing, free health care and extraordinarily generous levels of dole, they would lose money by going out to work, especially if they can supplement their dole through working in the black economy.
Is it any wonder that we have twice the number of people living in jobless households than the rest of the EU?
If you have worked continuously for 30 years and have paid PRSI for 30 years you will get €193 per week dole - the exact same as someone who has sat at home watching daytime TV for 30 years. Despite the fact that it is called "pay-related social insurance", it is neither pay related nor insurance in any normal understanding of the word. You get no extra dole for contributing to the social insurance fund. And in retirement, a person who has paid PRSI all their lives gets €10 a week more than someone who has lived on welfare all their life.
So what is to be done to bring a bit of sense and fairness into the system? The level of non-contributory dole and pension must be cut, and cut significantly. If people choose not to work, then they must be poorer than people who get out of bed in the morning and go to work and contribute to society.
A person who works for years and pays PRSI should get a much higher pension that someone who has been on the dole all their life. The non-contributory social welfare pension also needs to be reduced from its current level. For example, it's €377 for a couple in the Republic compared to €309 in the North.
One way to pull all this together would be to put each person's PRSI contributions into an account in their own name. If they work for many years and then lose their job, instead of getting social welfare, they would be drawing down their own money from their own account. When they retire, a person with more money in their account, would get a higher pension than someone with less money or no money in their account. Again, they would not be getting a social welfare pension. Instead, they would be withdrawing money from their own account.
Under such a system, someone would always be better off working than on the dole. When they are working, they would be adding to their account and building up their pension pot. When they are unemployed, they would be depleting their account i.e. spending their own money.
This personal account system would have many other advantages. Self-employed people working in cash businesses who hide their income to avoid paying tax would have very little in their account on retirement and so would get a much lower pension than a PAYE employee who has had no choice but to pay full taxes and PRSI all their working life.
At the moment, workers see PRSI as just another tax. If it were going into an account in their own name, they would resent it less.
In any event the current ridiculously high levels of social welfare are totally unsustainable for the national finances. Everything is going in our favour at present. Our exports are booming. Our tourism is booming. We have artificially high Corporation Tax receipts due to US multinationals diverting their earnings through Ireland. And although our national debt is huge, the cost of servicing it is low because interest rates are so low. Despite all this, we are taking less in tax than we are spending to run the country. When interest rates rise, when Britain leaves the EU and when Trump demands that US companies pay tax to the US government rather than to the Irish government, we will be in trouble. We should fix this now under our own control, rather than have it fixed for us under another bailout.
Brendan Burgess is a consumer campaigner and founder of the consumer forum Askaboutmoney.com
Sunday Independent
Dole payments should be cut, not increased
Last week the dole was increased by €5. Cue the usual howls of protests from the poverty lobby deploring the paltriness of this increase.
But let's look at a few facts.
The dole in the Republic of Ireland is €193 per week for a single person. The dole in Northern Ireland is the equivalent of €90. That is not a typo. An unemployed person in Dundalk is getting twice the dole than his cousin who lives 14 miles away in Newry. They have the same access to free healthcare, free education and roughly the same housing, although in the Republic, a person on the dole is expected to contribute €30 a week towards their housing costs.
One might assume that the hard-pressed worker in the Republic pays much higher PRSI than a worker in the North and so maybe they deserve to get a higher dole when they lose their job? Well one would be wrong to assume that. An employee in the Republic earning €40,000 pays €1,600 a year in PRSI, whereas an employee in the North pays the equivalent of €3,700!
So, a worker in Dundalk pays half the level of Social Insurance than his cousin in Newry, yet, when he loses his job, he gets twice the dole. This is completely unjustifiable and completely unsustainable.
Despite the very low levels of tax and PRSI on low-paid employees in Ireland, it's simply not worth their while to get a job. With almost-free housing, free health care and extraordinarily generous levels of dole, they would lose money by going out to work, especially if they can supplement their dole through working in the black economy.
Is it any wonder that we have twice the number of people living in jobless households than the rest of the EU?
If you have worked continuously for 30 years and have paid PRSI for 30 years you will get €193 per week dole - the exact same as someone who has sat at home watching daytime TV for 30 years. Despite the fact that it is called "pay-related social insurance", it is neither pay related nor insurance in any normal understanding of the word. You get no extra dole for contributing to the social insurance fund. And in retirement, a person who has paid PRSI all their lives gets €10 a week more than someone who has lived on welfare all their life.
So what is to be done to bring a bit of sense and fairness into the system? The level of non-contributory dole and pension must be cut, and cut significantly. If people choose not to work, then they must be poorer than people who get out of bed in the morning and go to work and contribute to society.
A person who works for years and pays PRSI should get a much higher pension that someone who has been on the dole all their life. The non-contributory social welfare pension also needs to be reduced from its current level. For example, it's €377 for a couple in the Republic compared to €309 in the North.
One way to pull all this together would be to put each person's PRSI contributions into an account in their own name. If they work for many years and then lose their job, instead of getting social welfare, they would be drawing down their own money from their own account. When they retire, a person with more money in their account, would get a higher pension than someone with less money or no money in their account. Again, they would not be getting a social welfare pension. Instead, they would be withdrawing money from their own account.
Under such a system, someone would always be better off working than on the dole. When they are working, they would be adding to their account and building up their pension pot. When they are unemployed, they would be depleting their account i.e. spending their own money.
This personal account system would have many other advantages. Self-employed people working in cash businesses who hide their income to avoid paying tax would have very little in their account on retirement and so would get a much lower pension than a PAYE employee who has had no choice but to pay full taxes and PRSI all their working life.
At the moment, workers see PRSI as just another tax. If it were going into an account in their own name, they would resent it less.
In any event the current ridiculously high levels of social welfare are totally unsustainable for the national finances. Everything is going in our favour at present. Our exports are booming. Our tourism is booming. We have artificially high Corporation Tax receipts due to US multinationals diverting their earnings through Ireland. And although our national debt is huge, the cost of servicing it is low because interest rates are so low. Despite all this, we are taking less in tax than we are spending to run the country. When interest rates rise, when Britain leaves the EU and when Trump demands that US companies pay tax to the US government rather than to the Irish government, we will be in trouble. We should fix this now under our own control, rather than have it fixed for us under another bailout.
Brendan Burgess is a consumer campaigner and founder of the consumer forum Askaboutmoney.com
Sunday Independent
