The cost-of-living crisis is essentially an issue of adequate income. A Central Bank Economic Letter published in February found that the impact of inflation is greatest on those households in the bottom 20 per cent of the income distribution. Households with the lowest incomes are the ones whose living standards have been affected the most.
They spend a greater proportion of their income, compared with better-off households, and as a result they are more exposed to price increases. They also spend a greater proportion of their income on food and energy. While the study finds that all households are experiencing significant price increases, the effect of this inflation is greatest on the living standards of those on the lowest incomes.
These are the people and families who were left behind in Budget 2022, who were struggling to make ends meet before the spike in inflation and energy costs. They are now falling further behind.
While the measures announced in February and March are welcome, blanket solutions such as the energy credit and reduction in excise duty for petrol and diesel are costly
The failure in Budget 2022 to benchmark social welfare rates and to make tax credits refundable means that people on fixed incomes and in low-paid employment will continue to struggle. The real value of their wages or social welfare payments will continue to fall.
While the measures announced in February and March are welcome, blanket solutions such as the energy credit and reduction in excise duty for petrol and diesel are costly. They also do not work for everyone and often the benefit does not always go to those who are most in need. Additional changes to the working family payment, the fuel allowance and the drugs payment scheme, as well as changes to school and public transport charges, fail to deal with the reality of the unavoidable trade-offs people living on inadequate incomes have had to make for two years because core social welfare rates were not increased in either Budget 2020 or Budget 2021, and the increase in Budget 2022 was half of what was required.
Government should be prioritising low-income households with all the resources and policy levers available to mitigate the impact of the rising cost of living. Yet in discussing inflationary pressures and related social welfare and budget issues with employers and unions in the Labour Employer Economic Forum, Government is excluding key stakeholders. Farmers, the community and voluntary pillar, and the environmental pillar, who represent many of those households in the bottom income deciles, are excluded from this discussion. While employers and trade unions have much to contribute to tackling poverty and social exclusion, this should not be used to justify the exclusion of those who work on these issues as their primary concern.
The cost-of-living crisis is just one of the post-pandemic challenges facing Government, albeit the one having the most immediate and dramatic impact on people’s everyday lives. There are other huge challenges that Ireland faces in related areas such as low pay; how to deliver housing, healthcare, childcare, and other vital services to everyone including those fleeing war; as well as how to meet our climate targets whilst protecting those most impacted. All of these issues affect people’s wellbeing and their capacity to cope with inflation and its related consequences.
A robust social dialogue structure involving all stakeholders would help Government to make progress in each of these areas. We need to get beyond growth and markets and recognise that, while they do have a role, they are only part of the solution. It is also important that all sectors and interest groups in society – young and old, urban and rural, businesses, trade unions, farmers, community and voluntary, social inclusion, and environmental – have a voice in deciding how these challenges will be met.
A new social dialogue is required to come to a consensus on the standard of living that people want and agree on
A social dialogue process provides a structure where current and future challenges can be addressed in a positive manner, acknowledging the task ahead, where reasoned and evidence-based debate forms the basis for decision-making, and where all stakeholders are included in the decision-making process. It provides a structure where decisions can be made about the most appropriate allocation of limited resources, ensuring that they are targeted at those most in need.
If Government is serious about our long-term wellbeing, about securing our public finances in a changed world, decarbonising the economy, transforming our energy sector, and preparing for digital and technological transformation then it needs a structure that would engage all sectors at a national level. Government’s own commitments on climate require far-reaching changes from all sectors if we are to meet the 2030 targets. These changes will impact on everyone.
The Coalition put a new social contract and a focus on the wellbeing of Irish people at the heart of the Programme for Government. If it is to deliver on this, then a new social dialogue is required to come to a consensus on the standard of living that people want and agree on, and, how this is to be delivered and financed. In the absence of a real social dialogue at national level, the strongest can fight their corner in the open market or in the political realm, while the weakest will be left behind. In such a scenario inequality, already at unacceptable levels, will continue to grow, the rich-poor gap will widen, and the integrated development that is required to address the challenges in housing, healthcare and meeting our climate targets will not be achieved.
Michelle Murphy is Research and Policy Analyst at Social Justice Ireland