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The sustained high rates of poverty and income inequality in Ireland require greater attention. Tackling these problems effectively is a multifaceted task. It requires action on many fronts ranging from healthcare to education, from accommodation to employment. However, the most important requirement in tackling poverty is the provision of sufficient income to people to enable them to live life with dignity. No anti-poverty strategy can possibly achieve any success without an effective approach to addressing low incomes.

This section addresses the issue of income in four parts. The first examines the extent and nature of poverty in Ireland today while the second profiles our income distribution. The final two sections address potential remedies to these problems by outlining the issues and arguments surrounding achieving and maintaining an adequate social welfare income and the introduction of a basic income.

(a) Poverty

Despite the advances in employment and economic growth achieved over the last decade, the phenomenon of poverty remains large. While there has been some progress in recent years, its continued existence remains as one of this country’s major failures.

Data on Ireland’s income and poverty levels are now provided by an annual survey entitled EU-SILC (Survey on Income and Living Conditions). This survey replaced the European Household Panel Survey and the Living in Ireland Survey which had run
across the 1990s. Since 2003 the EU-SILC survey has collected detailed information on income and living conditions from up to 130 households in Ireland each week; giving a total sample of between 5,000 and 6,000 households each year.

CORI Justice has welcomed this survey and in particular welcomed the speed and accessibility of the data produced. As this survey is conducted simultaneously across all of the EU states its results possess significant potential to inform the ongoing debate on relative income and poverty levels across the EU member states. It also provides the basis for informed analysis of the relative position of the citizens of member states. In particular, this analysis is informed by a set of agreed indicators of social exclusion which the EU Heads of Government adopted at Laeken in 2001. These indicators (known as the updated-Laeken indicators) are calculated from the survey results and cover four dimensions of social exclusion: financial poverty, employment, health and education.10

Finally, the change to this EU-wide survey has resulted in some minor changes in the way poverty and income levels are measured and reported. These changes are outlined below before we review the results from the recent report which deals with data from 2006.

What is poverty?

The National Anti-Poverty Strategy (NAPS) published by government in 1997 adopted the following definition of poverty:

People are living in poverty if their income and resources (material, cultural and social) are so inadequate as to preclude them from having a standard of living that is regarded as acceptable by Irish society generally. As a result of inadequate income and resources people may be excluded and marginalised from participating in activities that are considered the norm for other people in society.

This definition has been reiterated in the 2007 National Action Plan for Social Inclusion 2007-2016 (NAPinclusion).

Where is the poverty line?

How many people are poor? On what basis are they classified as poor? These and related questions are constantly asked when poverty is discussed or analysed. In trying to measure the extent of poverty, the most common approach has been to identify a poverty line (or lines) based on people’s incomes. In recent years the European Commission and the UN among others have begun to use a poverty line located at 60 per cent of median income. The median income is the income of the middle person in society’s income distribution; in other words it is the middle income in society. This poverty line is the one adopted in the EU-SILC survey and differs from the previous Irish poverty line (prior to 2003) which was set at 50 per cent of mean (average) income. This switch to using median income is to be welcomed as it removes many of the theoretical and technical criticisms that have
been levelled against using relative income measures to assess poverty.11 In cash terms there is very little difference between the poverty line drawn at either 60 per cent of median income or 50 per cent of mean income.12

While the 60 per cent median income line has been adopted as the primary poverty line, alternatives set at 50 per cent and 70 per cent of median income are also used to clarify and lend robustness to assessments of poverty. Using information gathered in the EU-SILC survey for 2006, the CSO established that the median income per adult in Ireland was €337.48 (2007:41). Consequently,
the income poverty lines for a single adult derived from this average were:

50 per cent line - €168.74 a week
60 per cent line - €202.49 a week
70 per cent line - €236.24 a week

Updating the 60 per cent median income poverty line to 2008 levels, using predicted increases in average industrial earnings (ESRI Medium-Term Review 2005:66), produces a relative income poverty line of €218.59 for a single person. In 2008, any adult below this weekly income level will be counted as being at risk of poverty.

Table 3.1.1 applies this poverty line to a number of household types to show what income corresponds to each household’s poverty line. The figure of €218.59 is an income per adult equivalent figure. This means that it is the minimum weekly disposable income (after taxes and including all benefits) that one adult needs to receive to be outside of poverty. For each additional adult in the household this minimum income figure is increased by €144.27 (66 per cent of the poverty line figure) and for each child in the household the minimum income figure is increased by €72.13 (33 per cent of the poverty line).13

These adjustments are made in recognition of the fact that as households increase in size they require more income to keep themselves out of poverty. In all cases a household below the corresponding weekly disposable income figure is classified as living at risk of poverty. For clarity, corresponding annual figures are also included.

One immediate implication of this analysis is that most weekly social assistance rates paid to single people are €20.79 below the poverty line.

How many have incomes below the poverty line?

The most up-to-date data available on poverty in Ireland comes from the 2006 EU-SILC survey, conducted by the CSO. Table 3.1.2 presents their key findings showing poverty levels among the Irish population. Using the EU poverty line set at 60 per cent of median income, the findings reveal that in 2006 just under one in every five of those living in Ireland was living in poverty. The table also indicates that there has been an overall growth in the proportion of the population living 13 For example the poverty line for a household with 2 adults and 1 child would be calculated as €218.59 + €144.27 + €72.13 = €434.99. below these lines over the last twelve years. Data for 1994, 1998, 2001, 2003, 2004, 2005 and 2006 show that the proportion of the population in poverty has risen from 15.6 per cent in 1994 to 17.0 per cent in 2006.However, the most recent data indicate that the poverty levels have fallen over the past few years; a factor directly related to the increases in social welfare payments sought by CORI Justice and delivered over recent Budgets.14

Source: CSO (2007:13) and Whelan et al (2003:12), using national equivalence scale.
Note: All poverty lines calculated as a percentage of median income.

As it is sometimes easy to overlook the scale of Ireland’s poverty problem it is useful to translate the poverty percentages into numbers of people. Using the percentages for the 60 per cent median income poverty line and population statistics from CSO population projections and Census results we can calculate the numbers of people in Ireland who have been in poverty for the years 1994, 1998, 2001, 2003, 2004, 2005 and 2006 (CSO 2004:48, 2006:52, 2007:37). These calculations are presented in table 3.1.3 below. The results give a better insight into how large the phenomenon of poverty is.

The fact that there are now just over 720,000 people in Ireland living life on a level of income that is this low must be a major concern. As we have shown earlier (see table 3.1.1) these levels of income are low and those below them clearly face difficulty in achieving what the NAPS described as “a standard of living that is regarded as acceptable by Irish society generally”.

Who are the poor?

In recent years two interchangeable phrases have been used to describe those who are living on incomes below the poverty line, namely those ‘living in poverty’ and those ‘at risk of poverty’. The latter of these terms is the most recent, introduced following a European Council meeting in Laeken in 2001. There it was proposed that those with incomes below the poverty line should be termed as being ‘at risk of poverty’.

The results of the EU-SILC survey provided a breakdown of those below the poverty line. This section reviews those findings, starting with a broad overview in table 3.1.4 and then proceeding to a detailed assessment of the different groups in poverty.

Table 3.1.4 presents figures for the risk of poverty facing people when they are classified by their principal economic status (the main thing that they do). These risk figures represent the proportion of each group that are found to be in receipt of a disposable income that is less than the 60 per cent median income poverty line. The groups within the Irish population that are at highest risk of poverty are the unemployed and those who are ill and disabled. At least four out of every ten people classified in these groups are living at risk of poverty and in both cases the risks are higher for males than for females. Just over one in four women on home duties lives with an income below the poverty line. Students, whether living in poor families while completing their secondary education or while attending post-secondary education also have a high poverty rate at 29.5 per cent.

