You end up in the same position as many low and middle earners - your family get sick and you are unable to afford doctors fees and drug fees for anything but the most serious of conditions. If you are unlucky enough to have a serious condition, you might die while waiting for treatment. But to be honest, you would probably have died on the medical card too.
What you are highlighting is a failure of the governments health system, the very institution that you put so much faith in when it comes running the economy. I've brought up the following calculation before:
Ireland spends about €3,500 per person on the health system, which as you said gives you long waiting lists, you still pay for GPs, dentists, opticians, prescriptions.
Switzerland has a private only health insurance system with public and private hospitals competing for the same patients (no taxes are collected to pay for health care). An adult pays about €250 per month or €3,000 per year for basic insurance. For this you have practically no waiting lists for even the simplest procedures, GP visits, some dental treatment and all prescriptions. And this in a country with higher wages and cost of living than Ireland. This is the most damning indictment of government incompetence, and superiority of private sector services.
I didn't mention kids, so I'm not sure I get your question about kids?
That's why I did. You only get FIS if you have kids. There are many unemployed that do not have kids.
Not true. FIS has no poverty trap. If you earn more, you do indeed lose the equivalent FIS, but you don't end up worse off. If you do have the opportunity to earn more (through overtime or promotion or whatever), there is no disincentive to progressing.
FIS is not limited to one year. If you still qualify after one year, you have to reapply.
http://www.welfare.ie/EN/Publications/SW22/Pages/10HowlongdoestheFISpaymentlast.aspx
Here's a quick calculation that shows the disincentive of FIS for a low paid worker with 1 child:
20h*€10/h=€200/w
€506-€200=€306 (€506 is the threshold for 1 child family)
€306*0.6=€183.6
€183.6+€200=€383.6/w (income including FIS)
40h*10/h=€400
€506-€400=€106
€106*0.6=€63.6
€400+€63.6=€463.6
for and extra 20 hours work you get €80 or €4/h. While this is not as bad as getting the same for 25 hours minimum wage as for doing nothing on the dole, it is still a serious lack of incentive. As Mpsox already mentioned, there is a lack of work ethic in this country and combine that with a lack of incentives to actually work more and you're on a road to disaster.
It is of course possible for people of exceptional talent and commitment to develop and build a career or a business from modest roots. But most people don't have that talent, and get frustrated at the lack of fairness and equity in the system. They look around them and see those who get to move up the ranks because Daddy owns the business, or because they went to the 'right' school or they play on the 'right' rugby team. We are a long, long way off a fair and balanced system where talent and commitment bring fair rewards. But even if we had this perfect system with equal opportunities for everyone to develop, this still misses the point. Focus on the job or the post, not the person. In our current environment and system, no cleaner or kitchen hand is going to earn a living wage. So when one kitchen hand gets promoted, the problem just moves to his or her replacement - the new person getting the crappy wage.
You do not need some exceptional talent to get a career started or a job that pays closer to the average income. And most people do have enough brains, but are lacking work ethic and incentive. There are plenty of colleges that offer night courses for diplomas and degrees, and they are not prohibitively expensive.
And the majority of people that do well in their careers do so because of merit, not because of aristocracy or relations. There is no such thing as inherent unfairness, and people will always blame someone or something else if their work isn't rewarded as much as they think it should be. If someone gets a promotion, it's because of some bias or preferential treatment; if bad singers earn more than an excellent paramedic, that's unfair; the list goes on, but this completely ignores the fact that wages are directly related to productivity and the supply and demand for labour.
The fact that a cleaner with essentially no skills earns very little is due to the fact that there is an abundance of people with no skills. And even when they manage to upskill, there are plenty of people in line with no skills that will take that job. Paying people this undefinable "living wage" for not having a skill does not solve the problem; it's simply all carrot and no stick.
If the education system actually worked and reduced the amount of unskilled workers, then unskilled wages would increase, while skilled wages would decrease. This would be a perfect, market driven distribution of income, without direct government intervention. But instead of governments highlighting their own failures and incompetence, they go on to appropriate ever more taxes to provide more welfare services, that provide less incentive.