Ireland In-Work Poverty and Labour Market Segmentation
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www.peer-review-social-inclusion.eu Ireland In-work poverty and labour market Segmentation A Study of National Policies Mary Daly Queen’s University Belfast, UK Disclaimer: This report reflects the views of its May 2010 author(s) and these are not necessarily those of either the European Commission or the Member States. The original language of the report is English. On behalf of the European Commission DG Employment, Social Affairs and Equal Opportunities IRELAND Content Summary..................................................................................................................................................3 1. Presentation of the Current Situation – Statistical Overview .......................................................4 2. Main Causes of In-Work Poverty and Labour Market Segmentation: Literature Review .........10 3. Presentation and Analysis of Policies..........................................................................................13 3.1 In-work Poverty...................................................................................................................... 13 3.1.1 Low Net Wage ............................................................................................................. 14 3.1.2 Tax Credits for Low-wage/Income Workers ................................................................. 15 3.1.3 Social Benefits to Those on Low Wages...................................................................... 16 3.1.4 Low work Intensity ...................................................................................................... 17 3.2 Labour Market Segmentation................................................................................................. 19 3.2.1 Job Retention and Advancement................................................................................. 19 3.3 Working Conditions and “Employees' Friendly” Flexibility: Voluntary part-time, Parental leave, Atypical hours ........................................................................................................................ 19 3.4 Life-long Learning.................................................................................................................. 20 3.5 Non-Discrimination Policies and Inclusive Work Environments ............................................. 20 3.6 The Role of the Social Partners............................................................................................. 21 References.............................................................................................................................................22 2 IRELAND Summary While it hardly needs pointing out, one has to make reference at the outset to both the rapid changes that Ireland has been undergoing and the fact that there are major gaps in our knowledge about the impact of this. While official statistics are very helpful in illuminating some of these changes, there is always a time lag in getting underway the kind of detailed research needed to illuminate underlying causal relationships. Against this background, it should be noted, therefore, that much of the research reported here is based on the period of boom in Ireland and that the report was written in May 2010. Then, as now, detailed and timely research on the impact of the recession and the kinds of changes it has induced was unavailable. Ireland’s rate of in-work poverty, at 6 per cent in 2008, compares relatively favourably in the European constellation, being below average. It is a rate that has remained more or less stable over the recent period, not touched by the downward trend in financial poverty especially among the unemployed in the years preceding 2008. As regards the labour market, on the main indicators of labour market segmentation, Ireland is around the EU average. But it is clear that the Irish labour market has a significant share of low-quality employment. Gender segregation, both vertically and horizontally, continues to be a feature of the Irish labour market and has remained stable or stubborn in the face of the huge inflow of Irish women into the labour market in the last decade or so. In addition, mention must be made of the fact that the low wage traps in Ireland are higher than the EU norm for some sectors of the population (viz. one earner couples with two children). Labour market segmentation and in-work poverty have both been taken up by the policy making process in Ireland and indeed could be said to have been the subject of policy innovation. However, at the present time they are definitely not to the forefront of the policy agenda. The priority now is, first, getting the banks on a sustainable financial footing, then righting the country’s fiscal situation (with particular emphasis on cutting expenditure and public services) and, some considerable distance after that, reducing unemployment (although the unions accuse the government of not being sufficiently concerned about unemployment). To take an overview of the current general policy direction of the Irish government, it could and has been depicted as inclined towards an ad hoc ‘slash and burn’ approach to cutting public spending (Dobbins 2010). The Irish government shows few signs of following the US, UK, or continental European ‘Keynesian’ stimulus option of borrowing to invest in areas such as public works programmes or infrastructure, in order to ‘pump-prime’ the economy and inject much needed demand at a time of recession. Concerns about debt levels weigh heavily on the government framing of debate about the state of the economy. In particular, the response to unemployment has been muted. The trade unions and Ireland’s main employer organisation, IBEC, have jointly called for a €1 billion plan to maintain jobs; however, the government has initially only committed to a small-scale €250 million jobs plan aimed at maintaining 30,000 existing jobs. Furthermore, issues of job quality have received relatively little attention and have generally been downgraded in priority since the onset of the recession. The fact that social partnership is in limbo does not help here since it was the trade unions and the social pillars which championed issues of job quality and in-work poverty during the 20+ years of social partnership. 3 IRELAND However it is not just a matter of being pushed in the background. While Ireland has many of the right approaches in place, there are gaps and weaknesses also. Existing policies on job quality and in-work poverty need to be reframed in several respects. Furthermore, there are real gaps as regards monitoring, information and knowledge. Quality of employment has not been as important in Ireland as quantity of employment and this is reflected in the available information and the lack of clear definitions and indicators of in-work poverty and job quality indicators. 1. Presentation of the Current Situation – Statistical Overview In-work Poverty At the time of writing, the most recent available figures are from the EU-SILC 2008 (CSO 2009a). The overall in-work at-risk-of-poverty rate in Ireland1 in 2008 was 6.7 per cent – this is equivalent to over 110,000 persons. The overall at-risk-of- poverty rate was 14.4 per cent. The in-work poverty rate was unchanged from the 2007 figure. At that stage Ireland was considerably below the 2007 EU-25 average (8 per cent). In fact, the 2007 figures placed Ireland among the 9th lowest in the EU-25, along with Austria, Cyprus, France and Hungary (ibid: 86). It is relevant to note that the 2007-2008 period saw a decline in the overall at-risk-of-poverty rate in Ireland of 2.1 percentage points and a decline of some 15.7 percentage points for those whose principal economic status was listed as ‘unemployed’. A relatively static in-work poverty rate is notable in this context, although looked at in the longer term the rate has been on a downward curve. Looking at the poverty population overall in 2008, those in employment had the lowest risk of poverty of any group – however overall they made up nearly one fifth (19 per cent) of persons at risk of poverty and comprised the largest single group of persons at risk of poverty. There are no significant gender differences. No breakdowns by age, educational level or household type for the in-work poor are published. Looking at the changes in income and risk of poverty more broadly, the risk of poverty was closely related to the number of people working in a household. In 2008, the at risk of poverty rate for households with no workers was 32.7 per cent, for those with one worker it was 15.7 per cent, for those with two it was 5.1 per cent and for those with three or more workers it was 4.2 per cent (ibid: 48). Somewhat less than a half of those at risk of poverty in 2008 lived in households where at least one person was in employment. 1 Defined as those individuals who are classified as employed (according to their most frequent activity status) and whose equivalised disposable income is below 60% of national median equivalised income. 4 IRELAND Tax Rate on Low Wage Workers: Low Wage Traps The low wage trap (as defined for Table 19.M6, European Commission 2009) in Ireland in 2008 was 88 for a one earner couple with two children and 50 for a single person with no children. Around the EU average for the latter, it was considerably above the EU average for the former, suggesting work disincentives for this family type. In both cases the low wage trap has gone up considerably over the course of the decade. The unemployment trap as measured