Working poor in Europe – Ireland
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In Ireland, levels of consistent in-work poverty fell during the country’s economic boom due to factors such as high levels of job creation, a high minimum wage, increases in social welfare benefits, tax credits and lower taxes for low-paid workers. However, relative poverty in Ireland – the income gap between low-paid workers and top earners – is among the highest of the advanced economies. The severity of the Irish economic recession, and the government’s deflationary policy response, are having a particularly detrimental impact on the country’s working poor population and those in a precarious labour market position.
Definitions and aims of study
The ‘working poor’ are a section of the population that is difficult to define, not only due to a lack of specific data but also because the concept combines two levels of analysis: the working status of individuals and the wages they earn from employment (individual level), and the extent to which they have a poverty-level of income which relates to the household context (collective level).
The aim of the comparative analytical report is fourfold:
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to obtain an insight into the extent of ‘in-work poverty’ in different European countries and the characteristics of those affected;
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to examine policies in place to tackle the problem of people in work on low levels of income and any assessments which have been carried out into the effectiveness of such policies;
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to consider the views of social partners towards the working poor;
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to investigate the effect of the current economic recession on the scale of in-work poverty.
For the purpose of the study, the working poor are defined in the same way as the indicator used by the European Commission to assess and monitor in-work poverty. Therefore, the working poor are those who are employed and whose disposable income puts them at risk of poverty. The expressions ‘working poor’ and ‘in-work poverty’ are thus used interchangeably.
‘Employed’ is defined here as being in work for over half of the year. ‘Risk of poverty’ refers to having an income below 60% of the national median. Income is measured in relation to the household in which a person lives and covers the income of all household members, which is shared equally among them after being adjusted for household size and composition. Accordingly, if persons are at risk of poverty, this may not be simply because they have low wages but because their wages are insufficient to maintain the income of the household in which they live. Equally, a person can earn a very low wage but not be at risk of poverty because the income of other household members is sufficient to raise the overall household income above the poverty threshold. The study covers people on low wages, or low earnings in the case of self-employed persons. Low wages, defined in an analogous way as low income – that is, below 60% of the median earnings of those in full-time employment – potentially put individuals at risk of poverty. The risk is likely to increase in the current economic crisis as companies introduce various measures to try to cut wage costs while keeping people in employment by reducing their working hours, giving them extended leave or simply cutting wages.
The characteristics of the people concerned are also important – particularly their age, with young people and, in some cases, older workers being more likely to be employed in low-paid jobs. Women are also more likely than men to be employed in low-paid jobs, even allowing for the relatively large numbers of women working part time. However, the statistics show that, if women are in work, they are on average across the European Union less likely than men to live in households with a poverty-level of income. Nonetheless, women are more likely than men to live in circumstances which put them at particular risk of poverty, such as being a lone parent in many countries. In addition, migrants are particularly vulnerable to being among the ‘working poor’, since they tend to combine various adverse characteristics, such as working in low-skilled jobs with low rates of pay and living in single-earner households.
A set of tables containing the data available at EU level on the working poor and on people with low wages was included in an annex to the questionnaire (see Annex 1 of the overview comparative analytical report). The data concerned derive from the EU Statistics on Income and Living Conditions (EU-SILC) for 2007, which are the latest available data and which relate to the position in 2006. The national correspondents were asked to comment on the table findings for their country and to supplement the data included with data from national sources where possible and where these help to interpret the situation or to add to the information included in the tables. The correspondents were also asked to specify the source of any additional data and the definitions used if these differ from those on which the table is based.
1. Scale and nature of in-work poverty
1.1 Please comment on the figures for the working poor for your country shown in the attached tables and what they indicate about the scale and nature of this. Please refer to any additional data available from national sources or any studies which have been undertaken if these provide additional information in this regard and help to give an insight into the issue.
Please see answer to 1.2.
1.2 Please comment on recent trends, giving any data or other evidence available to indicate whether the number of working poor has tended to increase or decline, between 2000 and 2007, especially considering women, young and older workers, self employed, migrants.
