Social welfare disincentivises work for families

professore

I always suspected this, especially after the ESRI report a few years ago. So I sat down to do the calculations - put the lowest working wage at €12 / hour. The results are truly shocking. See below. Even at €20 / hour, or over 40K per year, the difference is only €117 per week, not counting cost of getting to work or medical card. If you assume 2 parents working, the result would be even worse - childcare would eat up any benefit from the second income.

I can't see any holes in my calculations, but maybe others can point them out. Also that the guy on €12 / hour gets to pay nearly 2 grand in tax !!!!!!

Also seems to show the FIS is a joke. If these calculations are anywhere near correct, then welfare should be cut dramatically - as we can't afford to pay everyone 80K per annum.

The assumptions are as follows: typical family, 2 adults, 1 working, 2 children, one primary, one secondary.
Renting a house in Cork €1000 per month.

Social Welfare Rates:
Single Person: €188 p.w.
€124 p.w. dependent adult
€29.80 p.w. dependent child

2 Adults + 2 children = €371.60 p.w. = €19,323.20 p.a.

Rent Allowance
County Cork Couple with 2 children or one-parent with 2 children
€725 per month
€725 p.m. = €8,700.00 p.a.

Back To School allowance
The allowance paid for each eligible child aged 4-11 on or before 30 September 2014 is €100.

€100 for primary school child , €200 for secondary school child. €300 p.a.

The allowance paid for each eligible child aged 12-22 on or before 30 September 2014 is €200. Children aged between 18 and 22 years must be in full-time second-level education in a recognised school or college.


Rent house €1000 p.m

*************************************************************
* Social Welfare *
*************************************************************
S.W. Income: €19,323.20
Rent Allowance: €8,700.00
Back To School: €300
Rent contribution 40 p.w. (2080 p.a.)
Total income: €26,243
Rent: €12,000
Net after rent: €14,243

*************************************************************
* Working *
*************************************************************
Household single earner earning €12 per hour, 39 hour week : 468 p.w. = €24,336 p.a.
Tax: €1,995 (!)
Net income: €22,341 (€429.63 p.w.)
FIS: € 103.80 (60% of 602 - 429.63)
Total: €533.43 (€27,738.36)
Rent: €12,000
Net after rent: €15,738 (€1495 p.a. or €28.75 per week) better off NOT COUNTING MEDICAL CARD OR COST OF GETTING TO WORK

Household single earner earning €20 per hour, 39 hour week : €780 p.w. = €40,560 p.a.
Tax: €6,132
Net income: €34,428
Rent: €12,000
Net after rent: €22,428
(€8,185 p.a. or only €157.40 p.w better off) NOT COUNTING MEDICAL CARD OR COST OF GETTING TO WORK

Tax source: http://www.eoghanmurphy.ie/tax-transparency/

macnug

professore wrote: »

I always suspected this, especially after the ESRI report a few years ago. So I sat down to do the calculations - put the lowest working wage at €12 / hour. The results are truly shocking. See below. Even at €20 / hour, or over 40K per year, the difference is only €117 per week, not counting cost of getting to work or medical card. If you assume 2 parents working, the result would be even worse - childcare would eat up any benefit from the second income.

I can't see any holes in my calculations, but maybe others can point them out. Also that the guy on €12 / hour gets to pay nearly 2 grand in tax !!!!!!

Also seems to show the FIS is a joke. If these calculations are anywhere near correct, then welfare should be cut dramatically - as we can't afford to pay everyone 80K per annum.

The assumptions are as follows: typical family, 2 adults, 1 working, 2 children, one primary, one secondary.
Renting a house in Cork €1000 per month.

Social Welfare Rates:
Single Person: €188 p.w.
€124 p.w. dependent adult
€29.80 p.w. dependent child

2 Adults + 2 children = €371.60 p.w. = €19,323.20 p.a.

Rent Allowance
County Cork Couple with 2 children or one-parent with 2 children
€725 per month
€725 p.m. = €8,700.00 p.a.

Back To School allowance
The allowance paid for each eligible child aged 4-11 on or before 30 September 2014 is €100.

€100 for primary school child , €200 for secondary school child. €300 p.a.

