The Parliamentary Budget Office (PBO) published an analysis of social welfare rate changes 2011-2022 in December 2021. The report looks at core social welfare rates over time, and rate changes compared to both inflation and wage changes. The PBO analysis shows that flat increases in social welfare payments, such as the €5 increase to be applied to core benefits in 2022, result in disproportionate percentage changes and do not systematically account for price (or wage) inflation in a consistent manner.
Cost of living
The report notes that the core Consumer Price Index used in the analysis may be underestimating the real cost of living increases faced by many households at present. Energy and fuel costs, which disproportionately impact those in the lower income deciles and rural areas, are driving inflation at present but housing costs are also a key driver. Specifically, those living in self-funded private rented accommodation are facing recent cost of living increases beyond many owner-occupiers and those in State-supported accommodation.
Jobseeker’s Benefit will have increased 10.6% in nominal terms between 2011 and 2022, but the real increase is substantially less over that period at 2.3% - accounting for inflation and the 2022 inflation forecast. Following no increases between 2011 and 2016, Jobseeker’s Benefit increased from €188 to €203 between 2017 and 2019 and following two years of no increases to 2021, will increase to €208 in 2022. However, in the absence of increases in many years over the period, the real rate in 2022 will be €192.36 (2011 base). For the rate to stay in line with wage growth over the period and maintain the 2011 rate, the rate in 2022 would need to be €233.10. Wage growth has accelerated significantly more than price inflation, and the nominal increases in Jobseeker’s Benefit.
Jobseeker’s Benefit will increase by 2.5% in 2022. As the rate of inflation is forecast to be 2.5% in 2022, there will be no change in the real rate for recipients. The real rate will actually decrease overall in 2021 as the rate is unchanged but inflation, so far, is at 1.9%. The rate of Jobseeker’s Benefit is substantially below the rate required to keep pace with growth in wages - wage growth was 3.4% in 2019, 4.7% in 2020, 4.8% so far in 2021 and is forecast to be 4.9% in 2022.
Jobseeker’s Benefit kept pace with 27% of average earnings from 2011 - 2015, with little earnings growth over this period. Although there were rate increases from 2016 - 2019, average earnings increases were larger and the absence of rate increases between 2019 - 2021 has widened the gap. Benefit rates have been substantially lower than 30% of average earnings over the period. Using 27%, 27.5% and 30% of average earnings as potential benchmarks to maintain living standards at a reasonable level and keep poverty rates in check, Jobseeker’s Benefit rates have only reached this threshold between 2011 and 2014 when compared to 27% of average weekly earnings. By 2022, based on an earnings growth forecast of 4.9%, Jobseeker’s Benefit will be 86% of 27% average earnings, 84% of 27.5% average earnings and 77% of 30% average earnings. The decline has been most evident since 2019, when earnings growth accelerated.