The Conference of Religious of Ireland (CORI) regularly lobbies the Irish government on poverty issues. CORI has collected additional information based on the 2007 EU-SILC, along with national data from the Central Statistics Office (CSO) and the Economic and Social Research Institute (ESRI). CORI also examines recent trends in the number of ‘working poor’.
According to CORI, the most common approach to measuring the extent of poverty has been to identify a poverty line based on people’s incomes. In recent years, the European Commission and the United Nations (UN), among others, have begun to use a poverty line located at 60% of the median income. This poverty line is the one adopted in the EU-SILC and differs from the previous Irish poverty line (prior to 2003), which was set at 50% of the mean (average) income. This switch to using the median income is to be welcomed, CORI suggests, as it removes many of the criticisms that have been made against using relative income measures to assess poverty. In monetary terms, there is little difference between the poverty line drawn at either 60% of median income or 50% of average income. While the 60% median income line has been adopted as the primary poverty line, alternatives set at 50% and 70% of median income are also used to clarify measurements of poverty.
CORI notes that, using information gathered in the 2006 EU-SILC, the CSO established that the median income per adult in Ireland was €337.48 a week. Consequently, the income poverty lines for a single adult derived from this average were as follows:
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50% line amounting to €168.74 a week;
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60% line totalling €202.49 a week;
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70% line amounting to €236.24 a week.
Updating the 60% median income poverty line to 2008 levels, using predicted increases in average industrial earnings, produces a relative income poverty line of €218.59 for a single person. In 2008, any adult below this weekly income level would be counted as being at risk of poverty, CORI outlined.
Table 1 below applies this poverty line to different households 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 not be classified as poor. For each additional adult in the household, this minimum income figure is increased by €144.27 – or 66% of the poverty line figure. For each child in the household, the minimum income figure is increased by €72.13 – or 33% of the poverty line. These adjustments are made in recognition of the fact that, as households increase in size, they require more income to avoid the risk of poverty. In all cases, a household below the corresponding weekly disposable income figure is classified as being at risk of poverty. For clarity, corresponding annual figures are also included.
| No. of persons in household | Weekly poverty line | Annual poverty line |
|---|---|---|
| 1 adult | 218.59 | 11,406 |
| 1 adult 1 child | 290.72 | 15,170 |
| 1 adult 2 children | 362.86 | 18,934 |
| 1 adult 3 children | 434.99 | 22,698 |
| 2 adults | 362.86 | 18,934 |
| 2 adults 1 child | 434.99 | 22,698 |
| 2 adults 2 children | 507.13 | 26,462 |
| 2 adults 3 children | 579.26 | 30,226 |
| 3 adults | 507.13 | 26,462 |
Source: CSO and CORI, 2008
An implication of this analysis CORI suggests, is that most weekly social welfare rates paid to single people in Ireland are €20.79 below the poverty line.
Persons with 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 in Ireland. Table 2 presents the key findings showing poverty levels among the Irish population. Using the EU poverty line set at 60% of median income, the findings reveal that, in 2006, just under one in every five people in Ireland was living in poverty. The table also indicates that there has been an increase in the proportion of people living below the poverty line over the last 12 years. Data for 1994, 1998, 2001 and 2003–2006 show that the proportion of the population in poverty has risen from 15.6% in 1994 to 17% in 2006. However, the most recent data indicate that the poverty levels have fallen over the past few years, which seems to be partly linked to increases in social welfare payments in recent Irish budgets.
| 1994 | 1998 | 2001 | 2003 | 2004 | 2005 | 2006 | |
|---|---|---|---|---|---|---|---|
| 50% poverty line | 6.0 | 9.9 | 12.9 | 11.6 | 11.1 | 10.8 | 8.9 |
| 60% poverty line | 15.6 | 19.8 | 21.9 | 19.7 | 19.4 | 18.5 | 17.0 |
| 70% poverty line | 26.7 | 26.9 | 29.3 | 27.7 | 28.7 | 28.2 | 26.7 |
Note: All poverty lines are calculated as a percentage of the median income.