Among those who are retired the risk of poverty is 14.8 per cent. A closer assessment of the risk levels of poverty among the retired reveals that their risk of poverty rate has varied most over the past decade (see table 3.1.6). The 2006 figure represents a 5.7 per cent fall in their poverty risk since 2005 and an 11 per cent fall over the past two years. The lowest poverty risk figure is recorded for those at work (employees, self-employed, farmers) with 6.5 per cent of this group living below the poverty line.

One obvious conclusion to draw from table 3.1.4 is that the highest risk of poverty is concentrated among those dependent on the social welfare system. As CORI Justice has pointed out for some time, it is essential that adequate welfare payments are provided for these groups so that their poverty is addressed and reduced.

The working poor

The growth in jobs over recent years has been dramatic and many have benefited from the rapid rise in the number of jobs available. However, it is important to realise that having a job is not, of itself, a guarantee that one lives in a poverty-free household. As table 3.1.4 indicates 6.5 per cent of those at work are living at risk of poverty. Translating this into numbers of people suggests that among Ireland’s workers in 2006 at least 116,000 were at risk of poverty.15

This is a remarkable statistic. Action is urgently required to address this problem. The sustained commitment in recent Budgets to keep those on the minimum wage out of the tax net marks a welcome move in this direction. Similarly, attempts to increase awareness among low income working families of their entitlement to the Family Income Supplement (FIS) are also welcome; although evidence suggests that FIS is experiencing dramatically low take-up and as such has questionable long-term potential. However, the most effective mechanism available within the present system to address the problem of the working poor would be to make tax credits refundable. We will address this proposal later.

Child poverty

One of the most vulnerable groups in any society are children and consequently the issue of child poverty is one that deserves particular attention. Child poverty is measured as the proportion of all children aged less than 16 years who live in households that have an income below the 60 per cent of median income poverty line.The age category of 0-15 years is chosen to measure child poverty as it corresponds to the international definition of children used by the International Labour Office (ILO).

In 2006 the Census found that there were 922,767 children aged between 0 and 15 years living in Ireland.16 Of these, table 3.1.5 indicates that 20.3 per cent were at risk of poverty. This amounts to approximately 190,000 children. The scale of this statistic is shocking. Given that our children are our future, this finding is not acceptable. Furthermore, the fact that such a large proportion of our children are living below the poverty line has obvious implications for the education system and the success of these children within it. CORI Justice welcomes the fact that this figure has decreased by 13,000 since 2005 and we anticipate that it will decrease further when the 2007 poverty data becomes available (in late 2008). This has occurred, and will continue to occur, as a result of the introduction of the early childhood supplement of €1,000 per child under 6 years in Budget 2006.

There is widespread support for increasing child benefit if child poverty is to be eliminated. Child benefit is also a very effective component in any strategy to improve equality and childcare. This remains a key route to tackling child poverty and is of particular benefit to those families on the lowest incomes. CORI Justice believes that child benefit should be substantially increased. We oppose the inclusion of child benefit as part of the parents’ tax assessment. However, we do support the introduction of a refundable tax credit to all families with children irrespective of the labour-force status of parents. This could be achieved very effectively by converting the early childhood supplement into a refundable tax credit and increasing its value.

Older people

Census 2006 found that 11 per cent of the Irish population are aged over 65 years – some 467,926 people (CSO, 2007:38). The household composition data from the Census also indicated that just over a quarter of this group live alone (CSO, 2007: 36).When poverty is analysed by age group the 2006 figures show that 13.6 per cent of those aged 65 plus live in relative income poverty (see tables 3.1.6 and 3.1.7).

Among all those in poverty, it is the retired that have experienced the greatest volatility in their poverty risk rates. As table 3.1.6 shows in 1994 some 5.9 per cent of this group were classified as poor, by 1998 the figure had risen to 32.9 per cent and in 2001 it peaked at 44.1 per cent. The most recent four years of data mark a decrease in poverty rates. While these recent decreases are to be welcomed, it remains a concern that so many of this county’s senior citizens are living on so little.

The Ill /Disabled

As table 3.1.4 showed the ill/disabled are one of the two groups at highest risk of poverty with 40.8 per cent of this group classified in this category. Over time the situation of this group has visibly deteriorated with previous poverty studies by the ESRI showing that this group’s risk of poverty has increased rapidly; climbing from 29.5 per cent in 1994 (Whelan et al, 2003:24). This increase in the risk of poverty is an issue of concern. It implies that in 1994 approximately three out of every ten persons who were ill or disabled lived at risk of poverty and that by 2001 this had increased to over six out of every ten (66.5 per cent) before decreasing to four of out every ten in 2006. Consequently, although the ill and disabled only account for a small proportion of those in poverty, among themselves their experience of poverty is high.

CORI Justice believes there is an ongoing need for targeted policies to assist this group. These include job creation, retraining (see section on work) and further increases in social welfare supports. There is also a very strong case to be made for introducing a non-means tested cost of disability allowance. This proposal,which has been researched and costed in detail by the National Disability Authority (NDA, 2006) and advocated by Disability Federation of Ireland (DFI), would provide an extra weekly payment of between €10 and €40 to somebody living with a disability (calculated on the basis of the severity of their disability).The NESC Strategy 2006 also supported this policy development stating that “the Government strongly consider the case for a separate ‘cost of disability payment’ that, in line with its analysis in the Developmental Welfare State, would be personally tailored and portable across the employment/non-employment divide” (NESC, 2005:168). In their Pre-Budget Submission (for Budget 2008) DFI anticipate such a scheme would cost €183m per annum (DFI, 2007).

Poverty and education

The 2006 EU-SILC results provide an interesting insight into the relationshipbetween poverty and completed education levels. Table 3.1.7 reports the risk of poverty by completed education level and shows, as might be expected, that the risk of living on a low income is strongly related to low education levels. These figures underscore the relevance of continuing to address the issues of education disadvantage and early-school leaving (see section 3.7). Government education policy should ensure that these high risk groups are reduced. The table also suggests that when targeting anti-poverty initiatives, a large proportion should be aimed at those with low education levels, including those with low levels of literacy (we address the issue of adult literacy in section 3.7).

Poverty and Nationality

As Ireland changes, the growth in the number of people living in Ireland but born outside the state continues to increase. The CSO refers to this group as “non-Irish nationals” and the 2006 EU-SILC report presented data on poverty levels among this group vis-à-vis “Irish Nationals”. The definitions used by the CSO in examining this issue are necessarily broad given the difficulty associated with collecting accurate statistical samples among nationals of individual countries.

The findings, reported in table 3.1.8, reveal a stark contrast between the poverty risk levels of the two groups. Non-Irish nationals face a much higher risk of poverty, overall and by gender. As the data does not allow for a more detailed breakdownof these figures by nationality we cannot conclusively say who these non-Irish nationals in poverty are and where they have originated from. However, it is likely that many of those experiencing poverty are recent migrants, many from the new member states of the EU.

CORI Justice welcomes the provision of this new data. The poverty data suggests that migration issues, including issues with regard to the participation of migrants in Irish society, deserve greater attention. We will consider many of these issues
later in section 3.8.

Poverty by area

The 2006 EU-SILC results show that poverty is more likely to occur in rural areas than urban areas. The risk of poverty in rural Ireland was 7.2 per cent higher than in urban Ireland with at risk rates of 21.5 per cent and 14.3 per cent respectively. Poverty levels were also greater in the BMW (Border, Midland and Western) region than in the Southern and Eastern region with at risk rates of 26.2 per cent and 13.7 per cent respectively.When comparing the 2006 results with those from 2005 it is interesting to note that the primary drivers of the overall national decrease in poverty (from 18.5 to 17 per cent, see table 3.1.2) were decreases in the poverty levels of urban areas and in the Southern and Eastern region. There were minimal reductions in the rural and BMW areas (CSO, 2007:15).

