The replacement rate for given income levels is a tool used to measure the degree to which out-of-work benefits when unemployed replace take home income from work. While there is no predetermined level of replacement rate, which would influence every individual’s decision to work, higher replacement rates may indicate lower incentives to take up employment. In this regard a replacement rate in excess of 70% may be considered to be excessive.
The following table sets out replacement rates values for the requested household types, which compare social welfare income, assuming that fuel allowance and rent allowance is payable, with net income at National Minimum Wage (NMW), two thirds of the Average Weekly Earnings (67% AWE) and Average Weekly Earnings (AWE).
Relevant calculations use the current national minimum wage of €8.65 and an average weekly earnings figure of €687.84 - derived from the Central Statistics Office material in relation to the second quarter of 2012. Calculations in relation to rent supplement are based on rent allowance rates for Dublin effective in 2012 – and do not reflect new rent supplement rates introduced in June 2013. It may also be noted that rent supplement rates are higher in Dublin than in other counties.
|
Income Type
|
NMW
|
NMW with rent
|
67% AWE
|
67% AWE with rent
|
AWE
|
AWE with rent
|
|
Single
|
61%
|
86%
|
50%
|
70%
|
37%
|
52%
|
|
Couple: 1 earner
|
68%
|
95%
|
64%
|
89%
|
55%
|
77%
|
|
Couple: 1 earner/1 Child Dependent
|
72%
|
103%
|
68%
|
97%
|
61%
|
87%
|
|
Couple: 1 earner/2 Child Dependents
|
75%
|
105%
|
71%
|
99%
|
66%
|
93%
|
|
Couple: 1 earner/4 Child Dependents
|
75%
|
100%
|
72%
|
95%
|
66%
|
87%
|
Almost three-quarters of the people on the Live Register are only claiming a personal rate for themselves. They are either single or may have a spouse or partner who is working. In addition, 53% of the people on the Live Register receive less than the maximum personal weekly rate. This means that the great majority of people on the Live Register have a strong financial incentive to work and significant numbers leave the Register each year.
High replacement rates are generally associated with a relatively high number of dependent children and/or receipt of rent or mortgage supplement. However, it is important to note that only some 9% of persons on the Live Register are in receipt of rent supplement, with a further 1.5% in receipt of mortgage interest supplement. The vast majority of jobseekers do not receive these additional supports.
It should be noted that significant moves have already been taken to address the impact of housing entitlements upon replacement rates. Arising out of commitments in the Programme for Government to review the operation of the Rent Supplement Scheme, proposals to integrate the systems for providing rent supplement and social housing support have been advanced. It is intended to transfer responsibility for the provision of rental assistance to persons with a long term housing need from my Department (currently provided through Rent Supplement) to housing authorities using a new Housing Assistance Payment.
The effect of this transfer and the introduction of a new form of Housing Assistance Payment will be to address one of the significant disincentives to accessing full-time employment that exists under the Rent Supplement scheme. Under the new Housing Assistance Payment, the contribution that the tenant makes towards the rent is based on a means test that links the level of contribution to the household income, rather than employment status. This will have a positive impact on replacement rates.
