Cormac Staunton: A well-balanced article about the challenges faced of our public finances by Davy Economist Conall MacCoille finished with a question as to whether ‘Ireland’s disproportionately high working-age benefit payments [can] be sustained and do they foster a dependency culture?’
This issue of a ‘dependency culture’ is common in the UK media and is used by the government as a reason to cut welfare spending. There seems to be little evidence that such a culture exists and the main effect of these policies seems to be that one million people in the UK are now reliant on food banks.
Is there any evidence of a ‘dependency culture’ in Ireland?
Firstly, the article perhaps conflates two types of dependency. It correctly points out that our demographics mean we have high dependency ratios – meaning the number of people young (or old) dependent on the number of people of working age. Currently 22% of the population are under 15 which creates a high ‘young dependency’ ratio. Overall our dependency ratio (young and old) is 49.2% (CSO). It is predicted that this could rise to 70% but 2046. This means supporting younger and older people is a cost we have to fund now and into the future - which is an enormous challenge. But this is not the same as a ‘dependency culture’.
A ‘dependency culture’ typically refers to a system where people don’t enter the labour force because they are ‘dependent’ on the welfare system (usually described as ‘generous’). This is usually framed with negative connotations for those people – in the UK it comes through in a “shirkers versus strivers” narrative.
The evidence presented for a dependency culture in Ireland is that we spend more than other OECD countries (as a % of GDP) on welfare supports to the working age population.
This “disproportionately high working age benefits” is not that the payments themselves are higher or ‘more generous’ – it’s because more people are receiving them. The reason we spend more on support for the working age population than other countries is because we have low employment rate (65% of working age adults).
We know that the value of the transfer is not a cause of our low employment rate because ESRI studies have shown that six out of seven people would be better off working than on welfare.
So it’s not that the value of the welfare payment causes low employment but the opposite – our low employment causes us to have higher spending on working age welfare.
And what causes low employment?
Lack of affordable childcare is one obvious cause and one that is most frequently cited (including by Conall MacCoille). But other care services are also important: lack of affordable elder-care or home-care services means that people (most often women) give up work to look after elderly/sick relatives.
Ireland also has one of the lowest rates of people with disabilities in employment. A NESC report found that people in ‘jobless households’ are more likely to have no educational qualification, be low-skilled, have a disability or live with someone with a disability.
This is the real dependency culture – because we don’t provide the social services that people need, we rely on family members to provide care, at the expense of them entering the labour force.
This may be a deliberate choice in Ireland’s ‘Social Contract’. But the result of this is that we will have lower employment rates, and higher spending on ‘welfare’ – which in many cases is an extremely small payment for a 24/7 job which can at times be physically (and sometimes emotionally) challenging.
If the aim is to tackle low employment and cut ‘welfare’ …. then the trade-off will be that we need to invest in the public services that people need –education, active labour market policies, care services - so that they can enter the ‘official’ labour force.
Cormac Staunton is Policy Analyst at TASC. You can follow him on Twitter @Cormac_Staunton
Cormac Stauton is currently a policy advisor on EU and international policy in the Central Bank of Ireland. Prior to this, he was a policy analyst in TASC, and co-authored the first economic inequality report, Cherishing All Equally.