The poverty gap

As part of the 2001 Laeken indicators the European Union requested that all member countries begin to measure the relative at-risk-of poverty gap. Thisindicator assesses how far below the poverty line the income of the median (middle) person in poverty is. The size of that difference is calculated as a percentage of the poverty line and therefore represents the gap between the income of the middle person in poverty and the poverty line. The higher the percentage figure gets the greater the poverty gap and the further people are falling beneath the poverty line.

As there is a considerable difference between being 2 per cent and 20 per cent below the poverty line this approach is significant.
EU-SILC results for 2006 calculated that the poverty gap was 17.5 per cent and that the gap had decreased from a figure of 20.8 per cent in 2005. In 2006 the poverty gap figure implies that 50 per cent of those in poverty had an equivalised income below 82.5 per cent of the poverty line.

As table 3.1.9 shows, the 2006 level marks the lowest recording for this measure since the EU-SILC began in 2003. CORI Justice welcomes the fact that this gap is notably reducing. Given the profile of those who are poor, we expected the recent budgetary increases in welfare payments will continue to cause this gap to reduce. As the depth of poverty is an important issue, we look forward to monitoring the movement of this indicator throughout future editions of the EUSILC. It is crucial that as part of Ireland’s approach to addressing poverty that wesee this figure continue to decline.

The incidence of poverty

Figures detailing the incidence of poverty reveal the proportion of all those in poverty who belong to particular groups in Irish society. Tables 3.1.10 and 3.1.11 report all those below the 60 per cent of median income poverty line classifying them by their principal economic status. The first table examines the population as a whole, including children, while the second table focuses exclusively on adults (those classified as aged 16 years and above).

Table 3.1.10 shows that in 2006, the largest group of the population who are poor are children accounting for 26.6 per cent of the total. The second largest group are those working in the home (18.4 per cent). Of all those who are poor, some 32.4 per cent are associated with the labour market (classified as in work, unemployed or ill/disabled). The remaining 65.8 per cent of Ireland’s poor are outside the labour market.17

Table 3.1.11 offers a more informed assessment of the nature of poverty given that it looks at adults only. This is an important perspective as children depend on adults for their upbringing and support. Irrespective of how policy interventions are structured it is through adults that any attempts to reduce the number of children in poverty must be directed. The calculations show that over one-fifth of Ireland’s adults who have an income below the poverty line are at work. Overall, more than four in ten adults who are at risk of poverty in Ireland (44.1 per cent) are associated with the labour market (classified as in work, unemployed or ill/disabled).18 The remaining 53.4 per cent of adults who are poor are classified as being outside the labour market.19

The most shocking statistic here is that more than one in five adults at risk of poverty is in employment. This group’s plight is consistently ignored. Many of this group do not benefit from Budget changes in welfare or tax. They would be the main beneficiaries of making tax credits refundable; a topic we will address in detail in section 3.2.

Finally, table 3.1.12 examines the composition of poverty by household type. Given that households are taken to be the ‘income receiving units’ (income flows into households who then collectively live off that income) there is an attraction in assessing poverty by household type. CORI Justice welcome the fact that the CSO have, at our suggestion, begun to publish the EU-SILC poverty data broken down by household category. From a policy formation perspective, having this information is crucial as anti-poverty policy is generally focused on households (households with children, pensioner households, single person households etc).

This data shows that in 2006 29.5 per cent of households who were at risk of poverty were headed by somebody who was at work. Almost 50 per cent of households at risk of poverty were found to be outside the labour market.20

The Scale of Poverty - Numbers of People

As the three tables in the last section deal only in percentages it is useful to transform these proportions into numbers of people. Earlier, table 3.1.3 identified that in 2006 720,774 people were living below the 60 per cent of median income poverty line. Using this figure, table 3.1.13 presents the number of people in poverty in that year broken down into various categories. Comparable figures are also presented for 2004 and 2005.

The data in table 3.1.13 is particularly useful in the context of framing anti-poverty policy. Groups such as the retired, ill/disabled and single parents, although carrying a high risk of poverty, involve much smaller numbers of people than groups such as adults who work (the working poor), people on home duties and children/students. Over the three years of data, it is interesting to track how the numbers living below the poverty line have changed within each group. The primary drivers of the recent poverty reductions have been increasing incomes among the retired, single adults and households where two adults live with no children.21

Moving to Persistent Poverty: Poverty targets post 2008

CORI Justice is committed to using the best and most up-to-date data in its ongoing socio-economic analysis of Ireland. We believe that to do so is crucial to the emergence of accurate evidence-based policy formation. It also assists in establishing appropriate and justifiable targeting of state resources.At the intergovernmental conference in Laeken during 2001, the EU adopted a set of commonly measured indicators to monitor socio-economic progress across all of the member states. Data for these measures is to be collected annually in the EUSILC survey. The availability of annual data on poverty, incomes and living
conditions is an important move. It facilitates a more informed and timely assessment of these issues than was achievable in the past. It will also allow us to track changes more closely over time and to make accurate comparisons across all 27 EU member states.

Among the Laeken indicators is an indicator of persistent poverty. This indicator measures the proportion of those being below the 60 per cent of median income poverty line in the current year and for two of the three previous years.Persistent poverty therefore identifies those who have experienced sustained exposure to poverty which is seen to harm their quality of life seriously and increase their levels of deprivation. To date the EU-SILC survey has not produced any results for this measure – the survey needs to run for four full years before it is possible to provide this insight. The first set of results will be available in late 2008 (covering full EU-SILC samples from the years 2004-2007). 22

Once this data becomes available CORI Justice believe that it should be used as the primary basis for setting poverty targets and monitoring changes in poverty status. Existing measures (relative and consistent poverty) should be maintained as secondary indicators.As the persistent poverty indicator will identify the longterm poor, we believe that the CSO should produce comprehensive breakdowns of those in persistent poverty, similar to the approach they currently take withrelative income poverty.

Poverty and social welfare recipients

CORI Justice has always pointed out the very important role that social welfare plays in addressing poverty. Our continued campaign to benchmark social welfarerates at 30 per cent of Gross Average Industrial Earnings (GAIE) reflects this belief [see section 3.1(c) below]. As part of the EU-SILC results the CSO has provided an interesting insight into the role that social welfare payments play in tackling Ireland’s poverty levels. They have calculated what the levels of poverty are before and after the payment of social welfare benefits.

Table 3.1.14 presents these results and shows that without the social welfare system Ireland’s poverty rate in 2006 would have been 40.3 per cent. The actual poverty figure of 17 per cent reflects the fact that social welfare payments reduced poverty by 23.3 per cent.

Looking at the impact of these payments on poverty over time it is clear that the recent increases in social welfare have yielded noticeable reductions in poverty levels. The small increases in social welfare payments in 2001 are reflected in the smaller effects achieved in that year. Conversely, the larger increases in recent years have delivered greater reductions. This has occurred even as poverty levels before social welfare have increased. CORI Justice has warmly welcomed these increases and if the government continues to maintain a benchmarked social welfare payment, as agreed under the NAPinclusion, these figures measuring the role of social welfare in reducing poverty will increase.

As social welfare payments do not flow to everybody in the population it is interesting to examine the impact they have on alleviating poverty among certain groups such as older people. Without any social welfare payments 85.9 percent of all those aged over 65 years in Ireland would be living in poverty. Benefit entitlements reduce the poverty level among this group to 13.6 per cent (CSO, 2007:14) a finding which underscores the importance of these payments to older people.

Table 3.1.4 and the subsequent analysis have shown that many of the groups in Irish society who experienced increases in their poverty levels over the last decade have been dependent on social welfare payments. These include pensioners, the unemployed, lone parents and those who are ill or disabled. Table 3.1.15 presents the results of an analysis of five key welfare recipient groups performed by the ESRI using poverty data for five of the years between 1994 and 2001. These are the years that the Irish economy grew fastest and the core years of the famed ‘Celtic Tiger’ boom. Between 1994 and 2001 all categories experienced large growth in their poverty risk. For example, in 1994 only 5 in every 100 old age pension recipients were in poverty; in 2001 this had increased ten-fold to almost 50 in every 100. The experience of widow’s pension recipients is similar.

