On July 27th, just two weeks ago, the Irish Times reported that the hospitality sector, which is in the process of re-opening its doors to customers, is facing an “acute labour shortage”:
Indoor service in restaurants and pubs resumed on Monday after months of closure because of Covid-19 restrictions. Industry participants said the availability of PUP payments had contributed to a labour shortage made worse by some workers securing jobs in other sectors and non-Irish-national staff leaving the State.
Then yesterday, the Irish Examiner chimed in with the news that the Government intends to increase the basic social welfare rate in the forthcoming budget, while there will be no room for reductions in taxation:
The Government is considering increases in headline social welfare rates as well as the need to cut borrowing as budget discussions begin across departments.
Now, obviously, the Pandemic Unemployment Payment and the basic social welfare rate are not the same thing. The PUP was introduced to assist people who were working, and put out of a job by the Government’s decision to lock the country down over Covid. The Social Welfare rate, by contrast, is designed as the absolute floor level standard of living available to a person who cannot find, or does not wish to find, a job.
Nevertheless, the principle for both payments is the same: People receive money from the Government for doing nothing. A sentence like that will be described, no doubt, as offensive, by some. But it is factually correct.
A good social welfare system, then, should discourage people from making use of it. As somebody who, in my mid twenties, spent a brief time on the dole (at a time, in the great recession, when the rates were significantly lower than they are now), yours truly can attest to the fact that being on social welfare is not a pleasant experience. That’s how it should be, though: The rewards for working should always be much, much, greater than the rewards for not working at all.
Is that true in Ireland today? Not if you listen to the hospitality sector.
This is not a matter of wishing to punish the afflicted, or take money away from those in need. It is a simple matter of figuring out what the best policy for the country is. Unless and until you increase the dole to a level where it is the same as being in employment, being on the dole will never be a pleasant experience. But every time you do increase the payment, the incentive to get a job reduces, and fewer people will seek work.
By contrast, every time you reduce taxes for the low paid, the marginal reward for getting a job goes up.
In a situation where there are no jobs, increasing the dole makes sense, to alleviate the suffering of those who are out of work because there are not enough jobs to go around. But on the other hand, when there are jobs available, and people are not willing to take them, increasing the dole at the expense of tax cuts makes no sense at all, because we should be wanting to make working more attractive, not less.
Ireland has a very generous social safety net. For those who cannot afford housing, the state provides subsidised housing. We provide child benefit. And disability benefit. And social welfare. And a weekly pension payment for the elderly that is the second highest in the EU.
By contrast, Ireland has some of the highest marginal tax rates on work in the EU. By comparison to our EU partners and friends ™, Ireland has one of the social welfare systems that is hardest on those who work, and most generous to those who do not.
So why, then, the rush to increase it even further?
In part, of course, the answer is because Politicians have been absurdly useless at pointing out to the public that our welfare system is already generous, and our tax rates already high. In part, too, because nobody ever lost votes calling for more money for the elderly or the unemployed. And in part because taxpayers have never organised here, as they have in other countries, to make taxes an issue.
But this is not a matter of taking from the rich to give to the poor. In fact, the more you shove up welfare rates, the more you keep people in poverty, by discouraging work. As we can see in Ireland, we have a labour shortage. Why on earth, then, would we give more money to people not to work?