Vol. 87 No. 9
I move:
That the Social Welfare (Alteration of Rates of Contributions) Regulations, 1977, proposed to be made by the Minister for Social Welfare and laid in draft, sanctioned by the Minister for Finance, before Seanad Éireann on the 7th day of November 1977, under subsection (9) of section 6 of the Social Welfare Act, 1952, be approved.
These regulations, which it is proposed to make under subsection (9) of section 6 of the Social Welfare Act, 1952, may not be made until a resolution approving them in draft form has been passed by each House of the Oireachtas. The necessary resolution was passed by Dáil Éireann on 17th November, 1977.
The purpose of the regulations is to reduce by £1 a week the employee's element of the first-rate social insurance contribution in the case of workers on weekly earnings under £50. This reduction was promised in the Government's election manifesto. It will benefit all insured employees apart from permanent and pensionable employees in the public sector who are insured for limted benefits, mainly widows' and orphans' pensions and deserted wives' benefit, all of whose social insurance contributions are less than £1.
Earnings for the purpose of the £50 limit means gross earnings less superannuation contributions. These are the earnings used for income tax purposes and on which the existing 3 per cent pay-related contribution, where payable, is based.
The regulations provide that the reduction will take effect from Monday, 2nd January, 1978, which is the beginning of the contribution year for men. It is proposed to provide a new series of social insurance stamps at the reduced rates for the various classes of contributors involved and to place these on sale alongside the present rates which will continue to be payable in respect of persons earning £50 a week or more.
An average of over 300,000 insured persons a week will benefit from the reduction which will be of particular value to young people commencing employment and to many women workers. The measure is expected to cost some £13 million in a full year. I commend the motion for the approval of the House.
At the outset, may I take the opportunity of welcoming the Minister to the Seanad and wishing him well with his very important portfolio of social welfare and health. We are all conscious that there is no segment of budgetary policy more eagerly watched and of such importance as that governing the State's social welfare commitment to the community. On behalf of the Labour Party, I welcome the motion in so far as it represents a reduction in the employees' contribution towards the Exchequer. I have, however, some misgivings in relation to the ultimate value it will represent, and to those who will benefit. Anyone dealing with wage structures will realise that gross earnings of less than £50 per week are becoming the exception rather than the rule in any well-established wage structure. I accept that in the case of female employment, it will have widespread effects for some time to come. In male employment, except those outside trade union responsibility, there are few cases where the wage scales are below the gross income. Did the Minister take this fact into account and also the fact that, despite the statistics he has, out of a total insurable labour force of 700,000, in excess of 300,000 people are below a gross aggregate income of £50 per week?
With the next national wage agreement or free-for-all, whichever it may be, just around the corner, it is reasonable to assume that a reasonably substantial volume of insured workers, including female workers, who are below this income will go above it, substantially or otherwise. I take the guideline of the ordinary county council labourer or forestry labourer. All along the line they have been accepted as possibly the lowest paid male employees among the unskilled groups. Those two categories have now reached the basic figure of approximately £48 per week. With the impact of the impending wage adjustment, these people will be better off. These are people whom the Minister would still have in mind to get the benefit of this easement in the contribution.
If the national wage agreement—not agreements under any other heading— after the operation of the scheme puts people out of benefit, these adjustments should be ignored. Generally national wage agreements merely restore the purchasing value of an employee's money rather than greatly increasing his standard of living. While the Minister may have no control over it, in non-union areas of employment employers could say to workers "Arising from the fact that your social welfare stamp is costing £1 a week less, I will not be deducting this and I am restoring £1 a week to you". It might well be argued by unscrupulous people to unprotected employees in unprotected areas that it was a wage increase, which of course is not so. The Minister is providing it from national taxation to alleviate hardship. It should not under any circumstances be taken by such workers as the basis of a wage adjustment to which they would be clearly and justly entitled. I welcome this.