The lesson to be learnt from table 3.1.15 centres on the inadequacy of social welfare payments. Over the period covered by these studies CORI Justice repeatedly pointed out how these payments failed to rise in proportion to earnings elsewhere in society. The primary consequence of this was that recipients slipped further and further back and as a consequence more and more fell into poverty. It is clear that adequate levels of social welfare need to be maintained and we outline our proposals for this below.

Poverty and deprivation

Income, alone, does not tell the whole story concerning living standards and command over resources. As we have seen in the NAPS definition of poverty it is necessary to look more broadly at exclusion from society because of a lack of resources. This would involve looking at other areas where “as a result of inadequate income and resources people may be excluded and marginalised from participating in activities that are considered the norm for other people in society” (NAPS, 1997). Although income is the principal indicator used to assess well-being and ability to participate in society there are other measures used. In particular these measures assess the standards of living people achieve by assessing deprivation through use of different indicators. To date assessments of deprivation in Ireland have been limited and confined to a small number of items. While this is regrettable, the information gathered is worth considering.

Deprivation in the EU-SILC survey

CORI Justice, among others, has continued to express its discomfort with the range of deprivation measures provided by the CSO in the EU-SILC survey. There are clear problems with the phrasing and location of the questions within the questionnaire used to collect the information. The end effect of this has been to incorrectly overstate the scale of deprivation among some of the eight indicators collected. Unfortunately, limited progress has been made on addressing these crucial methodological and measurement issues over the first four years of the survey although some new indicators are about to be introduced. Looking forward we
believe that a whole new approach to measuring deprivation needs to be taken.

Continuing to collect information on a limited number of static indicators is problematic and not a true representation of the dynamic nature of Irish society and the ever changing set of items needed to participate in Irish society. The details presented in table 3.1.16 should be interpreted in the context of the above reservation. It shows that the rates of deprivation recorded across a set of eight items varied between 2.1 and 8.8 per cent of the Irish population. Overall 81.7 per cent of the population were not deprived of any item while 10.4 per cent were deprived of one item, 3.5 per cent were without two items and 4.5 per cent were without three or more items (CSO, 2007:17).

Deprivation and poverty combined: consistent poverty

‘Consistent poverty’ combines deprivation and poverty into one indicator. It does so by calculating the percentage of the population who are simultaneously experiencing poverty and are also registering as being deprived of one or more of the items in table 3.1.16. As such it captures a sub-group of the poor.

Since 1994 consistent poverty rates have fallen from 9 per cent to 4.1 per cent in 2001. Due to the new EU-SILC survey and its measurement problems (outlined above) previous figures are not comparable to the 2004-2006 results. In 2004 some 6.8 per cent of the Irish population were in consistent poverty this translates to a figure of 274,978 people of whom 85,635 are children (9.9 per cent of Ireland’s children). The 2005 survey reported an increase in consistent poverty (despite reductions in relative income poverty), recording a rate of 7.0 per cent for the population and 10.6 per cent for children.The 2006 figure was roughly the same at 6.9 per cent. Interpreting this in terms of the population the 2006 figures imply that 292,549 people, of whom 103,855 are children, live in consistent poverty.

The National Action Plan for Social Inclusion 2007-2016 (NAPinclusion) published in early 2007 set its overall poverty goal using this consistent poverty measure. It set an aim to reduce the number of those experiencing consistent poverty to between 2 per cent and 4 per cent by 2012, with the aim of eliminating consistent poverty by 2016.

Deprivation of food: food poverty

In 2004 the Society of St. Vincent de Paul, the Combat Poverty Agency and Crosscare published a report examining those deprived of an adequate diet entitled Food Poverty and Policy. Its purpose was to review the nature and extent of incomerelated constraints on food consumption in Ireland. The report also suggested a number of policy responses to the issue.

The report defined food poverty as: “the inability to access a nutritionally adequatediet and the related impacts on health, culture and social participation”. It found that among those living in poverty three main constraints were imposed on their food consumption. These were: (i) it affects food affordability through the choice and quantity of food that can be bought and the share of the household budget that is allocated to food; (ii) it impacts on access to food through the retail options available and the capacity to shop in terms of transport and physical ability; (iii) issues such as personal skills and knowledge, social pressure and cultural norms interact with structural and economic constraints to produce a complex set of factors contributing to food poverty. Consequently, the experience of food poverty among poor people was that they: eat less well compared to better off groups; have difficulties accessing a variety of nutritionally balanced good quality and affordable foodstuffs; spend a greater proportion of their weekly income on food; and know what is healthy but are restricted by a lack of financial resources to purchase and consume it.

The report found that those most at risk of food poverty were low-income households as well as the unemployed, older people, the homeless, Travellers and refugees/asylum-seekers. To address the problem of food poverty the report Planning for Progress and Fairness advocates a targeted food and nutrition policy initiative as part of the NAPS. It suggests that this policy would address financial constraints, affordability and accessibility of food, knowledge gaps, community initiatives, direct provision and
food banking.

Deprivation of heat in the home: fuel poverty

Another area of deprivation that has received attention in recent times is deprivation of heat in the home often labelled as fuel poverty. A 2007 policy paper from the Institute for Public Health (IPH) entitled “Fuel Poverty and Health” highlighted the sizeable direct and indirect effects on health of fuel poverty. Overall the IPH found that the levels of fuel poverty on the island of Ireland remain “unacceptably high” and that they are responsible for “among the highest levels of excess winter mortality in Europe, with an estimated 2,800 excess deaths on the island over the winter months” (2007:7). They also highlighted the strong links between low income, unemployment and fuel poverty with single person households and households headed by lone parents and pensioners found to be at highest risk.

Similarly, the policy paper shows that older people are more likely to experience fuel poverty due to lower standards of housing coupled with lower incomes. CORI Justice supports the IPH’s call for the creation of a national fuel poverty strategy similar to the model currently in place in Northern Ireland. Addressing this issue, like all issues associated with poverty and deprivation, requires a multi-faceted approach. Clearly, living on a low income is a major factor and underscores the need to continue to increase the income levels of those dependent on state pensions, unemployment benefit or living on the minimum wage. A further policy is to target households that require assistance in becoming more energy efficient. In particular many older local authority houses need to be upgraded.

The experience of poverty

For some years there existed a lack of information on the life experiences of those families living on a low income. Fortunately a number of recent publications have addressed this void and provided an insight that further underscores the extent and implications of poverty.

One very interesting report published by the Vincentian Partnership for Social Justice (VPSJ) casts new light on the challenges faced by people living on low incomes. Current debates about the extent of poverty and whether or not it can be reduced or eliminated suffer from the absence of agreed empirically based income standards. What is the minimum essential amount of money a person or household needs to enable them to have an acceptable standard of living? The Vincentian report addressed this question in their 300-page study entitled Minimum

Essential Budgets for Six Households. The results of this research project show for the first time the income needed for a household to have a minimum essential lifestyle in modern Ireland. Based on research involving hundreds of people in focus groups, the study builds on previous work done by the VPSJ entitled Low Cost But Acceptable Budgets for Three Households.

The report provides detailed information on the actual cost of a minimum essential standard of living for six household types. The study looked in detail at the following households: two parents and two children (aged 3 and 10); two parents and two children (aged 10 and 15); a lone parent and two children (aged 3 and 10); a pensioner couple, a single female pensioner and a single adult male. It found that most households on social welfare or the minimum wage do not have enough income to sustain a basic standard of living. The weekly incomes for five out of six household types surveyed fell well short of a basic standard of living. The gap between the basic standard of living and the actual incomes of these households varied by between €10 and €150.The only group judged to meet a basic standard of living were pensioner couples on a contributory pension but without the cost of running a car.

This study has major implications for government policy if poverty is to be eliminated. These include the need to address child poverty, the income levels of adults on social welfare, the ‘working poor’ issue and access to services ranging from social housing to fuel for older people.

