A question on the Irish social welfare system ...

wallycharlo

I'm pretty sure that this topic has been touched on before on this forum, so if someone knows of a relevant thread then please feel free to point me in that direction. I had first of all posted this in the Social Welfare forum, but was informed that it did not belong there, so hopefully it's more at home here

Many European countries adopt a social welfare system where the amount of welfare received (for a certain persiod at least) has a direct co-relation to the social secuity contributions which were paid in by that person when in employment. This would appear to me to be a very fair way of handling social welfare.

What do others feel about this?

What reasons could be used to argue against this type of system being implemented in Ireland?

nesf

If you mean higher PRSI for people on the dole long term if they return to work then it will act as a stronger disincentive to work the longer someone is on the dole and it is precisely the people longest on the dole that we want to get back to work and whose salaries will trend towards the lower end of the spectrum usually because of skills declining and lack of recent work experience and thus be more greatly affected by such an increase.

So, no I don't think it's a good idea. Fair yes, but realistic not really.

wallycharlo

nesf wrote: »

If you mean higher PRSI for people on the dole long term if they return to work then it will act as a stronger disincentive to work the longer someone is on the dole and it is precisely the people longest on the dole that we want to get back to work and whose salaries will trend towards the lower end of the spectrum usually because of skills declining and lack of recent work experience and thus be more greatly affected by such an increase.

So, no I don't think it's a good idea. Fair yes, but realistic not really.

Hmmm, I don't think I put my point across well.

Let me take the example of Austria ; If someone loses their job in Austria, then the amount of social welfare which they will receive while unemployed will be related to their last salary, which in turn is related to the amount of social security deduction which this person would have paid on that salary; i.e. the higher the salary, the larger the slice taken each month for social security.

Hence those who paid more money into the social kitty will get more back, should they fall on hard times.

This is (as far as I am aware) in contrast to Ireland where your dole payment is a flat rate so to speak, and not in any way related to your salary before becoming unemployed.

Outkast_IRE

wallycharlo wrote: »

Hmmm, I don't think I put my point across well.

Let me take the example of Austria ; If someone loses their job in Austria, then the amount of social welfare which they will receive while unemployed will be related to their last salary, which in turn is related to the amount of social security deduction which this person would have paid on that salary; i.e. the higher the salary, the larger the slice taken each month for social security.

Hence those who paid more money into the social kitty will get more back, should they fall on hard times.

This is (as far as I am aware) in contrast to Ireland where your dole payment is a flat rate so to speak, and not in any way related to your salary before becoming unemployed.

Its a good system and works well germany is similar.
Heres an example i can reference from their system.

My brothers gf got laid off. She is in the IT area to do with databases etc, a very specialised job.
After she was laid off and went to the local welfare office the welfare officer gave her two options .
1. Look for work and recieve 75% of her old salary for the first 3 months when looking, with further reductions as time went on.

2. There is a list of short upskilling courses that are recognised as being areas where there is a skills shortage, if she goes on one of these she gets 75% of her old wage and a small top up for passing exams as well as this benefit continuing for 3 months after exams. The courses are at the local university and cover a wide range of courses including IT based ones.

Obviously she took option 2. Completed the course and had work lined up a few weeks later.

nukin_futs

nesf wrote: »

If you mean higher PRSI for people on the dole long term if they return to work ...

I took the OP the other way.
There is a base rate (e.g. €100 per week). If you have worked and now become unemployed you are entitled to €100 + a top-up amount. The period during which you are entitled to the top-up is directly related to your employment history. Possibly the amount is somehow correlated.

Essentially while you are paying PRSI you are earning potential credit that can be drawn down. Once you have used up this amount, you then fall back to a much lower rate.

wallycharlo

Outkast_IRE wrote: »

Its a good system and works well germany is similar.

I would definitely agree, and it would appear to be inherently fair.

What stops countries such as Ireland having such a system though? Surely it's basic common sense that those who paid more in, should be allowed to take more out when they fall on hard times?

nesf

wallycharlo wrote: »

Hmmm, I don't think I put my point across well.

Let me take the example of Austria ; If someone loses their job in Austria, then the amount of social welfare which they will receive while unemployed will be related to their last salary, which in turn is related to the amount of social security deduction which this person would have paid on that salary; i.e. the higher the salary, the larger the slice taken each month for social security.