I would be doubtful if there are still so many employees in the social insurance industrial codes below the gross of £50 per week. I have in mind female employment, shop assistants and hotel workers. I would like to make a point regarding hotel workers. Will the service charge, which is a feature of a hotel workers' wages, be taken into account in an assessment for eligibility within or without the pound reduction? These are the type of factors with which employees will be concerned in the operation of this scheme.
I welcome this scheme and hope it will work. It represents a milestone, as indeed did the introduction of pay-related benefits and other aspects of the social insurance code which was expanded to include deserted wives, unmarried mothers and so on. These are milestones in our progression towards a proper social welfare code that will take regard of the hardships of all sections of our community.
I welcome the motion, which will be welcomed by employers. The principle implied in it is very important because it shows the employer that the Government are aware that extra incentives are needed and that they are prepared to give those extra incentives. I would not have any fears that it will be recognised as an increase in wages because the worker is going to benefit.
We all recognise that this is the type of incentive that produces benefits, because the social welfare contribution is a major overhead in any man's employment. This is a first step in the right direction and certainly is one to be welcomed. Unfortunately—and I say that deliberately—there is still a large number of people earning under £50 a week. It is right that this benefit should go to that section of the community. I can think of a wide range of people— agricultural workers, county council workers, forestry workers, those involved in the garment industry—whose basic weekly wage is under £50. These people will benefit. This motion will encourage employers, along with the incentives given by the Department of Labour, to provide more employment.
Not too long ago the authorities in Northern Ireland introduced a selective employment tax. They quickly recognised the folly of doing that. This motion is consistent with Government policy, and it encourages the employer to look forward hopefully to greater recognition of the difficulties facing them. I am satisfied that employers will welcome this and that it will encourage them to retain all the people they employ. All too often an employer is inclined to solve some of his problems by reducing the numbers employed. At the end of the year when he gets his balance sheet, he looks at the picture and he feels life has been pretty difficult for him. To some, unfortunately, the answer to the problem is to reduce the number employed. It is important for the Government to show that they are genuinely prepared to help. This is a first step, and I think it will be recognised and welcomed in the employment sector.
I welcome this motion on behalf of the Fine Gael Party. I believe any contribution or any increase in the take home pay of workers earning less than £50 per week must be welcomed by all. One thing that worries me about the motion is that for young people earning £50 or close to £50 per week, who do some overtime and increase their gross earnings to over £50 a week, this would have a detrimental effect. To rectify the situation one should take into consideration the yearly earnings of people earning £2,600 a year. Then one could counteract to some effect the gross earnings of people who do overtime. I am talking about apprentices. I know they do not earn £50 a week, but there is a certain amount of overtime in industry which would increase their weekly earnings, although over the year it may not increase their earnings to over £2,600. I suggest that some amendment might be made to the motion to allow for that situation.
It surprised me to read that 300,000 insured persons a week will benefit from this scheme. I did not realise we had so many people earning less than £50 a week. It surprises me that in this day and age we have so many people earning such a low wage. That the measure would cost £13 million also surprises me. I am working in industry and I know the type of wages people are earning. In the industry in which I work I do not believe there would be 1 per cent of the employees earning less than £50 a week. Perhaps later the Minister could give me a breakdown of the type of work those 300,000 people are doing. People, like myself, in trade unions, would like to find out what type of work these 300,000 people are doing because we might be able to make a case for them.
I commend the Minister for mentioning the many women workers who will benefit from this scheme. Many of these women who are employed in manufacturing industries will be the beneficiaries of the Minister's largesse only because they are the victims of discrimination in the matter of equal pay. If our Government's prediction of a 5 per cent increase in wages holds good for next year, and if our experts have done their sums correctly women in this category will continue to benefit for another 12 months or so. But, with the success of more equal pay claims, the gap will become narrower. I would ask the Minister at this stage to keep under review this ceiling figure of £50 per week and to raise it so that they will continue to benefit. In that way our Government will not seem to be giving with one hand what they intend to take back with the other.
