It's Time to Discuss a New Future for Income Supports

Michael Taft

Michael Taft is a researcher at the trade union SIPTU, and author of the political economy blog "Notes on the Front".


When the emergency passes, there’ll be lessons to draw.

How do we support people through times of need? How can we bring about social and economic security? What are the most efficient mechanisms to achieve this? It is not too early to start that conversation.

Some are turning to Universal Basic Income (UBI) – a universal payment made to every adult regardless of income or employment status – as a possible model for a post-Covid-19 world.

Most models put the basic payment at €203 per week – the level of most working-age social protection payments, such as unemployment benefit. All income above that would be taxable.

Upsides to a UBI include the creation of a universal income floor to replace our social protection system with its numerous means-tested programmes. Further, it challenges the idea the people would become idle if given financial security.

The few UBI pilots that have been done have indicated increased economic activity, improved health outcomes, and return to education – but results were mixed.

There are some downsides. First, it would be extremely costly, necessitating high tax rates. Second, it would not be able to target some income supports as effectively as social insurance.

And third, as many proponents say, UBI would be transformational. If it turned out to be a failure – and as no country has adopted such a system, there are no real-world examples – it would be as costly to undo as it had been to bring in.

Ultimately, debates around post-emergency income supports need to go beyond a simple argument of whether UBI is a good idea or not. A better approach would be to build on what we have, adapt best practice from other countries and use those principles from UBI that are affordable and effective.

Insuring the Social

From the outset, the government accepted that the existing Illness Benefit was flawed.

Before Covid-19 struck, you had to be sick for a week before you could access Illness Benefit. Payments were relatively low. Many people couldn’t afford to go sick – unless they were in the minority covered by an occupational sick-pay plan.

Now the government has now abolished the six-day waiting period and bumped up the benefit from €203 to €305 per week while the emergency goes on. It’s only for Covid-19-related illnesses, mind.

This compares poorly with other EU countries. In Germany, employers pay 100 percent of an employee’s wage during the first six weeks of illness and the state pays 70 percent of their wage for up to a year. In Denmark and Norway, workers receive 100 percent of their wage for the full year.

It’s not just for illness that people get more. In many EU countries, women receive 100 percent of their pay in Maternity Benefit. In Ireland, they get a flat-rate of €245 a week, which comes to less than a third of the average earnings of a full-time employee.

Again, in other EU countries, unemployment benefit can make up to 75 percent of previous earnings. In Ireland, it is a lowly €203 per week. At the time of writing, it appears that the government intends to increase unemployment benefit during the emergency – another admission of the weakness of our social protection system.

Ireland is an outlier in Europe, with a social protection system based on poverty amelioration rather than being truly social, protective and comprehensive.

There is a clear, feasible route to change, though. An enhanced social insurance (PRSI) system could turn these benefits into pay-related payments. If someone becomes temporarily unemployed or ill, or if a household is starting or extending a family or needs to temporarily care for a child or an elderly relative – these are instances where their income needs to be fully supported. Such situations are stressful enough.

The last thing people need is the added worry of meeting bills, rent or a mortgage.

Social insurance is not a tax. It is part of an employee’s compensation package. The employer pays a direct wage to the employee and a social wage (employers’ PRSI) to the Social Insurance Fund, out of which these pay-related benefits would be made. The reason the Irish social protection is so weak is because the social wage is low.

We wouldn’t have to increase the social wage to the EU average – given that we have fewer pensioners – to roll out pay-related income supports for households. While obviously we would need to wait until the economy has fully recovered, a crucial step in providing financial security would be to insure people against income loss through an enhanced social wage.

A Fairer Bargain

The current emergency shows that the benchmark of a successful business is not necessarily the bottom line. Profits can be quickly wiped out by external events.

Rather, businesses that are shared between owners, management and employees, working together to produce the goods and services – the value-added – are the ones best-placed to survive and prosper over the long-term.

Unfortunately, the sharing comes up short for one of the main stakeholders: workers. But there’s a way to strengthen that too.

More than 20 percent are officially categorised as low-paid, well above the EU averages, with a higher percentage unable to access social benefits in the workplace such as sick pay, pensions, and maternity benefit top-ups.

(Though that figure – the most up-to-date comparative one available – is from 2014, the Irish rate of low pay has remained remarkably stable since 2000.)

Most workers are denied a voice in the operations of their company. We need a new agenda of respect in every workplace. The starting point is the worker’s right to collective bargaining. Ireland is one of the few industrialised countries that does not have this right enshrined into law. Collective bargaining allows employees to come together to bargain as one unit with their employers.

The great advantage is that it raises wage floors, reduces wage inequality and can reduce precarious work practices. This is of particular benefit to low and average income earners. It gives workers the ability to increase their influence in the workplace. It can also integrate both the direct and social wage into the pay-bargaining process.

We shouldn’t rely on state subsidies and welfare programmes to do all the heavy lifting to ensure financial security. That security should be introduced in the workplace itself.

A Minimum Income

In 2018, 37 percent of all households in Ireland were unable to meet an unexpected financial expense, defined as an emergency bill of up to €1,000, such as refrigerator replacement, roof or car repair, or the like.

This rises to 70 percent for those living in relative poverty, which is 15 percent of the population or about 700,000 people.

In 2018, more than half of households found it difficult to make ends meet. This is the very definition of precarious living.

One principle we can borrow from UBI is to introduce a minimum guaranteed income, which would benefit, first-off, households on low earnings.

We could transform personal tax credits – which constitute a tax cash subsidy of nearly €65 per week to people in the income-tax net – into a guaranteed income for all those in work. This would exclusively benefit those with low earnings – and in particular, part-time and precarious workers who cannot avail of these tax credits.

From that modest start we could increase this income floor over time and extend it out to others. Like to carers, and students.

This would be part of a general policy on raising income floors, and increasing long-term social protection payments to the Minimum Essential Living Standard as calculated by the Vincentian Partnership for Social Justice.

A New Normal

We don’t have to wait for the emergency to end to start discussing a new dispensation.

The last thing we need is to backslide into business-as-usual for want of an alternative.

Covid-19 has exposed the deficits in our income-support system. It has also revealed what can be achieved through the collective efforts of civil society.

A programme of enhanced social insurance, collective bargaining rights and a guaranteed income can become the basis for a new politics that ensures social and financial security for everyone with none left behind.

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Michael Taft: Michael Taft is a researcher at the trade union SIPTU, and author of the political economy blog "Notes on the Front".

Reader responses

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John Baker
at 26 March at 15:39

Once we're agreed that *everyone* has an unconditional *right* to an adequate minimum income, it's a matter of institutional design of how that can be achieved. The total social cost will be the same, regardless of the institutional arrangement, so I still think that the clearest way of achieving that is through a Universal Basic Income. https://my.uplift.ie/petitions/em…

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