High prices and the rising cost of living are topics of conversation in every household the length and breadth of the country.
Ireland was already the second most expensive country in the European Union before the ongoing inflation surge. In 2020, when the inflation rate was below 0%, the price of a basket of 2,000 everyday consumer goods and services was more than a third higher than the EU27 average. Housing costs, which include utility and energy bills, were higher than anywhere else in the union at a massive 78% above average. Public transport was 37% more expensive. Average childcare fees for a working couple with two pre-school children were eating up a fifth (20%) of their joint income.
Together with collectively bargained pay increases to offset the effects of soaring inflation, government can bring down the cost of living for workers by improving their Social Wage.
The Social Wage is a measure of how much better off you are from social spending by government on welfare supports and services.
New research from the Irish Congress of Trade Unions shows that the value of the Social Wage for full-time workers in Ireland is exceptionally low by EU standards.
The Social Wage
Free or very low-cost public services reduce people’s out-of-pocket expenses. They act as a virtual income top-up to people’s cash income from work or welfare.
But Ireland is unusual among rich EU member states in means testing access to publicly-funded essential services like housing, healthcare and childcare. Because the maximum income cut-off point is so low, full-time workers rarely qualify. Public services in Ireland are just for people on the very lowest incomes unable to meet their basic needs from their own resources. The exception to this rule is free education for all children, free travel for everyone over 66, and free GP visits for those under the age of 6 and over 70 years.
In other EU countries access to public services is based on need. If, for example, you have a child and a job you need childcare. You are eligible for heavily subsidised public childcare services regardless of the size of your pay packet.
In other words, workers in Ireland earning above a very modest wage must pay market prices for essentials, driving up their cost of living, that all workers across the EU can freely access.
For example, a full-time worker in rural Ireland earning not much more than minimum wage is ineligible for social housing. While only 1 in 7 of all people in employment aged 18-64 hold a Medical Card and a mere 1 in 28 hold a GP Visiting Card.
Government can ease this unnecessary squeeze on wages by opening up access to public services and thereby increasing the value of workers’ Social Wage.
Low-tax economy
If government is to scale up social spending then it needs to generate more tax revenue.
Ireland is a low-tax economy and there is significant space to raise the revenue to pay for more public services without putting tax rates above the EU average and eroding national competitiveness.
Readers will understandably baulk at the suggestion that we are a low-tax economy. We certainly don’t feel like a low-tax economy when looking at your payslip or at a checkout. This is true. The tax-take from employees and consumers in Ireland is above average. Where we under-tax is in relation to property and employers.
Employers in Ireland pay the lowest social insurance contributions in the European Union after Cyprus, Lithuania, and Malta. The State could have collected €8.3 billion in additional revenue in 2019 had they taxed employers at the average tax level for rich member states. To put this into context, free childcare could be delivered for €2 billion.
Protecting living standards
The Covid-19 pandemic caused unparalleled disruption to our economy and to people’s livelihoods. It exposed the weaknesses in our threadbare social safety net in protecting workers’ living standards and has sparked wide public support (70%) for government to do more.
Now is the moment for radical change in the role of government in protecting the general population against common risks, including widening access to affordable housing, child and adult care, free healthcare and education, and heavily subsidised and sufficient public transport.
Just as the welfare system was built out of the ruins of World War II, one positive legacy of the pandemic can be a more generous Social Wage for workers and public services for all.
Dr Laura Bambrick is ICTU Social Policy Officer