Poverty: a European perspective

Irish people experience one of the highest risks of poverty when compared to all the other EU member states. Table 3.1.17 presents data recently published by the CSO reporting the ‘at risk of poverty’ (proportions of the population living below the poverty line) rates calculated using the 60 per cent of median income poverty line in each country. The risk of poverty which Irish people face is 1 per cent higher than that in the UK, 6 per cent higher than in Germany and France, and 10 per cent higher than in Sweden (the lowest EU poverty risk level). The only countries recording poverty levels higher than Ireland were Spain, Greece, Poland and Lithuania.

The average risk of poverty in the EU-25 for 2005 was 16 per cent. Chart 3.1.1 develops the findings in table 3.1.17 further and calculates the difference between national poverty risk levels and the EU-25 average. It reflects the fact that Ireland’s poverty problem is large and exceptional by European standards. It also underscores the need for Ireland to address this issue with greater vigour.

NAPinclusion (2007-2016)

Government published its National Action Plan for Social Inclusion 2007-2016 (NAPinclusion) on February 21, 2007. It sets out Government proposals to address social exclusion over the next decade. CORI Justice published a detailed response to this plan in our March 2006 Policy Briefing on Poverty.23 Overall we believe that the NAPinclusion contained a number of positive initiatives that are welcome such as the benchmarking of the lowest social welfare rates, the tackling of social housing problems and the provision of 500 primary care teams. However, we believe that the Plan completely fails to address the ‘working poor’ issue which is one of the major challenges facing Ireland if social exclusion is to be addressed effectively.

Chart 3.1.1: Percentage difference in National Poverty risk from EU-25 average

Source: CSO, 2006:7, 15; Eurostat, Statistics in Focus 13/2005: 4
Notes: EU-25 average poverty risk is 16 per cent
See data source notes attached to table 3.1.17 above

Overall the NAPinclusion is very unambitious. Given the extraordinary economic growth of the past decade and given the numbers at risk of poverty and the deficits in social services and social infrastructure that are causing social exclusion for so many people across the country, more ambitious targets and goals would have been expected. If we cannot tackle poverty and social exclusion in the present economic circumstances we will never do so. We are disappointed that more challenging targets and time frames were not included in this Plan.

(b) Income Distribution

As we have already outlined, despite some improvements, poverty remains a significant problem. The purpose of economic success should be to improve the living standards of all of the population. A further loss of social cohesion will ensure that large numbers of people continue to experience deprivation, and the gap between them and the better off will widen. This has implications for all of society and not just for those who are poor.

Analysing the annual accounts of income and expenditure provides us with some information on trends in the distribution of national income. However, the limitations of this accounting system need to be acknowledged. Unpaid work is not included. Many environmental factors, such as the depletion of natural resources, are registered as income but not seen as a cost. Pollution is not registered as a cost but cleaning up after pollution is seen as income. Increased spending on prisons and security, which are a response to crime, are seen as increasing national income but not registered as reducing human well-being.

The point is, of course, that national accounts do not include items that cannot easily be assigned a monetary value. Progress cannot be measured by economic growth alone. Many other factors are required as we highlight elsewhere in this review.24 However, it is still of interest and of value to look at the distribution of national income. As we have acknowledged already Ireland is doing very well when one uses the yardstick of economic growth as the basis of measurement. However, when judging economic performance, and making judgements about how well Ireland is really doing, it is important to look at the distribution of national income as well as its absolute amount.

Trends in Ireland’s income distribution: 1987-2006

It is useful in this context to focus on trends in income distribution among households in Ireland since the late 1980s. The results of studies by Collins and Kavanagh (1998, 2006) and Collins (2002) combined with the recent CSO (2006, 2007) income figures provide a useful insight into the pattern of Ireland’s income distribution over 20 years. Table 3.1.18 combines the results from these studies and reflects the distribution of income in Ireland as tracked by five surveys during that period.

Over almost twenty years the share of the bottom 50 per cent of the income distribution has fallen from 25.25 per cent in 1987 to 23.02 per cent in 2006. Comparing the share of the bottom two deciles (the bottom 20 per cent) between 1987 and 2006 shows that those in this group now account for 5.49 per cent of the total income in society versus 6 per cent in 1987.

The most recent data on income distribution, from the 2006 EU-SILC survey, indicates a further shift in the distribution of Ireland’s income. In 2006, the top 10 percent of the population received their biggest ever share at 28.30 per cent of the total income while the poorest 50 per cent received a smaller share at 23.02 percent. However, there are some positive signs at the bottom of the income distribution. In each of the last three EU-SILC surveys (2004 2005 and 2006) the CSO found that the bottom two deciles saw their share of income increase. Similar to the earlier changes in the poverty figures, it is likely that these improvements are related to the recent budgetary policy which has increases social welfare payments.

The CSO data show that households in these deciles receive a large proportion of their income from social welfare payments (CSO, 2007: 24-25). Table 3.1.19 outlines the cash values of these income shares in 2006 as found by the EU-SILC survey. It shows that the top 10 per cent of households receive an average weekly disposable income (after all taxes and having received all benefits) of €2,367, a sum that is almost thirteen times greater than the €184 per week received by those households in the bottom decile. In 2006 the average household disposable income was €836.44 a week / €43,645 per annum (CSO, 2007: 24-25).

Income distribution: a European perspective

Another of the eighteen indicators adopted by the EU at Laeken assesses the income distribution of member states by comparing the ratio of equivalised disposable income received by bottom quintile (20 per cent) to that of the top quintile. As such, this indicator reports how far away from each other the shares of these two groups are – the higher the ratio the greater the income difference. Table 3.1.20 presents the most up-to-date results of this indicator for the 25 states that were members of the EU in 2005.The latest results mark the first time the Irish figure has converged with the EU average; a factor driven by the aforementioned rise in the share of the bottom decile following budgetary policy in recent years.

Overall, the greatest differences in the shares of those at the top and bottom of the income distribution are found in many of the new and poorer member states. However, some EU-15 members including the UK, Italy, Spain, Greece and Portugal also record large differences.

Income Distribution and Budget 2008

For some time CORI Justice has monitored the income distribution impact of annual Budgets. In doing this analysis we first look exclusively at the effect on the distribution of income as a result of increases in social welfare and changes to the tax bands and credits.A more comprehensive analysis of these Budget changes which includes the effects of increases in wages/increments and other benefits is explored subsequently.

When assessing how much better off people are going to be in 2008 it is important that wage increases and tax changes be included as well as social welfare increases. Unemployed people, for example, gain nothing from wage increases or tax reductions while those with jobs may gain from both. In our calculations we have included the general wage increase in various national agreements as well as the impact of Budget changes on social welfare and taxation.We have not included the impact of any benchmarking increases for public servants, as they do not apply to everyone.

Chart 3.1.2: Income Distribution and Budget 2008

Notes: * Except in LTU case where there is no earner
** LTU: Long Term Unemployed

Chart 3.1.2 (25) reports the findings of our analysis and shows that a single person who is long term unemployed received a weekly gain of €12 (€626 a year). The other figures in chart 3.2 show single people on €30,000 a year were €24.22 a week better off while those on €50,000 became €34.46 a week better off. Couples who are long-term unemployed gained €20 a week while those on €30,000 a year were €25.56 a week better off. Couples who both work and earn a total of €30,000 a year got €27.36 extra each week following Budget 2008 compared to €41.69 for a similar couple on an annual income of €50,000.

Overall, Budget 2008 provided a welcome distributive bias towards welfare recipients. However, a major regret arising from Budget 2008 was its failure to address the aforementioned issue of the working poor. While CORI Justice welcomed the fact that Government adjusted tax credits to ensure that those on the minimum wage pay no tax, we are concerned at the lack of attention for low paid.