Source: CSO and Whelan et al (2003), using national equivalence scale
According to CORI, because it is sometimes easy to overlook the extent of Ireland’s poverty, it is useful to translate poverty percentages into numbers of people. Using the percentages for the 60% median income poverty line, along with population statistics from CSO population projections and census results, CORI estimates the numbers of people in Ireland who have been in poverty in 1994, 1998, 2001 and 2003–2006. These data are illustrated in Table 3 below. The results give a better insight into how severe the phenomenon of relative poverty is, CORI argues.
| % of persons in poverty | Population of Ireland | Number of persons in poverty | |
|---|---|---|---|
| 1994 | 15.6 | 3,585,900 | 559,400 |
| 1998 | 19.8 | 3,703,000 | 733,194 |
| 2001 | 21.9 | 3,847,200 | 842,537 |
| 2003 | 19.7 | 3,978,900 | 783,843 |
| 2004 | 19.4 | 4,043,800 | 784,497 |
| 2005 | 18.5 | 4,130,700 | 764,179 |
| 2006 | 17.0 | 4,239,848 | 720,774 |
Source: CSO (2007) and Whelan et al (2003), using national equivalence scale; CSO (2004, 2006, 2007)
In 2006, just over 720,000 people (17%) in Ireland were deemed to be below the relative income poverty line, although this is lower than in 2001, when the figure was at 21.9% (842,537 persons).
The working poor
Up until the economic recession hit Ireland from 2008, the level of job expansion in the country had been dramatic and many had benefited from the rise in the number of jobs readily available. However, CORI suggests that having a job does not, by itself, guarantee living in a poverty-free household. As the results in Table 4 indicate, 6.5% of those at work are at risk of poverty. Translating this into numbers of people indicates that among Ireland’s working population in 2006, at least 116,000 persons were at risk of poverty.
| Economic status | Men | Women | Total |
|---|---|---|---|
| At work | 6.8 | 6.3 | 6.5 |
| Unemployed | 47.9 | 32.5 | 44.0 |
| Students and school attendees | 29.9 | 29.2 | 29.5 |
| On home duties | * | 24.0 | 23.8 |
| Retired | 15.0 | 13.8 | 14.8 |
| Ill or disabled | 46.7 | 31.3 | 40.8 |
| Other | * | * | 32.1 |
| Total | 16.6 | 17.4 | 17.0 |
Note: * No recorded figure as sample occurrences were too small for estimation
Source: CSO (2007), using national equivalence scale
Finally, Table 5 examines the composition of poverty by household type. Given that households are taken to be ‘income receiving units’ – that is, where income flows into households, which then collectively live off that income – CORI considers it worthwhile assessing poverty by household type. These data show that, in 2006, some 29.5% of households that were at risk of poverty were headed by somebody who was at work. Almost 50% of households at risk of poverty were found to be outside the labour market.
| Economic status | 2004 | 2005 | 2006 |
|---|---|---|---|
| At work | 29.8 | 31.1 | 29.5 |
| Unemployed | 12.0 | 13.1 | 14.7 |
| Students and school attendees | 2.8 | 4.8 | 4.6 |
| On home duties | 28.0 | 25.4 | 30.7 |
| Retired | 13.5 | 11.4 | 8.5 |
| Ill or disabled | 12.0 | 12.6 | 11.5 |
| Other | 1.9 | 1.7 | 0.7 |
| Total | 100.0 | 100.0 | 100.0 |
Source: CSO, 2007
1.3. Please outline the main findings of any research studies which have been undertaken in your country on the working poor or on low pay, more generally, and what they reveal about the characteristics of the people concerned and the jobs that they do and how these might be changing over time.
Ireland’s independent ESRI has published research relating to the characteristics of the working poor. The most comprehensive study to date by ESRI researchers in this area is probably the study entitled Bust to boom? The Irish experience of growth and inequality (Nolan, O’Connell and Whelan, 2000).