The allowance paid for each eligible child aged 12-22 on or before 30 September 2014 is €200. Children aged between 18 and 22 years must be in full-time second-level education in a recognised school or college.


Rent house €1000 p.m

*************************************************************
* Social Welfare *
*************************************************************
S.W. Income: €19,323.20
Rent Allowance: €8,700.00
Back To School: €300
Total income: €28,323
Rent: €12,000
Net after rent: €16,323

*************************************************************
* Working *
*************************************************************
Household single earner earning €12 per hour, 39 hour week : 468 p.w. = €24,336 p.a.
Tax: €1,995 (!)
Net income: €22,341 (€429.63 p.w.)
FIS: € 103.80 (60% of 602 - 429.63)
Total: €533.43 (€27,738.36)
Rent: €12,000
Net after rent: €15,738 (€6,690 p.a. or €128.65 per week) worse off NOT COUNTING MEDICAL CARD OR COST OF GETTING TO WORK

Household single earner earning €20 per hour, 39 hour week : €780 p.w. = €40,560 p.a.
Tax: €6,132
Net income: €34,428
Rent: €12,000
Net after rent: €22,428
(€6,105 p.a. or only €117.40 p.w better off) NOT COUNTING MEDICAL CARD OR COST OF GETTING TO WORK

Tax source: http://www.eoghanmurphy.ie/tax-transparency/

Your forgetting the sw families contribution to the rent which would be 135 a month (I think) which would bring down the bottom line a fair bit but in fairness your point is still pretty valid.

professore

Medical card can a big one too ... we have had medical bills in the thousands some years from GP visits and prescription medicine alone, even allowing for the DPS scheme.

professore

macnug wrote: »

Your forgetting the sw families contribution to the rent which would be 135 a month (I think) which would bring down the bottom line a fair bit but in fairness your point is still pretty valid.

OK, just checked it there. For a family the contribution is at least €40 per week.

andrew

All social welfare disincentivises work at the margin. It's a question of whether the aggregate effect in practice, in terms of employment, is greater than this disincentive effect. Which AFAIK it is, but labour markets are tricky.

macnug

professore wrote: »

Medical card can a big one too ... we have had medical bills in the thousands some years from GP visits and prescription medicine alone, even allowing for the DPS scheme.

You can get a medical card while working. Id say the low income family in your hypothetical scenario would be entitled. I know a family with a good income that have medical cards because their mortgage is so high. The travelling to work is a big one imo, probably 50-100 per week for a lot of people.

macnug

andrew wrote: »

All social welfare disincentivises work at the margin. It's a question of whether the aggregate effect in practice, in terms of employment, is greater than this disincentive effect. Which AFAIK it is, but labour markets are tricky.

I think the margin should be broadened (especially now that there are jobs coming on stream) by cutting welfare a small bit, say 10% and use those savings to increase fis.

Kermit.de.frog

I think it is going to be very difficult even with jobs being created getting the unemployment rate below 9% because of the welfare traps.

Any minimum wage job should pay more than basic social welfare.

GP Visit Card weekly income limit (gross less tax, USC and PRSI)

Category Aged under 66 Aged 66-69

Single person living alone €276 €302
Single person living with family €246 €260
Married or cohabiting couple (or lone parent with dependent children) €400 €447
Allowance for each of first 2 children aged under 16 €57 €57
Allowance for 3rd and for each subsequent child under 16 €61.50 €61.50
Allowance for each of first 2 children aged over 16 (with no income) €58.50 €58.50
Allowance for 3rd and for each subsequent child over 16 (with no income) €64 €64
Each dependant over 16 years in full-time non-grant aided third-level €117 €117

A couple with two children could have a weekly income of 571 euro and get a GP visit card.

The above are the income limits for the GP visit card and that is after tax income.

n97 mini

professore wrote: »

Children aged between 18 and 22 years must be in full-time second-level education in a recognised school or college.

Working parents will pay €3000 registration fees per child in 3rd level. SW will get this waived.

Guffy

n97 mini wrote: »

Working parents will pay €3000 registration fees per child in 3rd level. SW will get this waived.

Can you tell me how sw can get this waved?

Idbatterim

Working parents will pay €3000 registration fees per child in 3rd level. SW will get this waived.

I think the threshold is 39,000 for the household, over that and it has to be paid AFAIK...