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 sample 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 pay increase as a means of offsetting the effect of higher prices, improving the Social Wage can bring down the cost of living for workers and their families.
The Social Wage is a measure of how much better off you are from social spending by government on 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, few full-time workers 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 and free travel for everyone over 66.
In other EU countries, access to public services is based on need. If you have a child and a job, you need childcare. You are therefore eligible for heavily subsidised public childcare services, irrespective of the size of your pay packet.
As a result, a worker in Ireland earning a very modest wage must pay market prices for essentials that 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 one in seven of all people in employment aged 18-64 hold a Medical Card and a mere one in 28 hold a GP Visiting Card.
Government can ease this unnecessary squeeze on wages by 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 pay slip 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 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’ standard of living and has sparked wide public support (70%) for government to do more.
Now is the moment for a radical change in the role of government in protecting the general population’s living standards against social risks, including expanding access to affordable housing, child and adult care, free healthcare and education, 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 this otherwise desperately unhappy experience can be a more generous Social Wage for workers and public services for all.
Dr Laura Bambrick is Head of Social Policy and Employment Affairs at the Irish Congress of Trade Unions. ICTU is the umbrella body for 45 unions together representing the interests of some 700,000 workers on the island in all sectors of the economy.
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