According to the ESRI, the characteristics distinguishing low-paid employees from other employees in Ireland are similar to elsewhere. Part-time employees face a significantly higher risk of being low paid than those employed full time. Employees under the age of 25 years also face a much higher risk of being low paid than those aged 25 years or over. There is no difference in risk between men and women under 25 years of age. However, women above this age face a substantially higher risk of being low paid than men, with married women being particularly vulnerable to low pay. The risk of low pay is also closely linked to levels of educational attainment and skills, although this varies by age. There is strong evidence of a widening gap between those who are more and less skilled and educated. Almost half of low-paid persons in Ireland have attained a Leaving Certificate or higher level of qualification, but many of these relatively highly qualified workers are aged between 18 and 24 years. The risk of being low paid also varies across industries and occupations, and is particularly high in retail and personal services.
The ESRI has examined the link between low pay and poverty in a number of studies, and concludes that the overall shape of tax and welfare policies is crucial for determining the nature of income distribution. In Chapter 10 of Bust to boom? The Irish experience of growth and inequality (2000), Callan and Nolan examine the implications of social welfare and taxation for poverty and income inequality. Moreover, in a report entitled Reforming tax and welfare (2001), Callan et al also examine the link between social welfare and low pay. According to the ESRI, it is important to note that the overlap between low pay and poverty in Ireland is weaker than often assumed. This is because many low-paid workers are not the only earner in their household. For instance, those who are on low pay may have a partner who has higher earnings. Consequently, only a small minority of low-paid persons are in households that would generally be identified as being poor. Many households characterised as poor do not have anybody working at all. This is a reflection of the tendency towards a polarisation between ‘work-rich’ and ‘work-poor’ households.
A research study published in July 2009 by the independent policy think-tank TASC – entitled The solidarity factor: Public responses to economic inequality in Ireland – observed that relative income inequality in Ireland has been heightened by precariousness. TASC argues that any assessment of income inequality must be paralleled by an assessment of income insecurity. The TASC study notes that the term ‘precariat’ refers to those in precarious employment: often underemployed, members of this group may find themselves in temporary or involuntarily part-time positions, working outside the tax and social insurance networks and/or working without documentation. In many cases, they are ‘self-employed’ – often having been let go by their employers and re-hired on a contract basis. In other cases, they may be employed through an employment agency, with little or no job security or access to sick pay, pension entitlements or other non-pay benefits. Their rates of pay are generally lower than those of the regular workforce and collective representation or negotiations can be difficult to achieve. Unsurprisingly, TASC notes that the ‘precariat’ is dominated by women. However, as the economic recession deepens in Ireland, women are likely to be joined by migrants, young people, those with low levels of educational attainment, and older people who are made redundant and may find it difficult to secure permanent employment due to a range of factors – including ageism and psychological barriers to upskilling or retraining. The growth of employment precariousness in Ireland has created a new division between the majority of workers in relatively secure employment with attendant rights and benefits, and a growing group of people struggling to earn a living on the fringes of the workforce. As well as employment insecurity, this group must often contend with low wages and non-existent benefits.
2. Policies towards the working poor
2.1 Is the issue of in-work poverty seen as an important problem in your country for the government to address? Has the issue become more or less important in the policy debate over recent years? To what extent is there seen to be a conflict between reducing the number of working poor in your country and increasing the number of people in work?
Yes. The issue of in-work poverty has become more important in Ireland’s policy debate in recent years. A certain level of conflict has arisen in terms of competing priorities between reducing the number of working poor and increasing the number of people in work. The priority of employers and the government has been focused on increasing the number of people in work. Trade unions and the social pillar have also agreed that it is important to increase the number of people in employment, but have argued that Ireland’s model of peak-level social partnership could go further in terms of achieving social and redistributive goals – in particular, reducing the number of working poor. Overall, it is evident that the Irish model of social partnership – which has been largely based on a wage moderation/tax reduction trade-off – has been primarily geared towards economic growth and employment creation rather than any re-distributive function – as implied by the term ‘competitive corporatism’.
2.2 What kinds of policy have been devised to address the working poor issue in your country? On which particular area have national policies tended to focus: labour market, social protection, fiscal policy or some combination of these policy areas? Which particular groups are policies targeted at: workers, employers, families?
A combination of policy measures has been adopted in Ireland to address the working poor issue. Such policies include changing the tax system or moving to a system of tax credits, increasing the national minimum wage, maximising job creation, and increasing social welfare benefits. Policy measures have been targeted at various groups, such as workers and families.