As chart 3.2 shows, the Budget benefited those who are unemployed through increases in unemployment benefit and those who are working and paying taxes through alterations to tax credits and tax bands. However, for low paid workers and their families, they benefit from neither the tax changes (as their incomes are too low to pay any tax) nor welfare changes.A low income worker on €15,000 a year gained nothing from Budget 2008. Similarly, families with 1 earner on an income of €15,000 and those with two earners on an income of €30,000 gained nothing from the Budget. This is the second year that Budgetary changes have overlooked this group. It implies that such workers, and their dependents, are falling behind the rest of society; a fact that is reflected in the earlier EU-SILC poverty figures. The obvious inequity of this situation inspires CORI Justice’s belief that tax credits should be made refundable. We address this issue in section 3.2

The impact of Budget 2008 on the distribution of income in Ireland can be further assessed by examining the rich-poor gap. This measures the gap between the disposable income of a single person on long-term unemployment and a single person on €50,000 per annum. Budget 2008 widened the rich-poor gap by €22.46 per week.

(c) Achieving and Maintaining an Adequate Level of Social Welfare

Over recent years there has been major progress on benchmarking social welfare payments. As we detail below, Budget 2007 benchmarked the minimum social welfare rate at 30 per cent of Gross Average Industrial Earnings (GAIE). CORI Justice warmly welcomed the achievement of this benchmark. It has been a key element of the policy programme CORI Justice has outlined over recent years. We are confident that the achievement and maintenance of this benchmark will lead to further reductions in poverty rates, complementing those already achieved and detailed earlier. We also note the comments of the Minister for Finance Brian Cowen T.D. who stated the morning after Budget 2007 that: We’ve hit a landmark-type point in relation to social welfare in this respect, that we have in the last three budgets had unprecedented increases, particularly on the lowest rate, in order to get it to the point where the social partnership commitment required us to do, something around 30% of the gross average industrial earnings (Minister for Finance Brian Cowen T.D. on Today with Pat Kenny RTE Radio 1, 7th December 2006)

The process of benchmarking social welfare payments has centred on three elements: the 2001 Social Welfare Benchmarking and Indexation Working Group (SWBIG), the 2002 National Anti-Poverty Strategy (NAPS) Review and the Budgets 2005-2007.

Social welfare benchmarking and indexation working group

In its final report the SWBIG agreed that the lowest social welfare rates should be benchmarked. A majority of the working group, which included CORI Justice, also agreed that this benchmark should be index-linked to society’s standard of living as it grows, and that the benchmark should be reached by a definite date. The working group chose Gross Average Industrial Earnings (GAIE) to be the index to which payments should be fixed. The group further urged that regular and formal review and monitoring of the range of issues covered in its report should be provided for. The group expressed the opinion that this could best be accommodated within the structures in place under the NAPS and the National Action Plan for Social Inclusion (now combined as NAPinclusion). The SWBIG report envisaged that such a mechanism could involve

• the review of any benchmarks/targets and indexation methodologies adopted by government to ensure that the underlying objectives remain valid and are being met
• the assessment of such benchmarks/targets and indexation methodologies against the various criteria set out in the group’s terms of reference to ensure their continued relevance
• the assessment of emerging trends in the key areas of concern - e.g. poverty levels, labour market performance, demographic changes, economic performance, competitiveness, etc.
• identification of gaps in the area of research and assessment of any additional research undertaken in the interim.

CORI Justice strongly endorsed this position and urged Government to ensure that such a mechanism be established forthwith and that it keep these issues under constant review.

National Anti-Poverty Strategy (NAPS) review 2002

In 2002, the NAPS review set the following as key targets:
To achieve a rate of €150 per week in 2002 terms for the lowest rates of social welfare to be met by 2007 and the appropriate equivalence level of basic child income support (i.e. child Benefit and Child Dependent Allowances combined) to be set at 33 per cent - 35 per cent of the minimum adult social welfare payment rate.

CORI Justice welcomed this target. It was a major breakthrough in social, economic and philosophical terms. We also welcomed the reaffirmation of this target in Towards 2016. That agreement contained a commitment to “achieving the NAPS target of €150 per week in 2002 terms for lowest social welfare rates by 2007” (2006:52). The target of €150 a week was equivalent to 30 per cent of Gross Average Industrial Earnings (GAIE) in 2002.26

In response to this commitment CORI Justice calculated the projected growth in €150 between 2002 and 2007 when it is indexed to the estimated growth in GAIE. Table 3.1.21 outlines these expected growth rates and calculates that the lowest social welfare rates for single people should have reach €185.80 by 2007.

Budgets 2005-2007

The NAPS commitment was very welcome and was one of the few areas of the anti-poverty strategy that was adequate to tackle the scale of the poverty, inequality and social exclusion being experienced by so many people in Ireland today. In 2002, CORI Justice set out a pathway to reaching this target by calculating the projected growth of €150 between 2002 and 2007 when it is indexed to the estimated growth in GAIE. Progress towards achieving this target had been slow up until Budget 2005. At its first opportunity to live up to the NAPS commitment the government granted a mere €6 a week increase in social welfare rates in Budget 2003. This increase was below that which CORI Justice requested in our Pre-Budget Briefing for Budget 2003 and also below that recommended by the government’s own tax strategy group. In Budget 2004 the increase in the minimum social welfare payment was €10. This increase was again below the €12 a week CORI Justice sought in our Pre-Budget Briefing for Budget 2004. At this point CORI Justice set out a three-year pathway (see table 3.1.22).

Following Budget 2004 CORI Justice argued for an increase of €14 in Budget 2005. The Governments decision to deliver an increase equal to that amount in that Budget marked a significant step towards honouring this commitment was a step we warmly welcomed. Budget 2006 followed suit, delivering an increase of €17 per week to those in receipt of the minimum social welfare rate. Finally, Budget 2007’s decision to deliver an increase of €20 per week to the minimum social welfare rates brought the minimum social welfare payment up to the 30 per cent of GAIE benchmark.

CORI Justice believes that these increases, and the achievement of the benchmark in Budget 2007, marked a fundamental turning point in Irish public policy. Budget 2007 was the third budget in a row where the government delivered on its NAPS commitment. In doing so the government moved to meet the target such that in 2007 the minimum social welfare rate increased to €185.80 per week; a figure equivalent to the 30 per cent of Gross Average Industrial Earnings (GAIE).

We warmly welcomed its achievement. It marked major progress and underscored the delivery of a long overdue commitment to sharing the fruits of this country’s recent economic success.

Social welfare payments post-2007

An important element of the NAPS commitment to increasing social welfare rates is the acknowledgement that the years from 2002-2007 marked a period of ‘catchup’ for those in receipt of welfare payments. Now that this income gap has been bridged, the increases necessary to keep social welfare payments at a level equivalent to 30 per cent of GAIE become much smaller. In that context we welcomed the commitment by Government in NAPinclusion to “maintain the relative value of the lowest social welfare rate at least at €185.80, in 2007 terms, over the course of this Plan (2007-2016), subject to available resources” (2007:42).

Budget 2008 delivered an increase of €12 per week in social welfare payments, maintaining the benchmark and reflecting earnings figures from the CSO and projections by the ESRI which suggested a GAIE of between €650-€660 per week for 2008. The precise value of the Budget 2009 social welfare increase required to keep rates at the 30 per cent level will not be clear until the CSO have published the final results of their Industrial Earnings and Hours Worked survey results in late June 2008. Using this data, combined with ESRI GAIE growth projections, CORI Justice will publish the value of the necessary increase in our subsequent Budget Choices Policy Briefing (September/early October 2008).

Whether or not 30 per cent of GAIE is adequate to eliminate the risk of poverty is an issue to be monitored through the EU-SILC studies and in particular to be addressed when data on persistent poverty emerges.