Hence those who paid more money into the social kitty will get more back, should they fall on hard times.

This is (as far as I am aware) in contrast to Ireland where your dole payment is a flat rate so to speak, and not in any way related to your salary before becoming unemployed.

Ah ok. Yeah, I'd be in favour of some kind of capped system like that with steadily decreasing payments as time goes on. I quite like the German system actually.

nesf

wallycharlo wrote: »

I would definietly agree, and it would appear to be inherently fair.

What stops countries such as Ireland having such a system though? Surely it's basic common sense that those who paid more in, should be allowed to take more out when they fall on hard times?

Should the guy earning 50k a year get more than the working man on 25k a year when they're laid off from the same factory. To many on the left this would be like poking them in the eye with a needle.

wallycharlo

nesf wrote: »

Should the guy earning 50k a year get more than the working man on 25k a year when they're laid off from the same factory. To many on the left this would be like poking them in the eye with a needle.

If his social secrity deductions from his salary were higher each week/month (I'm assuming that to be the case - I have not actually worked in Ireland for a long time!) then I can't see why not?

Manach

nesf wrote: »

To many on the left this would be like poking them in the eye with a needle.

So a plus then for non-leftists.

nesf

wallycharlo wrote: »

If his social secrity deductions from his salary were higher each week/month (I'm assuming that to be the case - I have not actually worked in Ireland for a long time!) then I can't see why not?

Ah my dear boy how much tax one pays should have absolutely nothing to do with the level of services one receives!

wallycharlo

nesf wrote: »

Ah my dear boy how much tax one pays should have absolutely nothing to do with the level of services one receives!

I've no particular political leanings myself one way or the other, but looking at it from a purely logical point of view I would strongly argue that those who gave more should gain more.

State pension is also the same in such countries AFAIK, i.e. worked out as a proportion to your salary, which again seems very fair to me.

Surely any counter argument to such a system is just pure begrudgery?

nesf

wallycharlo wrote: »

I've no particular political leanings myself one way or the other, but looking at it from a purely logical point of view I would strongly argue that those who gave more should gain more.

State pension is also the same in such countries AFAIK, i.e. worked out as a proportion to your salary, which again seems very fair to me.

Surely any counter argument to such a system is just pure begrudgery?

The argument generally follows that those who most need state services are those with lowest incomes and to give these people a lower quality or amount or whatever of services is a great injustice. Instead services are doled out based mostly on population density with some attempt to balance this with rural grants and whatnot.

wallycharlo

nesf wrote: »

The argument generally follows that those who most need state services are those with lowest incomes and to give these people a lower quality or amount or whatever of services is a great injustice. Instead services are doled out based mostly on population density with some attempt to balance this with rural grants and whatnot.

I see your point.

Has such an Austrian/German system ever been seen as a serious option in Ireland?

Just wondering if any political party / TD (or even economic / social thinktank for that matter) has ever proposed such a system in the past, or ran with it as a serious part of an election manifesto, etc. I would imagine that there may be a lot of votes to be had on the back of such a policy?

PRAF

Personnally, I don't buy into the idea that just because someone pays higher levels of tax, they automatically deserve higher state payments. If you accept the principle of progressive taxation (which is pretty much universally applied in most civilised countries) then you must accept that the rich are expected to contribute more than the poor. Your PRSI and USC isn't some form of state sponsored savings account that you can dip into from time to time to take what you think is rightfully yours

However, I do think what is being proposed has some merit to it. For example, people on higher wages will usually have bigger financial committments. Following that logic, it makes sense that they might receive larger dole payments (at least on a temporary basis). It may also act as an incentive on the small minority who are addicted to welfare.

The size and duration of the extra payments would be worthy of debate. How we fund such a system would also be interesting. There is probably no chance of it happening right now.

wallycharlo

PRAF wrote: »

...it makes sense that they might receive larger dole payments (at least on a temporary basis). It may also act as an incentive on the small minority who are addicted to welfare...

The Austrian/German system does exactly that, i.e. one gets the higher rate of payout only for a limited period (which relates to the length of time that one was employed) after which the payout tapers back to the base level.