2.3 Please describe the main measures taken for improving the income situation of the working poor. Are there any fiscal measures in place, in the form of tax credits, or in-work benefits more generally, for maintaining or raising the income of those in employment with low earnings? Are there any social transfer schemes in place to ensure that income of households exceeds a minimum level, even if the people in the household are in work? If so, please outline their main features, including whether or not they apply to the self-employed as well as employees.
In recent years, one of the main measures introduced in Ireland to improve the income situation of the working poor is the system of tax credits. All ‘pay as you earn’ (PAYE) taxpayers are entitled to a tax credit known as the PAYE Tax Credit. This was worth €1,830 in 2009. Another important fiscal policy measure aimed at the working poor was to remove those earning the national minimum wage and below from the tax net. A further significant policy measure has been to increase the amount of in-work social welfare benefits availed of by some of the working poor population. For instance, where their working hours dip below a certain threshold, workers are entitled to supplementary income support, depending on their contributions.
2.4 Please assess the role minimum wage legislation plays in limiting the number of working poor. Please indicate the nature of the regulation (statutory/legislative/collectively agreed/sectoral) in your country and how the minimum wage varies between different groups of worker.
Initially, Ireland’s statutory minimum wage was set by the National Minimum Wage Commission in 1999–2000. Subsequent increases were then negotiated between the social partners under successive peak-level social partnership agreements. However, since 2005, the Labour Court has recommended appropriate rises in the national minimum wage, and this is rubber-stamped by government. Ireland’s current national minimum wage is €8.65 an hour, which works out at €337.35 a week and €1,461.85 a month. Workers under 18 years of age receive 70% of the full adult rate; younger workers, just over 18 years of age, and those undergoing apprenticeship receive between 75% and 90% of the full rate.
In terms of the impact that the national minimum wage has had on limiting the number of working poor, in a survey on the impact of the minimum wage published in 2003, the ESRI estimated that 57,000 persons or 4.5% of those employed in private sector non-agricultural companies were earning the minimum wage. The percentage of workers earning the minimum wage rate decreased substantially from 21% in 1999 to 4.5% in 2002. An earlier comprehensive joint study by the ESRI and the National University of Ireland Maynooth (NUIM), which was funded by the government, examined the impact of the minimum wage. The study – entitled A follow-up study on the impact of the minimum wage in Ireland (Nolan et al, 2001) – concluded that as few as 5% of employees had their pay increased as a direct result of the introduction of the minimum wage. Crucially, the authors argue, tight labour market conditions and labour shortages were more significant factors behind wage increases, reducing the incidence of the working poor in many low paying sectors, as unemployment dropped sharply from the late 1990s. The study found that as many as 81% of employers claimed that they would have increased wages to attract or retain workers, regardless of the minimum wage.
The impact of the national minimum wage in reducing the numbers of working poor is mainly limited to specific sectors. The percentage of employees who had a wage increase as a direct result of the minimum wage varied from sector to sector, according to the ESRI study. It was highest in the retail industry (11.6%), followed by hotels, restaurants and bars (8.9%), and textile manufacturing (7%). These are traditional low paying sectors, which one would expect to be most affected by the minimum wage. Here, the impact of the national minimum wage on the working poor has been most significant. The figures for other sectors included wholesale (5.1%), non-textile manufacturing (2.7%), banking and finance (2.4%) and construction (0.8%).
Only 2.5% of people in companies with over 100 workers were directly affected by the minimum wage. This is an indication that many large companies pay above the minimum wage anyway. In companies with between four and 100 workers, 7% to 8% of workers were directly affected by the minimum wage. Four times as many workers in indigenous Irish-owned companies were affected by the minimum wage than in foreign-owned multinationals, where wages often tend to be higher.
According to the ESRI, most families benefitting from the minimum wage are in fact in the middle-income distribution range.
2.5 How effective are the policies in place for reducing the number of working poor? Please refer to any survey, research studies or policy evaluations which have been undertaken to assess the measures in place.
