The cost-of-living crisis is an adequate income crisis. Those hardest hit by rising inflation and energy prices are those on fixed or low incomes — households in the bottom 20 percent of the income distribution.
These are individuals and families who are dependent on welfare or work in low-wage jobs. People who are already financially overwhelmed and have absolutely no financial leeway to absorb rising costs. That means they have to cut elsewhere.
These households are most exposed to price increases as they spend a larger portion of their income on food and energy.
The impact of inflation hits the living standards of those on the lowest incomes hardest.
Government decisions on policies to deal with the rising cost of living must focus on improving the situation of people with insufficient income. Government policies and resources must be focused on these low-income households to support them with the growing cost-of-living challenges they face.
Social Justice Ireland recognizes that poverty is never just about income, it is always about income.
The same applies to the rising cost of living. Government initiatives to date to address the cost-of-living crisis, while welcome, are grossly inadequate and under-targeted to those most in need.
Increases in the fuel surcharge, for example, ignore the fact that many of Ireland’s poorest people do not have access to this payment. Reducing fuel costs means that the better off will gain far more than the poorer citizens.
Poverty hits hardest those who experience it in their daily lives. It limits their options and opportunities, narrowing their focus on weekly survival and the inevitable trade-offs of living on inadequate income.
The latest data shows that 661,518 people live in poverty in Ireland, including 210,363 children.
In a wealthy country, these statistics just don’t make sense, they almost defy logic. Rising costs of living are hitting those without extra disposable income hardest, those who are already struggling to make ends meet.
Social Justice Ireland has consistently argued that the core rates of social assistance should be set at 27.5 per cent of average weekly earnings to avoid leaving those on the lowest earners behind.
As the cost of living continues to rise in 2022, the real value of welfare benefits has been eroded by a failure to compare core welfare rates. Compared to 2011, the real value of the jobseeker’s benefit in 2022 is just over €192 per week and the real value of the contributory state pension in 2022 is just over €234 per week.
Ever-increasing energy costs further diminish the value of these payments.
In 2021, the gap between core welfare rates and 27.5 percent of average weekly earnings was €19 per week. Today the gap is €27 per week.
This is the required increase in core welfare rates and pensions in the next budget if current trends are maintained – simply to keep up with inflation.
Otherwise, the value of social benefits will fall and the gap between the most vulnerable and the rest of society will continue to widen.
The government needs to close that €27-a-week gap, and any further packages aimed at mitigating people’s rising costs must be targeted at those who need it most – those on the lowest incomes.
Blanket solutions such as the proposed VAT cuts on gas and electricity and those announced in February and March will not protect the poorest and most vulnerable. They can be costly, but often the benefits don’t always reach those most in need.
For example, three-quarters of the funds allocated to the Living Scheme will be spent on a universal energy credit rather than being targeted to those most in need of assistance.
The National Retrofit Plan is to be welcomed. However, the upfront cost is still a barrier for those on low incomes, while those on higher incomes can take advantage of the system.
The situation in which the government now finds itself, making a third attempt to tackle the rising cost of living six months after the budget was announced, underscores the need for a new social dialogue to ensure that the resources available are focused on those who need them most in need and that the poorest are not left further behind.
dr Sean Healy is CEO of Social Justice Ireland
https://www.independent.ie/opinion/comment/our-poorest-should-be-the-focus-of-cost-of-living-supports-41564749.html Our poorest should be at the heart of cost-of-living support
