Thursday, 27 September 2012

Just one in eight better off on dole, ESRI finds

ONE IN eight people currently in receipt of unemployment benefit is better off staying on welfare than moving to paid employment, according to new research by the Economic and Social Research Institute (ESRI).

The paper, published today, strongly rejects research by the Organisation for Economic Co-operation and Development (OECD) in Paris that claims the gap between earned income and welfare income is among the smallest in the 34-member bloc. The authors stress the need to counter the OECD research because recent International Monetary Fund reports, which have appeared to advocate reductions in welfare rates, have been “strongly influenced” by the OECD.

The ESRI researchers state their “more nuanced approach leads to quite different conclusions from those drawn by both OECD and IMF”. Among its findings the ESRI says that single people are far more likely to have higher net incomes if they are in employment than on welfare, but the gap closes for married people.
A married adult on jobseeker’s benefit has an annual income of €16,283, while his counterpart on minimum wage takes home €2,000 more. By contrast the gap for single people is €7,500.

One in 17 Irish residents would be better off on social welfare benefits than in work, the ESRI report concludes. The paper, written by Prof Tim Callan and four others, follows the ESRI’s withdrawal last June of a controversial working paper on the issue co-authored by former employee Richard Tol.

The OECD research, which is conducted in the same way across dozens of countries, takes a number of hypothetical families and adds all the welfare benefits they are entitled to in different circumstances. It then compares their total net income with income from employment at different pay levels.

The ESRI method is similar, but differs in that it is based on “large-scale nationally representative survey data which takes better account of the diversity of individual circumstances, and how they affect taxes, benefits and net incomes.” The authors say theirs is a “more careful interpretation”.

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