For Paws

PRAF wrote: »

Personnally, I don't buy into the idea that just because someone pays higher levels of tax, they automatically deserve higher state payments. If you accept the principle of progressive taxation (which is pretty much universally applied in most civilised countries) then you must accept that the rich are expected to contribute more than the poor. Your PRSI and USC isn't some form of state sponsored savings account that you can dip into from time to time to take what you think is rightfully yours

I was under the impression that PRSI stood for Pay Related Social Insurance.
Calling this progressive (in the sense that the more one earns the more one pays) tax Pay Related would seem to indicate that what the taxpayer is investing in might be in some way Pay Related.

So, if a person becomes unemployed they would be entitled to a series of payments designed to support them while they seek re employment, or are re trained. The level of these payments would be related to the pay they had been earning and the amount of their PRSI contributions.

Instead of this, some would prefer a system of base rate payments which the State would dole out whether the recipient had paid in €50,000 in PRSI during their working life, or having not ever worked, paid in nothing.

Seems fair.

PRAF

wallycharlo wrote: »

The Austrian/German system does exactly that, i.e. one gets the higher rate of payout only for a limited period (which relates to the length of time that one was employed) after which the payout tapers back to the base level.

Yeah, that sounds reasonable to me.

PRAF

For Paws wrote: »

I was under the impression that PRSI stood for Pay Related Social Insurance.
Calling this progressive (in the sense that the more one earns the more one pays) tax Pay Related would seem to indicate that what the taxpayer is investing in might be in some way Pay Related.

So, if a person becomes unemployed they would be entitled to a series of payments designed to support them while they seek re employment, or are re trained. The level of these payments would be related to the pay they had been earning and the amount of their PRSI contributions.

Instead of this, some would prefer a system of base rate payments which the State would dole out whether the recipient had paid in €50,000 in PRSI during their working life, or having not ever worked, paid in nothing.

We currently have a system based largely on flat rate payments. It acts as a safety net for people who are not in employment for whatever reason. I can see some potential in a move towards of German / Austrian style system whereby the system is tweaked so that those who may more, get more when they need it. However, the devil would be in the detail.

What extra payments would a higher earner get?
How long would the extra payments last for?
Would the increases in those payments need to be offset by lower base payments for everyone else?
How much will all of this cost?
Will it be more difficult to administer or can it be done reasonably easily with our existing social welfare systems?

For fundamental changes like this, there needs to be a clear benefit to doing all of this. I'm not sure what the benefit is. Typically, those employees on large wages (and who are paying large amounts of PRSI and USC) are already highly skilled and are the least likely people to end up on social welfare. Do we have an underbelly of ex CFOs, CIOs, etc who are now unemployed and struggling to get by on €200 a week?

Cody Pomeray

I would generally be supportive of this sort of unemployment insurance system.

Someone has already mentioned the German system, which I agree is attractive overall, but should have a more substantial insurance 'paid in' component.

The principle should not be confused with a benefits received principle of taxation overall. Social insurance should not be directly likened to taxation. Social insurance must be insurance - its primary function must be to protect the recipient should he require aid - as opposed to general taxation, which primarily exists to protect society as a whole.

Cody Pomeray

PRAF wrote: »

For fundamental changes like this, there needs to be a clear benefit to doing all of this. I'm not sure what the benefit is.

Apart from 'fairness', I think a significant benefit would be in encouraging irish people who have lost their jobs not to emigrate.

Obviously, that safety net would become less relevant over the course of a long recession, whereby the recession outlives the unemployment insurance and the recipient reverts to basic rate of unemployment aid.

But given that we are such a small, open economy in close proximity to the EU economic superpowers, I think there is a benefit here for society in preventing brain drains.

jester77

People are mixing up social insurance and tax, two separate things. Someone earning more will pay more tax but will see the same benefits as someone who has paid less tax. Social insurance is used for things like unemployment, so the more you pay in the more you will get back.

nesf

jester77 wrote: »

People are mixing up social insurance and tax, two separate things. Someone earning more will pay more tax but will see the same benefits as someone who has paid less tax. Social insurance is used for things like unemployment, so the more you pay in the more you will get back.

The issue is, in Ireland things like PRSI have effectively just been another name for income tax for a very long time.