ESRI researchers have examined the impact of various options aimed at providing so-called in-work benefits to the low paid – such measures seek to reduce income inequalities, while increasing the incentive for people to take up, or remain in, employment. The ESRI suggests that careful tweaking of the tax system and a greater use of refundable tax credits may be of most benefit to households close to the poverty line. Making all current tax credits refundable, regardless of whether the recipient actually pays tax, is regarded by the ESRI as an effective way of directing resources towards those on low incomes and reducing the number of working poor.
See 2.4 above for ESRI studies on the impact of the national minimum wage on reducing the number of working poor.
Most recently, the aforementioned survey published by the Irish policy think-tank TASC, on 6 July 2009, claims that 85% of respondents believe that wealth is distributed unfairly in Ireland – this constitutes a 15 percentage point increase over 2008 figures. The same survey indicated that 85% of respondents believe that the government should take active steps to reduce the gap between high and low earners. The survey, carried out by the market research agency Behaviour & Attitudes on behalf of TASC, also showed that 77% of respondents were concerned about high levels of wealth inequality in Ireland. Launching the survey results, the Director of TASC, Paula Clancy, commented:
Economic inequality is endemic in Ireland. According to the most recent available figures, the top 1% of the Irish population owns 20% of the nation’s wealth, and last year the disposable income of the top 10% was nearly 13 times that of the bottom 10%. It is clear from our survey that the vast majority of Irish people not only believe that wealth is unfairly distributed in Ireland, but are also concerned at high levels of wealth inequality. We asked the same questions in our 2008 Inequality Survey, and it is noteworthy that – as the recession bites and people become increasingly concerned about their own economic future – there has been a significant increase (15 percentage points) in the number of people who feel wealth is distributed unfairly.
Commenting specifically on the effectiveness of policies in Ireland for reducing the number of working poor, the TASC report concludes that:
during the boom years, Ireland failed to address the structural causes of poverty and inequality, which are reasserting themselves as Ireland moved into a deep recession.
3. Attitudes of the social partners to the working poor
3.1 What is the attitude of the social partners in your country to the issue of in-work poverty? Is there any debate on the relative priority to be given to the quality of jobs and working conditions as against the quantity of jobs? What has been the impact of the present recession on their positions and on the actions taken towards reducing in-work poverty?
The trade unions believe that both the quality and quantity of jobs are important priorities. Employers have emphasised the importance of attracting high-quality high-value added jobs. Nevertheless, on balance, the employers tend to lean more towards maximising the quantity of jobs. The impact of the economic recession – which has hit Ireland particularly hard, with unemployment rising to 12% in July 2009 – has changed the labour market context dramatically. As a result, the emphasis is now on preserving jobs. In this context, the trade unions and employer organisations have urged the Irish government to divert resources spent on social welfare benefits to keeping people in jobs and to retraining workers.
3.2 Do trade unions have explicit policy proposals for reducing the number of people on low wages? If so, please outline the main features of these. Do such proposals include complementary schemes on healthcare, pensions and family support to help increase the effective income of workers? Do trade unions see a specific role for themselves in implementing and managing such schemes? What level of importance is attached to reducing the number of working poor in relation to creating more jobs or keeping more people in employment?
Yes. The trade unions have explicit policy proposals for reducing the number of people on low wages. In particular, they prioritise the national minimum as an important measure for helping the working poor, as well as the reform of in-work social welfare entitlements, keeping minimum wage earners out of the tax net, enhancing workers’ skills and training, and organising workers collectively into trade unions to prevent the downgrading of wages.
Through peak-level social partnership, trade unions in Ireland see themselves as having a central policy role in reducing low wage work. As part of its own ‘10 point’ solidarity plan for dealing with the economic recession, the Irish Congress of Trade Unions (ICTU) has for some time been calling for measures to protect jobs and tackle unemployment. According to ICTU, Ireland’s social welfare system must be radically altered and integrated with skills enhancement, education and training. In this respect, ICTU has called for greater engagement with the concept of ‘flexicurity’.
3.3 Do employers generally support measures for reducing the extent of in-work poverty? If so, indicate the principal measures they support and implement themselves such as respecting minimum wage levels, ensuring adequate basic rates of pay, paying suitable amounts for working overtime or in bonuses.