This is the sort of unrealistic Alice in Wonderland approach to social welfare benefits that was characteristic of the National Coalition Government in their last days. In our January Budget, for example, the old age pensioners were promised a rise, but it only applied to those of them who were fortunate enough to survive the rigours of a particularly harsh winter. Those of us who benefit from children's allowance were told to expect a bonanza in the summer. It came the month after several of our children had left school but we pocketed our small change and said nothing because we were aware of the sinister rumblings that the then Minister for Finance was threatening to remove from us altogether what some of us in our foolishness had come to regard as a right.
People are not fools and this sort of political chicanery seems to me to be calculated to drive most of us frantic with sheer frustration. Basically, social welfare is a matter of insurance— insurance by the State against revolution and by the citizen against unemployment and sickness. But, as our social attitudes have changed slowly, and become more liberal, the State has had to accept the responsibility for more than just the aged and the infirm. The State now accepts responsibility for the abandoned, for the deserted wife, for the single parent families; and, of course, with this increase in responsibility the whole scheme has become more unwieldly, more bureaucratic and more impersonal. With this more liberal attitude also there is proportionately a decrease in what I would like to call social responsibility for the principles of social justice. We have the curious situation today that when social welfare benefits are costing more than ever before, we have more real poverty and less individual and less community responsibility or awareness.
If I am prepared to pay more in taxes so that the social welfare scheme can increase, have I thus made the State the custodian of my conscience; or does the stage come when the State says to me "This is as far as we go, the rest is up to you?" I do not want to get involved in talking in high-faluting terms of social justice—I think these things are better left for the boys in the episcopal bonnets—but it occurs to me that we take our social justice in small weekly doses along with our Sunday sermons. We can never hope to eliminate poverty, but we can be a caring community if we are given a lead by a Government prepared to base their social welfare policy upon the notion of helping out rather than merely handing out. We can perhaps hope in this way to alleviate some of the more dreadful consequences of what Shaw called "the greatest of evils and the worst of crimes".
I welcome the Minister for Health and Social Welfare here. If he comes with good tidings as often as his predecessor and his Parliamentary Secretary did, he will have served a very good term indeed. Any reduction in any form of taxation, be it income tax or social insurance stamps, is always welcome; and nobody could begrudge any reduction. However, we have to look at it a bit more closely from the national and from the Exchequer points of view and weigh up the situation. Just as there is always a choice to be made between demands on expenditure, so also, when it comes to giving out central Exchequer funds, the choice has to be made as to the best way that money is to be spent. If I had £13 million to distribute, as the Minister for Finance and Minister for Social Welfare have, I doubt if I would spend it in exactly the way it is listed here to be spent. Thirteen million pounds is a lot of money in these times. If we look at this a little closer, we find areas which raise certain doubts about both the long-term efficacy of the legislation and its general benefit.
First, let us look at the question of the date. I could be partisan and say "Why not October rather than January," but I will accept the Minister's and the officials' arguments that there are adminstrative problems here and that we have to exhaust the current year's insurance stamp supplies before we embark on a reduction in the contribution. Another Government found it was feasible to give benefits in October when previously it had been said that they could not be given in that month. I could also say that perhaps this reduction could have been given a little earlier than January. However, we will leave that.
We will move on to the number of people who will benefit from this because they earn less than £50 a week. This is a grey area and some doubts have been raised as regards the numbers who will benefit. If I accept the Minister's statement of 300,000, it leads to the further question about the long-term efficiency of this reduction of £1. For instance, if there is another phase of the national wage agreement, which will bring many of these 300,000 employees over the £50 margin, what happens then? Will there be a further upgrading of the ceiling figure?
