Level of jobless households in Ireland brings high rate of poverty

Ireland has relatively high rates of poverty and social exclusion. With almost 30 per cent of Irish people in this category it is significantly above the EU average of 25 per cent.

A striking aspect of the Irish economy is the high level of jobless households, at over one in five (23.4 per cent). This is by far the highest in the EU and over twice the EU average of 10.7 per cent. Even in 2008 the number was very high at 13.7 per cent (almost one in seven). As is to be expected, the more paid work done by people in a household, the lower the risk of poverty.  In Ireland, a household with a very low work rate is 27 times more likely to be at risk of poverty than a household with very high levels of work.

What is perhaps more surprising is that the risk-of-poverty rates in Ireland are much lower than those in the EU generally for households with the same level of work. The figures for Ireland are also much lower (about half in most categories) than those in the Nordic countries. Indeed, Ireland scores quite well in that our ranking is in the top quartile (best performing) of countries on this measure.

Before taxes and transfers, almost half the Irish population is at risk of poverty, that is, their income is less than 60 per cent of median income. However, our tax and transfer system is one of the most effective in reducing poverty and reduces the number at risk of poverty to 15 per cent.

OECD (Organisation for Economic Co-operation and Development) secretary-general José Ángel Gurría said recently: “Remarkably, Ireland’s tax and transfer system still does more to reduce inequality than any other in the OECD. While Ireland has the most unequal distribution of market income in the OECD, inequality in disposable income is below the OECD average.”

The overriding policy priority in reducing poverty is to focus on creating employment and reducing barriers that may prevent people from taking available jobs.

More can be done to tackle unemployment and poverty traps. Sometimes, as with housing and other welfare benefits, financial assistance is withdrawn too quickly as earnings increase.

Unemployed single people taking a job at half the average wage may face implicit tax rates of over 80 per cent in some cases mainly due to loss of benefits.

At the same time, childcare costs are 40 per cent of the average wage; over three times the EU average and the highest in the OECD. Much more needs to be done to make childcare affordable, particularly for low-income families, so that taking a job becomes financially viable for more parents.

This is particularly important for lone parents. Ireland has double the EU percentage of households consisting of a lone parent with dependent children (7.1 per cent).

We also need to do more to improve skills. While the performance of Irish children in maths and science is better than the OECD average, one in seven (15.1 per cent) of Irish students don’t attain the basic skills score. Although below the OECD average, this figure represents modern functional illiteracy of a significant cohort of 15-year-olds in Ireland. Those with low skills find it more difficult to get a job. Ireland has a relatively low rate of employment for low-skilled workers – about half of them are unemployed compared with an EU average of 40 percent.

The prevalence of “jobless” households is a significant social problem in Ireland and a major cause of poverty and social exclusion. This is a complex issue which does not have simple solutions. While an effective tax and transfer system is necessary, a range of other policy measures are needed. The evidence suggests that providing affordable childcare, reducing unemployment traps and tackling low skills may all be needed to deal with the problem.

Donal de Buitléir is director of Publicpolicy.ie