Although employers generally support measures for reducing the extent of in-work poverty, there are important differences. For instance, associations representing small companies have, in particular, voiced strong opposition to the minimum wage. Ireland’s largest employer organisation, the Irish Business and Employers’ Confederation (IBEC), was originally opposed in principle to the concept of the minimum wage, even though the majority of its affiliates pay above the rate. IBEC has since pragmatically accepted the minimum wage. However, particularly since the onset of the economic recession, concerns are growing among IBEC, other employer organisations and individual employers that the current minimum wage of €8.65 could further undermine competitiveness by keeping labour costs at too high a level.
In the context of recession, employers are in general increasingly seeking to cut pay levels and bonuses, impose pay freezes, and question the validity of existing systems of pay determination – such as in relation to the Joint Labour Committees setting minimum pay and conditions in low pay sectors. However, it is important to note that not all employers are seeking to downgrade pay and conditions.
Prior to the economic recession, IBEC felt that significant progress had been made in improving the fortunes of the low paid. The confederation believed that strategies aimed at creating ‘good’ high value-added jobs and moving towards a knowledge economy are important elements in reducing low pay. IBEC has also emphasised the importance of upskilling employees for improving their employment prospects and employability. However, IBEC suggests that a certain degree of low pay is inevitable, given that there is a mix of employment across the economy, as well as varying skill levels. IBEC also believes that tax cuts or tax credits for low earners have also helped to improve the position of low-paid workers.
4. Effect of current economic recession on in-work poverty
4.1 Is there any evidence that the number of working poor has tended to increase during the present recession (as a result of a reduction in wages and/or working time)?
Yes. A clear trend is emerging whereby large numbers of employers are reducing or freezing wages, reducing working time or introducing short-time working, or making people redundant. Nonetheless, this is not the case everywhere. The working poor are in a particularly vulnerable position in the context of Ireland’s current deep recession, given that many are in precarious employment, as noted in the aforementioned TASC report. As a result, the number of working poor has tended to increase since 2008.
4.2 Have any surveys or studies been launched since the crisis started to assess the effect on the working poor and to monitor the numbers involved? Please give details of such surveys or studies (their objectives, the approach adopted, the institution in charge, the main findings and so on).
Yes. The TASC think-tank report published on 6 July 2009 considers the impact of Ireland’s recession on the working poor. According to TASC, with the onset of the economic recession, many of the working poor are struggling to make ends meet. TASC argues that, in reality, Ireland was and is a low-waged economy, with private sector wages ranking 11th out of the original 15 EU Member States (EU15). However, this figure conceals gender and other disparities: half of all women, who make up nearly 40% of the private sector workforce, earn below €12.34 an hour, while half of those aged under 25 years earn less than €10 an hour. TASC does not have data on migrant wages, but says it is reasonable to expect that migrants may also earn substantially less than the already low median private sector wage. Half of the entire private sector workforce in Ireland – encompassing about 600,000 workers – earns substantially below the average industrial wage. Many people in this group have incomes at or just above minimum wage level. The working poor are being hit hard by the decline in unskilled employment, especially in the retail, hotel and catering, and construction sectors. To tackle income inequality, TASC concludes that public policy measures to reduce economic inequality would inevitably need to involve stronger redistributive mechanisms – these could include some combination of increased taxation together with improved social transfers.
As mentioned, the survey was conducted by the Behaviour & Attitudes agency on behalf of TASC. The survey results were based on a sample of 1,000 respondents, which was quota controlled to reflect the profile of the adult population in the Republic of Ireland. All interviews were carried out by trained members of the Behaviour & Attitudes field force from 1–10 May 2009. Interviewing was conducted on an in-home, face-to-face basis.