Individualising social welfare payments

Budget 2007’s achievement in bringing social welfare rates up to 30 per cent of Gross Average Industrial Earnings (GAIE) is a significant development. Having lobbied and campaigned for this over recent years, CORI Justice is happy to acknowledge its
achievement. However, despite this development, there are still some recipients of social welfare who do not fully benefit from these income improvements - in particular, couples in receipt of a social welfare payment.The issue of individualising payments so that all recipients receive their own social welfare payments has been on the policy agenda in Ireland and across the EU for several years. CORI Justice welcomed the report of the Working Group, Examining the Treatment of Married, Cohabiting and One-Parent Families under the Tax and Social Welfare Codes, which addressed some of the individualisation issues. Recent Budgets have also made welcome progress on the individualisation of contributory State Pension payments.

At present the welfare system provides a basic payment for a claimant whether a pension, a disability payment or a job-seeker’s payment etc. It then adds anadditional payment of about two-thirds of the basic payment for the second person. For example, following Budget 2008 a couple on the lowest social welfare rate will receive a payment of €329.10 per week. This amount is approximately 1.66 times the payment for a single person (€197.80). Were these two people living separately they would receive €197.80 each; giving a total of €395.60. Thus by living as a household unit such a couple are discriminated against and receive a lesser income.

CORI Justice believes that this system is unfair and inequitable. We also believe that the system as currently structured is not compatible with the Equal Status Acts (2000-2004); a point we strongly made in our recent submission to the Department of Social and Family Affairs Review of the Social Welfare Code with regard to its compatibility with the Equal Status Acts. People, often women, are disadvantaged, through the receipt of a lower income, for living as a household unit. We believe that where a couple are in receipt of welfare payments, the payment for the second person should be increased to equal that for the first person. Such a change would remove this disadvantage and bring the current social welfare system in line with the terms of the Equal Status Acts (2000-2004).We look forward to seeing progress on this issue in the coming year and believe such a policy development would go some way towards delivering the equality that should be the hallmark of all systems.

(d) Basic Income

Over the past number of years major advances have been achieved in the case for introducing a basic income in Ireland. These include the publication of a Green Paper on Basic Income by the government in September 2002 and the publication of a book by Clark entitled The Basic Income Guarantee (2002). Both publications are discussed below.

The case for a basic income

CORI Justice has argued for a long time that the present tax and social welfare systems should be integrated and reformed to make them more appropriate to the changing world of the twenty-first century. To this end CORI Justice has argued for the introduction of a basic income system.

A basic income is an income that is unconditionally granted to every person on an individual basis, without any means test or work requirement. In a basic-income system every person receives a weekly tax-free payment from the Exchequer, and all other personal income is taxed, usually at a single rate. For a person who is unemployed, the basic-income payment would replace income from social welfare.

For a person who is employed the basic-income payment would replace tax credits in the income-tax system. Basic income is a form of minimum income guarantee that avoids many of the negative side effects inherent in social welfare payments. A basic income differs from other forms of income support in that

• it is paid to individuals rather than households
• it is paid irrespective of any income from other sources
• it is paid without conditions. It does not require the performance of any work or the willingness to accept a job if offered one
• it is always tax free.

There is real danger that the plight of large numbers of people excluded from the benefits of the modern economy will be ignored. Images of rising tides lifting allboats are often offered as government’s policy makers and commentators assure society that prosperity for all is just around the corner. Likewise, the claim is often made that a job is the best poverty fighter and consequently all priority must be given to getting everyone a paid job. These images and claims are no substitute for concrete policies to ensure that all are included. Twenty-first-century society needs a radical approach to ensure the inclusion of all people in the benefits of present economic growth and development. Basic income is such an approach.

As CORI Justice has designed it, a basic income system would replace social welfare. It would guarantee an income above the poverty line for everyone. It would not be means tested. There would be no “signing on” and no restrictions or conditions. In practice a basic income recognises the right of every person to a share of the resources of society.

The Basic Income system ensures that looking for a paid job and earning an income, or increasing one’s income while in employment, is always worth pursuing, because for every euro earned the person will retain a large part. It thus removes the many poverty traps and unemployment traps that may be in the present system. Furthermore, women and men get equal payments in a basic income system. Consequently the basic income system promotes gender equality because it treats every person equally.

It is a system that is altogether more guaranteed, rewarding, simple and transparent than the present tax and welfare systems. It is far more employment friendly than the present system. It also respects other forms of work besides paid employment. This is crucial in a world where other forms of work need to be recognised and respected. It is also very important in a world where paid employment cannot be permanently guaranteed for everyone seeking it. There is growing pressure and need in Irish society to ensure recognition and monetary reward for such work. Basic income is a transparent, efficient and affordable mechanism for ensuring such recognition and reward.

Basic income also lifts people out of poverty and the dreadful dependency mode of survival. In doing this it also restores their self-esteem and broadens their horizons. Poor people however are not the only ones who should welcome a basic income system. Employers for example should welcome it because its introduction would mean they would not be in competition with the social welfare system.

Since employees would not lose their basic income when taking a job, there would always be an incentive to take up employment.
A basic income system would create a platform for meaningful work. It would benefit paid employment as well as other forms of work. It would also have a substantial impact on reducing income poverty. The present tax and welfare systems were designed for a different era. They have done well in addressing major problems of the second half of the twentieth century. The world however is changing radically. A new system is required for the twenty-first century. Basic income is such a system.

Ten reasons to introduce basic income

1. It is work and employment friendly.
2. It eliminates poverty traps and unemployment traps.
3. It promotes equity and ensures that everyone receives at least the poverty level of income.
4. It spreads the burden of taxation more equitably.
5. It treats men and women equally.
6. It is simple and transparent.
7. It is efficient in labour-market terms.
8. It rewards types of work in the social economy that the market economy often ignores, e.g. home duties, caring, etc.
9. It facilitates further education and training in the labour force.
10. It faces up to the changes in the global economy.

Green Paper on basic income

CORI Justice welcomed the publication of the government’s Green Paper on Basic Income (2002). In particular it welcomed the fact that the Green Paper vindicates our previous claims that a basic income system would have a far more positive impact on reducing poverty than the present tax and welfare systems. The Green Paper shows that a basic income system would have a substantial impact on the distribution of income in Ireland. As a result of its introduction it would improve the incomes of 70 per cent of households in the bottom four deciles (i.e. the four tenths of the population with lowest incomes) and raise half of the individuals that would be below the 40 per cent poverty line under “conventional” options above this poverty line. According to the Green Paper these impacts would be achieved without any resources additional to those available to “conventional” options.

The critical test of any tax and welfare system is its impact on people with lower incomes. In that context the Green Paper shows that a basic income system is far more effective at tackling poverty than the present tax/welfare system. Therefore it should form part of a comprehensive strategy to totally eliminate income poverty in the years immediately ahead.

When one looks at the “losers” identified in the Green Paper, two key issues need to be borne in mind. The first of these is that over a three-year implementation period of a basic income system all the “losers” would be better off than they are at present. They would simply not gain as much under Basic Income as they would under the present system. The second issue is that the ‘losers’ in the bottom four deciles can be easily targeted and compensated through the Social Solidarity Fund that forms part of the basic income structure. In addition the analysis concluded that a basic income system could encourage some people to move from the unofficial economy into regular employment.

On the macro-economic aspects the Green Paper itself acknowledges that the findings of previous studies were very tentative, speculative and hard to quantify. The Green Paper uses the tax rate (including PRSI replacement) of 47.7 per cent which previous studies showed was required to fund basic income, based on January 1999 estimates. Since then the economy has grown significantly and the revised rate, based on the Revenue Commissioner’s estimates of the tax base, is likely to be far below the present situation which has a marginal tax rate of 41 per cent plus additional social insurance payments.

The choice between a basic income system and the “conventional” tax/welfare options is a trade-off between greater equity and a possible risk of slightly lower economic growth versus less equity and less risk to higher economic growth. At a time when so much concern is expressed about the country’s failure to use its recent economic growth to build a fairer society, the argument in favour of introducing a basic income system is further strengthened.

