Friday, August 14, 2009

Economics 14/08/2009: Irish welfare rates - Part II

I grew tired of, honestly, of the bull surrounding the OECD stats on social welfare. So I crunched through the data, available from their database on the subject. The link to this data is here.

Tables below rank Irish welfare payments as per the percent of the Average Production Wage (average wage in manufacturing for production & maintenance workers). Rankings are given for EU and OECD as a whole, comparing these in 2001 and in 2007 - the latest year for which data is available.

First Tables:

So, of course, 1 above refers to Ireland being ranked the country with the highest level of benefits for the specific type of welfare assistance or unemployment assistance received.

That is bad enough? Oh, I also looked through the OECD methodology. And what I found confirmed exactly what I was saying before in yesterday's post:
  • Only cash incomes are considered, so no in-kind benefits, e.g health cards were factored in;
  • Average wage was not accounting for childcare costs despite welfare recipients having that taken care of;
  • Only income taxes and own social security contributions, so no health levy was factored in;
  • Housing costs, childcare costs and any other forms of “committed expenditure” are not deducted when computing net incomes. Nor are they counted on the 'income' side as benefits-in-kind for welfare recipients;
  • As benefits included in the calculations exclude benefits “in-kind”, free school meals, subsidised transport, free health care, etc. are not included. Occasional, irregular or seasonal payments (e.g. for Christmas or cold weather) are not included. Also excluded are benefits strictly related to the purchase of particular goods and services (other than housing or childcare as described below), reduced price transport or purchase of domestic fuel or the purchase of medical insurance and prescriptions;
  • Cash benefits excluded are: old-age cash benefits, early retirement benefits, childcare benefits for parents with children in externally provided childcare, sickness, invalidity and occupational injury benefits and benefits relating to active labour market policies;
  • Subsidies for the construction of housing, purchases of owner-occupied housing, subsidies for the interest payments on owner-occupied housing, and other similar payments are not included. Similarly, the assumption of living in private rental accommodation means the benefits in kind provided by social housing, usually involving rents below the market rate, are not taken into account in the comparative tables;
  • It is assumed that families live in privately rented accommodation and the level of rent for all family types regardless of income level and income source is 20% of the gross earnings of an average production worker. In Ireland today this means that OECD figures only account for maximum of €565 per month per household. Real levels of subsidy in Dublin would require a minimum of €750-800 pm for one bedroom property and over €1,000 for two-bed rental ( figures on rental properties). Thus OECD underestimating Irish welfare recipients' housing assistance by a factor of 2.
Taking into account these omitted variables, my figures from the earlier post show that pretty much anyone working in lower grades of all sectors in Irish economy would be better off on social welfare.

I stress, again, that my assertion concerns people on social welfare. It does not cover people on unemployment assistance.

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