4.3 Have any policy measures been taken to reduce the possible effect of the recession on the working poor?
Many commentators have noted that the Irish government has been slow to react to the current economic crisis, in terms of developing appropriate policies to reduce the impact of the recession. Initially, the government was struggling to grapple with the crisis affecting the Irish financial system, which meant that policies for maintaining employment did not receive much attention. In 2009, the government and the social partners discussed a jobs plan designed to maintain employment. However, as things stand, the initial jobs proposal looks quite small in scale. A €250 million employment subsidy scheme is planned, which seems initially to be targeted at saving some 30,000 existing jobs. Trade unions and employers had jointly called for a €1 billion jobs plan, but the government has given no firm commitments on this amount of funding.
5. Commentary
Up until 2008, the combination of an impressive job creation record, very low unemployment, the introduction of a national minimum wage, significant pay gains for low-paid workers, and tax cuts/tax credits targeted at low paid workers undoubtedly contributed to an improvement in the absolute position of low-paid workers in Ireland. For instance, the level of consistent income poverty declined. In short, the absolute position and living standards of low-paid workers improved somewhat between 2000 and 2008, as the minimum income floor was raised, social welfare rates increased, the low paid were taken out of the tax net, tax credits were introduced, and employment became much easier to find in a tight labour market.
Crucially, however, real income gains at the bottom of the income ladder may still have been experienced as inadequate when expectations are fuelled by the experience of seeing those higher up on the income ladder doing much better – particularly given that the cost of living in Ireland became so high in many areas. In view of this, as the economic boom gathered pace, there was an overall increase in relative income inequality, in the sense that the relative gap between high and low income earners widened. Indeed, measured by relative income poverty, Ireland is one of the most unequal societies in the developed world.
With the boom years now behind, the economic recession that hit Ireland particularly badly from 2008 is having an especially negative impact on the ‘working poor’. Large numbers of already precariously employed low-paid workers have subsequently become unemployed since the onset of the recession, with unemployment rising rapidly to 12% as of July 2009. Others have faced pay freezes or cuts, along with income levies and tax rises. Trade unions and various anti-poverty groups are fighting a rearguard action to defend the ‘working poor’ from job losses, pay cuts and social welfare reductions. The unions and Ireland’s main employer organisation, IBEC, have jointly called for a €1 billion plan to maintain jobs; however, the government has initially only committed to a small-scale €250 million jobs plan aimed at maintaining 30,000 existing jobs.
In terms of the current general policy direction of the Irish government, it seems inclined towards what some observers define as an ad hoc ‘slash and burn’ approach to cutting public spending. Such an approach could take further purchasing power out of the economy as deflation takes hold, and exacerbate an already serious unemployment situation. The government shows few signs of following the United States, United Kingdom, or continental European ‘Keynesian’ stimulus option of borrowing to invest in areas such as public works programmes or infrastructure, in order to ‘pump-prime’ the economy and inject much needed demand at a time of recession. The government has expressed concerns about the level of additional debt that would be incurred if it borrows heavily. Thus, influenced by the inclination towards the former deflationary policy direction, the prospects facing the working poor in Ireland seem to be gloomy for the foreseeable future.
References
Callan, T. et al, Reforming tax and welfare, Dublin, Economic and Social Research Institute (ESRI), 2001.
Central Statistics Office (CSO), EU Survey on Income and Living Conditions (EU-SILC) 2006 (280Kb PDF), Dublin, CSO, 2007.
Conference of Religious in Ireland (CORI), ‘CORI justice claims the working poor are among Irelands most vulnerable and should be protected’, News release, Dublin, CORI, 2008.
Nolan, B., O’Connell, J. and Whelan, C., Bust to boom? The Irish experience of growth and inequality, Dublin, Institute of Public Administration, 2000.
Nolan, B., O’Neill, D. and Williams, J., A follow-up study on the impact of the minimum wage in Ireland (278Kb PDF), Report for the Department of Enterprise, Trade and Employment, 2001.
TASC, The solidarity factor: Public responses to economic inequality in Ireland (118Kb PDF), 2009.
Whelan, C.T., Layte, R., Maître, B., Gannon, B., Nolan, B., Watson, D. and Williams, J., Monitoring poverty trends in Ireland: Results from the 2001 Living in Ireland Survey, Dublin, ESRI, 2003.
Tony Dobbins, Centre for Innovation and Structural Change (CISC), NUI Galway