In-work Benefits: Can Ireland learn from international experience?

In-work benefit programmes, designed to “make work pay” for families with children, have grown rapidly in many countries. In Ireland, as in America and the UK, the number of employees qualifying for in-work benefits has grown strongly in recent decades, and the average in-work benefit has also increased substantially. New research from the ESRI draws some lessons from international experience for the future development of Irish in-work benefits.

All countries face sharp trade-offs between overall costs and the objectives of combating child poverty, ensuring that taking up employment is rewarding, and ensuring that taking on additional hours of work also carries a significant financial reward. Lead author Dr. Michael Savage said “While the UK has made several structural reforms to its in-work benefit scheme in recent decades, the underlying trade-offs remain at the heart of the matter”.

The ESRI analysis points to two aspects of recent UK experience which could help to inform future development of Ireland’s in-work benefits. First, the Universal Credit scheme in the UK has the merit of drawing together a range of means-tested benefits to provide a simpler and more unified structure, avoiding the danger that overlapping withdrawal of multiple means-tested benefits can leave individuals with little incentive to take on additional work. In the same way, there could be merit in the medium term to an integration of a number of means-tested benefits in the Irish system (for example, Family Income Supplement, Housing Assistance Payment, Medical Card, Affordable Childcare Scheme).

Second, implementation of the Universal Credit has been fraught with major delays, particularly related to the development of IT systems. Based on this experience the authors suggest that the next step for Ireland should be to complete the development of the planned “real time” information on pay from the Revenue authorities. This could help to develop new structures for administration of means-tested benefits, ensuring they reach the targeted groups, and providing a better platform for new policy developments.