The most important question is this. Is this the best way of spending £13 million? How will the young people— and it is the young people the Minister expressly declares will be particularly appreciative of this measure—react to this extra £1 which they are going to have in their pockets? I can think of many other people—fathers and mothers, for instance—who if they had £1 extra in their pockets would probably put that money to better use than the young people will.
Will the employer take advantage of this £1 reduction? There is an element of truth in the assertion which has been made that there will be cases where the employer will take advantage of that. I am not going to say it will be taken advantage of generally, but there will be cases where it will arise. If it does arise, that will take away from the general benefit of this legislation. The most important question is this. Will it do anything to encourage employment? I cannot see any way in which this £1 reduction will encourage employment. I do not think the employers are going to snap it up as an opportunity to increase the numbers in their employment.
As I said at the outset, I am not going to begrudge any reduction in any form of taxation. However, if I had the personal decision to make as regards the expenditure of £13 million from the Central Fund. I am sure I could find far more needy cases within the social welfare category than this section of the community.
Senator Markey raised a number of interesting questions of a practical kind, just as Senator Cassidy raised questions of a philosophic kind. I wish she had spoken longer because I found what she had to say on the whole subject of social welfare extremely challenging and interesting. I am not holding any brief for anybody, out I believe the question Senator Markey asked is the one that is in everybody's mind: if you had £13 million to spend, would you expend it in this way? That is a very weighty question. If I sought for a means of justifying the application of this £13 million to what seems a trivial thing —putting £1 a week extra in the pockets of people earning less than £50 per week—I would argue that it is probably well spent for one reason: that it would be a small but genuine incentive to people to stay in employment. A great malaise afflicting our society at the moment is the manner in which the gap between what you can get when unemployed and when employed is narrowing so much in certain areas that almost a death wish is falling upon our people.
I am not going to generalise about Ferenka, but everybody recognises the fact that the satisfaction of working, of doing a job and of drawing a commensurate salary, is something that is slowly dying—pride in work is dying. This is one of the biggest afflictions not of Europe, but of these islands— Britain and Ireland. If you have people working and earning less than £50, anything that would keep them working is a good thing. One of the challenges facing our society at the moment is to make the rhythm of going to work, earning money, being paid in a commensurate wage, not being over-taxed, and not being made to feel that the more you exert yourself the more you are going to be taxed. The more we can alleviate that, the more we are going to add to the health of our society. Senator Butler raised the question of people doing overtime. I welcome this idea because even if people do "nixers" it means they still recognise that you should work for your money. That is a very important aspect of our society.
This is a tiny measure. The Minister would not claim it is a large measure, but it is a fairly well-placed measure with regard to the allocation of £13 million. That reflection was sparked particularly by the point made by Senator Markey.
I would like to join in welcoming the Minister to this House and to wish him every success in his office. This increase will be welcomed by both the lower paid worker and the employer. To the lower paid worker it means at least a 2 per cent increase, free of tax. To the employer it is an indication that what can be termed taxation on employment is being reduced. I presume that the part of the stamp the employer will pay in the future will not be changed. He will still pay the same amount.
The stamp always inhibits casual employment. If an employer gives a person a day's work it will cost him the stamp. The sooner the stamp is removed the better for casual employers. Also from the employer's point of view, it means that there will be more money spent locally. Money in circulation should improve trade in the home market. One thing that worries me, and perhaps the Minister can clarify this point, is the administration of this measure. There may be a number of employees whose basic wage is under £50 per week but there are differentials and, as has been mentioned, overtime. One week an employee might earn less than £50 and the next week over £50. Does that mean that a different stamp has to be put on for a different week? In industry a person is paid a fixed basic amount per week and at the end of the month any overtime or differential due is paid. Do you take the average per month or do you have the low rate stamp on three weeks with a higher rate on the fourth week? These are some of the problems I see in the administration of this scheme. Perhaps the Minister could clarify this.
I would like to say at the outset that this is a very simple, straightforward proposal. It is a fulfilment of an election promise. It will give 303,000 lower paid workers an extra £1 per week. It is as simple, as straightforward and as direct as that.
