Monday, 3 August 2009

Homo Economicus Dublinius

Slí Eile: Commenting on this website, anonymous said a private sector worker married to a nurse I can assure you that the reality of life for us is very different to the majority of people who post to this site.
Fair point, although one cannot presume the background of all who contribute, comment or read any site on the internet.

Lets assume Home Economicus Dublinius is a 50 year old male, professor of economics in the Free University of Dublin who earns €120,000 a year, plus external research consultancy fees permitted by his institution of 25%, plus an unknown income stream from investments in property, bonds and equity (being a smart connoisseur of the markets, you know).

OK, Homo Economicus Dublinius has had to take a hardship hit this year of 10% in ‘pension’ levy on his base salary of €120,000. That translates into a nominal wage income cut of, say, 8% (on €150K).

Add to that, Government steals another 5% in various stealth charges and taxes. So the additional burden is over 10%. But, hold on, given sauce for the welfare goose we must factor in the impact of price deflation for the gander. So, his real cut in take-home pay is not as much as 10%. Still, it's hard – some adjustments to the property portfolio....

Now, someone on, say, €25,000 a year (cleaning attendant at the Free University of Dublin) needs to take a nominal pay cut of 20% to help the national war effort to make Ireland competitive again, and get the bloated public sector off the backs of hard-pressed taxpayers in the ‘real economy’ (read: private sector minus banking, property and estate). Or, more effective still, let's see the attendant’s job phased out altogether since she is on a contract and does not have to be replaced (the softest target surely in the public sector).

Where does that leave us?

This is not idle speculation.

Have a read of Kathy Sheridan’s piece in the Irish Times a couple of weeks ago (Taking Stock of the Newly Destitute):

Or, take a real couple this time:

A couple in their mid-40s who had worked hard since their teens, each running a small business, had bought an old house and were slowly doing it up, but failed to sell their first home before the slump. Now they can’t sell either. Both businesses have come to a stand-still, but for welfare purposes they are regarded as asset-rich so are entitled to no benefits. They are currently surviving on hand-outs from family members and the Vincent de Paul, as well as food parcels left on the doorstep by concerned friends.
And some economists are calling for cuts in welfare spending as well as reductions in the minimum wage. Well, let's say it again: it is one thing for someone in the top income decile in relatively secure employment to take a 10% cut in income; its quite another matter for someone in the middle income bracket to lose practically all income all at once (such as in the example above), and yet another matter for someone who is already among the ‘working poor’ (i.e. close the statutory minimum wage) to take a cut of 5, 10 or more percent.


Anonymous said...

As just another anonymous poster - I don't have an URL - I'm frankly bemused at the lack of traffic on this site. This is particularly the case in the context of the scale of the fiscal adjustment being considered, the lack of an economic stimulus to boost investment and jobs and the economy-destroying NAMA legislation that has been published.

The Oireachtas is totally ineffective in curtailing the elected dictatorship that this Government has become - it has no popular mandate for the policies it's pursuing.

I simply can't understand why there is no evidence of a popular groundswell to eject this Government - at the very least a mass popular petition demanding a general election.

It would be perfectly understandable if a majority of voters were to use the 2nd Lisbon referendum to tell the Government (for the second time - having made it clear in the local and European elections) just to go. In the current global economic and financial crisis the Lisbon Treaty is almost enntirely irrelevant, but rejecting it might call into question continuing EU and ECB life support for both the banking system and the Government's fiscal position.

It would be far better to get rid of this gloriously incompetent Government asap and then decide on Lisbon II on its merits.

Not sure if we would like the IMF in - even if they have shown some evidence of learning since the 1998 Asian crisis.

Any takers?

Conor McCabe said...

This is a bit off your point, but Kathy Sheridan's piece is a very strange one. You're allowed to have a second home on the property market for up to two years before it is assessed as means. If the property remains unsold after two years, the normal capital value is assesed thereafter. Furthermore, her article says that if you do not have any PRSI contributions, then all you're entitled to as a single person is €204 a week. Thing is, that's the case even if you have PRSI contributions.

The other thing is, that couple should get in toudch with their local community welfare officer, who has the authority to make social welfare level payments in exceptional circumstances such as the one outlined above.

Food parcels at the doorstep?

It seems to me that the glorious Irish middle class don't know anything about Ireland's social welfare system.

I see a consultancy opportunity here...

Conor McCabe said...

One last point on social welfare assessment...

you can have up to €20,000 in cash in the bank and not one penny of it counts as means with regard to social welfare assessment. On amounts over €20,000 (cash), the means assessment is €1 per week per €1,0000.

and if the social welfare office turns down your application for a social welfare payment, you can appeal, and while it is in appeal, you can go to the community welfare officer and they can give you an "emergency" payment for the duration of the appeal.

Now, for any other queries on social welfare payments, my office hours are....