Here comes the welfare cuts

The Department of Finance has news dumped an analysis of “Replacement Rates and Unemployment” while everyone is waiting for the 12 Days of Christmas deal with the public sector unions to be finalized.  The replacement rate is defined as the percentage of potential disposable income in a job that could be retained by a household being in unemployment instead.  The analysis is of replacement rates available to various households based on some characteristics drawn from representative data.  It’s done for various household types including single, single parent, married no children and married with children, and at wage levels for the potential worker ranging from minimum wage, 2/3 of average industrial wage, and industrial wage.  The threshold adopted is 70 percent i.e. that if a household can replace more than 70 percent of potential at-work disposable income via unemployment, it’s too high.  

The basic findings are that replacement rates are higher for minimum wage jobs than for higher up the scale (thus a disincentive to take a higher paying job, assuming you could find it) and that the availability of child benefit, rent supplement, and community employment scheme worsen the incentive to take a job, especially for single parent families. 

So if you’re trying to guess what’s going to be in the Social Welfare Bill that will be coming with the budget bill, those are the hints.  Incidentally, I don’t see any costing for childcare for working parents which of course makes these incentives even worse.   The preferred childcare provision incentive during the Celtic Tiger years was tax breaks for creches but that instrument is not so favoured any more. 

Anyway, the union beards are doing the best to act in the interests of public sector workers.  Who’s acting in the interests of the unemployed?