I shall deal with how I arrive at the figure of 303,000. This matter was adverted to in the Dáil but it is a very accurate calculation; I will put it more precisely, it is a very accurate projection. We have approximately 900,000 insured employees in this country. Of those about 200,000 are in the public sector or elsewhere, and we are left with the figure of 700,000 which is the relevant figure for this calculation. The most accurate projection we can make by analysis, from statisticians' and the Revenue Commissioners' figures is that approximately 43.4 per cent of that number is under £50 a week—a figure which, when superannuation is deducted, is £50 a week or less. This means that 43.4 per cent of 707,000 is approximately 303,000. I do not think there is much point in arguing a great deal about that. It is an interesting figure from the point of view of the indication it gives us as to how our workforce is constituted. As far as this proposal is concerned, it is as accurate as it can be and points directly to the cost of the proposal, that is £13 million in a full year.
The existing system of a flat rate contribution for social insurance is in essence unfair. It does not matter what a person earns at the moment, provided he is in a particular category he pays the same level of contributions. I want to emphasise that this reduction of £1 a week in the stamp for people earning less than £50 a week must be regarded as an interim measure. I intend, by April, 1979, to introduce a fully pay-related system of social insurance where an employee's contribution will be directly related to what he earns. This will be calculated on a percentage basis. That is the right and fair way to give effect to insurance. As I said, I hope that will be in operation by April, 1979. I wished to bring it earlier but unfortunately this sort of changeover can only be given effect to at the beginning of an income tax year because we will be using the Revenue Commissioners' PAYE mechanism for collecting this contribution. It had to come into operation either in April, 1978, or April, 1979. Unfortunately, because of many complex administrative difficulties it cannot be brought in by April, 1978, so we have to wait until April, 1979. It will be coming in then and people will contribute to the insurance fund in exact proportion to what they earn, with a cut-off point at a certain figure above which the contribution will not continue to increase. This proposal is seen in the light of that change-over. This is going some way towards that. In that it reduces the burden of the insurance contribution on the lower paid employee. It is as simple and straightforward as that. As Senator Martin says, in the present circumstances we could not use this £13 million more equitably in that area. It is an immediate relief of this flat rate contribution burden on lower paid employees.
A number of Senators referred to the manner in which the £50 will be calculated. As I have already indicated, it will be the gross figure less superannuation. Thereafter it will be calculated in the exact same way as income is determined at present for the 3 per cent pay-related social insurance contribution. Each week by itself will be taken and the employer may be affixing the lower rate stamp one week and the higher rate stamp the next week. That, unfortunately, cannot be avoided. Everything that is normally included as pay will count— overtime, bonuses, holiday pay, danger money and so on. Anything that is brought into account for income tax purposes will be brought in to determine the £50 level.
There is one important point I should like to make. In the case of people who do not work a full week, if a man or woman works one, two or three days it would be the actual earnings that would count. The two or three days' income will not be projected over the whole week to give a higher figure with the possibility of bringing the person over the £50 limit. It will be the exact earnings for the week that will count.
Deputies are suggesting that this £50 limit should be reviewed. They are, I think, overlooking the fact that, in any event, this will all be subsumed into the new pay-related insurance contribution system which will be introduced in April, 1979. To that extent it is not a long-term proposal. It will only operate between now and then at the very outset.
Senator Moynihan specifically asked about hotel workers. In so far as the service charge goes into their pay in the normal way, it will be included for the purpose of determining the £50 per week.
I think these are the main questions raised by Senators during the debate. I am glad that, with the exception of minor criticisms, the proposal has been welcomed by the Seanad, as I expected it to be. It is an interim measure, ultimately to be assumed into a much broader and more comprehensive and fairer arrangement for social contributions. It does make an immediate, positive, helpful contribution to the lot of 303,000 lower paid workers, young people and women workers especially.
