Lowering benefits not best incentive for jobless to seek work, report finds

CUTTING WELFARE payments to the unemployed is not an effective way to incentivise them to look for work, while an “exaggerated” perception of the scale of welfare fraud could derail effective reforms in the system, a report from the National Economic and Social Council (NESC) finds.

Presenting the report, Supports and Services for Unemployed Jobseekersyesterday, Dr John Sweeney of the NESC said sanctions against jobseekers who refused to take up quality training or work experience would be more effective in getting them off the Live Register than cuts in welfare rates.

The welfare system had achieved a lot during the boom in reducing poverty, and this was worth defending. Reducing welfare rates would “compound the problems of child poverty and emigration” more efficiently than it would incentivise job-seeking.

There was “too much” focus on welfare fraud. Contributing to the appearance of fraud were the “overall complexity of the welfare code” and the “the inflexible definition of part-time work”. Much of the “fraud” was in fact error by claimants or claims administrators.

Though there was a huge rise in the numbers on welfare there was no increase in the propensity for welfare “fraud” or error, the report says. Some unemployed got no welfare at all, particularly those with spouses in work, while a large number received just the basic allowance of €188 per week.

For the short-term unemployed the welfare system was “anorexic”. Many of those who had become unemployed here “have experienced some of the steepest falls in living standards” of all those made jobless across the EU.

The majority on welfare, thus, had a “strong financial incentive to work”. A more significant disincentive to work, he said, was the marginal effective tax rates – the proportion of additional wages “taken back” from the individual by tax and withdrawn benefits.