The importance of Social Welfare in addressing poverty

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Social Justice Ireland believes in the very important role that social welfare plays in addressing poverty. As part of the SILC results the CSO has provided an interesting insight into the role that social welfare payments play in tackling Ireland’s poverty levels. It has calculated the levels of poverty before and after the payment of social welfare benefits.

Table 1 shows that without the social welfare system just over 4 in every 10 people in the Irish population (41.4 per cent) would have been living in poverty in 2019. Such an underlying poverty rate suggests a deeply unequal distribution of direct income. In 2019, the actual poverty figure of 12.8 per cent reflects the fact that social welfare payments reduced poverty by 28.6 percentage points.

Looking at the impact of these payments on poverty over time, the increases in social welfare over the period 2005-2007 yielded noticeable reductions in poverty levels. The small increases in social welfare payments in 2001 are reflected in the smaller effects achieved in that year. Conversely, the larger increases, and therefore higher levels of social welfare payments, in subsequent years delivered greater reductions. This has occurred even as poverty levels before social welfare increased.

A report by Watson and Maitre (2013)[1] examined these effects in greater detail and noted the effectiveness of social welfare payments, with child benefit and the growth in the value of social welfare payments, playing a key role in reducing poverty levels up until 2009. The CSO have also shown that in 2009 poverty among those aged 65 and older reduced from 88 per cent to 9.6 per cent once social welfare payments were included. The same study also found that social welfare payments (including child benefit) reduced poverty among those under 18 years of age from 47.3 per cent to 18.6 per cent – a 60 per cent reduction in poverty risk (CSO, 2010:47)^[2].

These findings, combined with the social welfare impact data in table 1, underscore the importance of social transfer payments in addressing poverty; a point that needs to be borne in mind as Government forms policy and priorities in the years to come.

Many of the groups in Irish society that experienced increases in poverty levels over the last decade have been dependent on social welfare payments. These include pensioners, the retired, lone parents and those who are ill or have a disability. Table 2 presents figures for the risk of poverty facing people when they are classified by their principal economic status (the main thing that they do). These risk figures represent the proportion of each group that are found to be in receipt of a disposable income below the 60 per cent median income poverty line.

In 2019 the groups within the Irish population that were at highest risk of poverty included those permanently unable to work due to illness or a disability and the unemployed. Over one in four classified as being “on home duties”, mainly women, have an income below the poverty line. The “student and school attendees” category represents a combination of individuals living in poor families while completing their secondary education and those attending post-secondary education but with low incomes. Table 2 also reveals the groups which have driven the overall reduction in poverty over the period (falling from 19.4 per cent in 2004 to a record low of 12.8 per cent in 2019). Comparing 2004 and 2019, the poverty rate has fallen for all groups although the big changes have been for those on home duties, those unable to work due to illness or disability and the retired.

Source: CSO online database.

Table 3 presents the results of an analysis of five key welfare recipient groups performed by the ESRI using poverty data for five of the years between 1994 and 2001. These were the years that the Irish economy grew fastest and the core years of the ‘Celtic Tiger’ boom. Between 1994 and 2001 all categories experienced large growth in their poverty risk. For example, in 1994 only five out of every 100 old age pension recipients were in poverty. In 2001 this had increased ten-fold to almost 50 out of every 100. The experience of widow’s pension recipients is similar.

Source: Whelan et al (2003: 31)[3].

Table 3 highlights the importance of adequate social welfare payments to prevent people becoming at risk of poverty. Over the period covered by these studies, groups similar to Social Justice Ireland repeatedly pointed out that these payments had failed to rise in proportion to earnings and incomes elsewhere in society. The primary consequence of this was that recipients slipped further and further back and therefore more and more fell into poverty. In 2021, as we plan future budgetary priorities, it is important that adequate levels of social welfare be maintained to ensure that the mistakes of the past are not repeated.

[1] Watson, D, and Maître, B. (2013). ‘Social Transfers and Poverty Alleviation in Ireland: An Analysis of the CSO Survey on Income and Living Conditions 2004 – 2011’, Social Inclusion Report No. 4. Dublin: Department of Social Protection/ESRI.

[2] This data has not been updated in subsequent SILC publications.

[3] Whelan, C.T., R. Layte, B. Maitre, B. Gannon, B. Nolan, W. Watson, and Williams, J. (2003) ‘Monitoring Poverty Trends in Ireland: Results from the 2001 Living in Ireland Survey’, Policy Research Series No. 51. Dublin: ESRI.