Workers fare better in jobs than Covid supporters, says ESRI study

The majority of Irish people are doing better financially despite some households experiencing increased income due to supports linked to the pandemic, according to a new report from the Institute for Economic and Social Research (ESRI).

It is estimated that 1.18 million workers, or nearly a quarter of the Irish population or half of all workers, were either receiving the Pandemic Unemployment Payment (PUP) or a wage subsidy, or were on the Live Register in April of last year, according to figures from the Central Bureau of Statistics (CSO) Show.

While the impact of Covid-19 has resulted in widespread job cuts and reduced corporate income across many sectors, the ESRI report (Covid-19 and the Irish Social Protection System) estimates that if support for the income, such as the PUP and the Workplace Wage Subsidy (EWSS) program were not introduced, “pandemic-related unemployment would have reduced household income by 7 percent”.

As a result of these measures, the Institute says the actual declines in household income were around 3 percent, with the greatest impact being felt by those with higher incomes.

Income gains

Dividing households into five groups, or income quintiles, the report adds: “Families in the lowest income quintile actually experienced small income gains compared to the pre-Covid scenario due to the higher rate. generous PUP. “

More than a quarter of people (26%) in the third quintile have seen their incomes drop due to the pandemic, of which 20% have noted a drop of more than a fifth in their income.

Those in the fourth trimester were the second most affected cohort, with 19% of them being negatively affected, of which 15% suffered a stroke of 20% or more.

Taking into account two measures used to assess whether workers would be better off financially if they continued to receive income supports or returned to employment, ESRI found that this was only the case for a small percentage. Population.

Analyze the replacement rate (TR), which gives a person’s inactivity income as a percentage of their earned income (a higher percentage means that they have less incentive to forgo child support in favor of work ), “About 5 percent of individuals have an RR greater than 100 percent once PUP is introduced – that is, no financial incentive to work,” the report says.

While an additional 15% would have a “high” RR rate of over 75%, ESRI points out: “Financial incentives are not the only types of work incentives and that a substantial number of people do. would be better off not working financially, choose to do it anyway. “

The report adds: “The availability of the PUP, while increasing income support for people in the middle and upper parts of the income distribution, weakens financial incentives to work.

“Despite this, 85% of those we are faking losing their jobs due to the pandemic have an RR of 75% or less, which means there are still financial gains to be made by working.”

young people

The research pays particular attention to the impact of Covid supports on young people, as many young workers would not have been entitled to existing income supports, Jobseeker’s Allowance (JSA) and Jobseeker’s Allowance (JSB), due to the lack of PRSI contributions.

Full-time students are also not eligible for the JSA or JSB, with the report stating: “34 percent of PUP beneficiaries under the age of 25 (or 8 percent of total PUP beneficiaries) were enrolled as full-time students “.

While research shows that unemployment in younger cohorts is much higher than in the general population, reaching almost 64% in April 2020 and remaining close to 60% in recent months, the lack of criteria for resources and taking into account previous social insurance contributions has enabled young workers with “short and unstable employment history” to benefit from support measures.

Analyzing the decreases in income by age, 20 percent of the 25-34 age cohort faced reduced earnings, of which 72 percent experienced a decline of more than a fifth.

The Great Recession showed us that certain groups, especially young people, can feel the effects of unemployment for many years.

The total number of people affected by the income cuts was slightly lower for 18-24 year olds (19 percent), however, a whopping 91 percent of those workers saw a reduction of more than 20 percent.

ESRI notes that despite the easing of restrictions allowing many employees to return to work, “unemployment is expected to remain high in 2021 and 2022.”

“The Great Recession has shown us that certain groups, especially young people, can feel the effects of unemployment for many years,” the report adds, stressing the need for greater support for young workers.

The report concludes that while some groups may appear slightly better off because of the supports, the incentives to return to work remain strong and will increase further when pandemic supports are phased out at the end of the year.

The report also points out that it may take time for income and working hours to return to pre-pandemic levels, and assistance may be needed for those in low-paid part-time jobs to ensure a standard of living maintained while encouraging a return. to work.