Decreasing poverty requires a mix of policy measures such as increasing female labour force participation and spending more on benefits targeting children
A new ESRI study commissioned by the Department of Social Protection explores how the national consistent poverty target of 2 per cent by 2025 could be achieved.
Income poverty, deprivation, consistent poverty and vulnerable groups
Over the period 2004-2019, lone parents and their children and working-age adults with disabilities and their children experienced the highest rates of at risk-of-poverty (AROP)*, deprivation and consistent poverty. Consistent poverty captures those who are both at risk of poverty and in deprivation.
These groups have also the highest degree of overlap between income poverty and deprivation. In 2019, 57 per cent of lone parents that were income poor were also deprived. This figure was 49 per cent for those living in households of working-age adults with disabilities. In 2019, these two groups together account for just over half of those in consistent poverty. In 2019, the consistent poverty rate was 5.5 per cent.
Labour market activation, wages and income poverty reduction
Simulations using SWITCH, the ESRI’s tax benefit model, estimate an overall AROP rate of 14 per cent for 2022. The simulations indicate that increasing female labour force participation and hours worked to match those of men could reduce the overall AROP rate by 2.9 percentage points (from 14 per cent to 11.1 per cent) and that of children by over five percentage points. A further simulation shows that if the head of all jobless households took up a job, this would also substantially contribute to reducing AROP rates - by three percentage points for children and by two percentage points for the whole population.
Social transfers and income poverty reduction
The research also investigated how increases in social transfers could contribute to reducing the AROP rate. An annual increase in spending of €100m on benefits targeting children, working-age adults and the elderly show modest poverty reduction across these groups. Among the benefit increases simulated, the Working Families Payment (WFP) and Qualified Child Increase (QCI) contribute the most to AROP reduction. Increasing spending on WFP by €100m per year reduces the AROP rate by approximately one percentage point for people in rented accommodation and children, and half a percentage point for the whole population. A similar increased spend on QCI reduces child poverty by 0.8 percentage points and by half a percentage point for people in rented accommodation.
Grouping single benefits into packages targeted at children, working-age adults and the elderly, and simulating an increased spend of €1bn per annum for each of these packages produces stronger effects on AROP rates. The children’s package has the greatest impact on child poverty, reducing it by 4.8 percentage points. The working-age adult reforms reduces income poverty for renters by 4.5 percentage points and by two percentage points for the whole population.
Consistent poverty target of 2 per cent
The research estimates that increasing labour market participation of women could decrease the AROP rate by 2.9 percentage points while activating jobless households could decrease the AROP rate by 2.1 percentage points. This could translate into decreases in the rate of consistent poverty of around 1.2 percentage points and 0.9 percentage points, respectively. From a social transfer perspective, the increase of €1bn spent on a package of measures targeted at children, working-age adults or older people could reduce the whole population AROP rate by 2.3, 2.4 and 1.9 percentage points and consistent poverty by 1, 1, and 0.8 percentage points respectively. It is therefore likely that a mix of policy measures, including activation and social welfare, will be needed to reach the consistent poverty target rate of two per cent by 2025.
Bertrand Maître, an author of the report commented, “A combination of measures targeting both employment and social transfers is likely to be the most effective way to address poverty reduction targets. This could involve increased spending on benefits targeted at vulnerable groups and tackling barriers to work such as childcare costs.”
Karina Doorley, an author of the report commented, “Encouraging labour market participation while maintaining strong safety nets for those out of work is challenging but essential if we are to reach the national consistent poverty target of 2 per cent.”
Joe O’Brien, T.D., Minister of State with responsibility for Social Inclusion in the Department of Social Protection, noted “Government is committed to its ambitious target of reducing consistent poverty to 2% or lower by 2025, as set out in the Roadmap for Social Inclusion 2020 – 2025, our national strategy for poverty reduction and improved social inclusion. This report is an important contribution to inform policymaking in this area as it examines which means are most effective in reducing poverty.”