The resources of recent years were more than adequate to introduce a full basic income system in Ireland. It is regrettable that the resources were not used to introduce such a system. Its introduction would have produced a much fairer tax and welfare system. It would have moved beyond models that were appropriate to the twentieth century but are not capable of effectively addressing the neweconomic realities of the twenty-first century. Also, basic income would be far more effective than the present tax/welfare system at addressing the income inequality, increased insecurity and social exclusion that accompany the “new economy”.27

The basic income guarantee

The publication of The Basic Income Guarantee: ensuring progress and prosperity in the 21st century by Charles M.A. Clark adds another influential voice to the debate on basic income. Initially Clark states that “the great challenge of the twenty-first century economy is to promote real efficiency and equity not only to ensure future progress, but also to ensure that all get to benefit from this progress”(2002:22). To achieve this heidentifies and outlines a basic income guarantee proposal.

The system he proposes is based on the fiscal year 2001/2002. In it Clark proposes that the universal basic income payments should be: €142.21 for adults aged 80+, €135.86 for adults aged 65-79, €109.20 for adults aged 18-64 and €43.17 for those aged up to 17.28The total cost of these payments in 2001/2002 would be €18.68bn. The proposal also incorporates a social solidarity fund designed to compensate low-income households that might be adversely affected by the introduction of a basic income. This fund is estimated to cost €804.9m for the year. Aside from basic income expenditure, additional government spending is estimated at €5.379bn while administrative costs attached to the introduction of the basic income scheme are calculated to cost €141m. The introduction of this proposal would also produce a series of exchequer savings.29 These would evolve from the need not to fund the living costs associated with various employment programmes, education grants and from administrative savings in the Department of Social and Family Affairs. These savings combine to a total of €1.137bn. Table 3.1.23 presents these costs and savings figures. It also shows that Clark identified that the net costs of this proposal would be €23.875bn in 2001/2002.

To fund the proposal a flat tax rate of 47.14 per cent was established as necessary. Clark notes that this tax rate would result in Ireland retaining its position as a lowtax economy as measured by the OECD tax to GDP ratio. Following the introduction of this scheme Ireland would have a tax level equal to 34.9 per cent of GDP, a figure which would be lower than the corresponding figures for 2001 in all other EU economies (2002: 64)30.As we have shown earlier, a much lower tax rate would be required to fund this approach today.

A further significant contribution of this research is that it proceeds to calculate the impact of the basic income proposal on poverty and income inequality. These calculations indicate that a basic income system that incorporated a social solidarity fund would result in the complete elimination of poverty as measured using the 50 per cent of mean income. Furthermore the system would also reduce child income poverty from a 1995 level of 23.2 per cent to 0 per cent. Finally the impact of the basic income proposal on the distribution of disposable income is to enhance equality by increasing the share of the total income received by the poorest sixty percent of society (2002: 122 and 124).

Policy Proposals on Income

A series of short-term and medium-term initiatives is required if the reality of poverty and income inequality is to be addressed once and for all in Ireland. The income measures, which are necessary to bring about greater societal fairness, are outlined below.

• Acknowledge that Ireland has an ongoing poverty problem.
• Honour the NAPinclusion and Towards 2016 commitment that the lowest social welfare payment for a single person will be benchmarked to 30 per cent of GAIE from 2007-2016.
• Address the problems of child poverty through the introduction of a refundable tax credit for all children irrespective of the labour force status of their parents. This would address child poverty and childcare costs.
• Convert the childcare supplement into a refundable tax credit payable for all children irrespective of the labour force status of their parents.
• Raise the ‘qualifying adult’ social welfare payments until they reach the single-adult payment rate.
• Move towards the individualisation of social welfare payments.
• Introduce a cost of disability allowance as a means of addressing the poverty and social exclusion experienced by people with a disability.
• Recognise the problem of the ‘working poor’ and make tax credits refundable so as to improve the situation of the workers and their families who are living in this situation.
• CORI Justice believes that a Government commitment to:
  • maintaining benchmarked social welfare payments,
  • equity of social welfare rates,
  • early childcare supplement/child benefit increases,
  • higher state pensions and cost of disability payments
  • refundable tax credits

would lead to Ireland’s poverty risk levels falling to below the EU average level over the next few years. Government should adopt these policy reforms so that this goal is achieved.

• Poverty-proof all public policy initiatives and provision.
• Equality-proof all public policy initiatives and provision.
• Recognise the new problems of poverty among migrants and adopt policies to assist this group.
• Increase the weekly allowance allocated to asylum-seekers on ‘direct provision’ to at least €60 a week for an adult and €30 for a child.
• Move to address income adequacy among those dependent on state pensions.
• Adopt a new approach to measuring deprivation - one that uses regularly updated indicators reflective of society as it currently is.
• Implement the IPH’s call for the creation of a national fuel poverty strategy similar to the model currently in place in Northern Ireland.
• Continue to resource the production of up-to-date data in the area of poverty and social exclusion and ensure the publication of such data as soon as they become available.
• Accept that persistent poverty should be used as the primary indicator of poverty measurement once this data becomes available (late 2008).
• Move towards introducing a basic income system. All initiatives in the areas of income and work should constitute positive moves towards the introduction of a full basic income guarantee system.
• Government should support a public debate on the Green Paper on Basic Income. Further research on basic income should also be supported.

Notes:

10 For more information on these indicators see Nolan (2006:171-190).
11 In particular the use of median income ensures that it is possible to eliminate poverty (a rate of 0 per cent), a feature that was theoretically impossible when poverty lines were calculated using mean income.
12 For example in 2003 the CSO reported that the 60 per cent median income line was €14 higher than the 50 per cent mean income line. In some other European countries the opposite situation was found.
13 For example the poverty line for a household with 2 adults and 1 child would be calculated as €218.59 + €144.27 + €72.13 = €434.99.
14 See table 3.1.14 below for further analysis of this point.
15 See table 3.1.13.
16 This figure is calculated from tables 5A and 9 of Census 2006 – Principal Demographic Results (CSO, 2007:41, 56).
17 Calculations exclude the category of ‘others’.
18 Following Collins (2006:141, 147) we assumed that those classified as ill/disabled are likely to want to participate in the labour market. However, we note that the entirety of this group is unlikely to join.
19 Calculations exclude the category of ‘others’.
20 Those on home duties, students and school attendees, retired plus a proportion of the ill and disabled.
21 Many of those who comprise the latter two categories of households will also be classified as retired.
22 See Collins (2006:144-145) for further details.
23 This is available on our website www.cori.ie/justice - see pages: 1, 4, 5, 7 and 8.
24 We return to critique National Income statistics in section 3.10. There, we also propose some alternatives.
25 This analysis was first published in our analysis and critique of the Budget, issued the day after the Budget was presented by the Minister for Finance.
26 GAIE is calculated by the CSO on the earnings of all individuals (male and female) working in all industries. The GAIE figure in 2002 was €501.51 and 30 per cent of this figure equals €150.45 (CSO, 2006: 2).
27 See also Ward (2006).
28 These payments were equivalent to social welfare rates in that year.
29 These savings are discussed in more detail in Clark (2002:45) and Ward (1994:84-88).
30 For details on a pathway to introduce a basic income see: Clark and Healy (1997) and Ward (1994).

Statistical Information on Social Welfare Services 2006 - published December 20, 2007

A FUTURE BEYOND POVERTY - Article by Fr Seán Healy, s.m.a., Director, CORI Justice, published in the Irish Examiner op-ed page - Monday, March 12th, 2007 Download Pdf

March 12, 2007: CORI Justice publishes Policy Briefing on POVERTY including critique of Government's National Action Plan for Social Inclusion. Download Pdf

How to banish poverty and exclusion - and create new wellbeing – Article by Sean Healy, Director of CORI Justice, published: Irish Times op-ed page November 29th, Download Pdf

EU Survey on Income and living Conditions (EU-SILC) - first results from Ireland (published by the Central Statistics Office January 24, 2005)

2004 July: CORI Justice Commission publishes Policy Briefing on Poverty. Download Pdf