Gavan Reilly

IT HARDLY NEEDS restating that the economy is going gangbusters. We might be hitting a ceiling of what the multinational sector can do for Irish jobs, but the headline figures are almost preposterously good: never in the history of the State have so many people been at work. Nor has the unemployment rate been so persistently low: not since December 2021, in the days of the omicron wave of Covid-19, has it been above 5.0%.

Opinions differ as to what exactly amounts to ‘zero unemployment’. There will always be adults who are incapable of participating in the labour force, and the official figures do not discern between those who could work and those who cannot. Helpfully, however, the CSO does publish a version of the rate that excludes those aged 15 to 24. With those excluded, the rate has been below 4% for four-and-a-half unbroken years. Long may it last.

But in this Dáil recess week it may be worth reflecting on how, at a time of unprecedented bounty, we’ve still never spent more on Social Protection.

Much more than ‘the Department of the Dole’

The department now run by Dara Calleary has traditionally been the biggest spender in the country, irrespective of how the economy is doing and how many people might be out of work. This year its budget runs to just under €31 billion, its highest ever. Of every seven euro put into everyday spending in 2027, Social Protection takes two.

We don’t have a line-by-line breakdown of how the Department intends to spend every single bit of its 2027 Budget – that doesn’t come until the ‘revised estimates’ are published, usually in the days before Christmas – but the allocations for 2026 are a good indicator. The combined spend on Jobseekers’ Allowance and Benefit, the two main categories of payment to those without work, comes to about €2 billion.

That in itself should be a reminder of how a Department we sometimes innately label as being ‘the one that pays the Dole’ is much more than that. In fact, the biggest single cost for the Department is for those whose working days are behind them: the cost of the State Pension next year is a mammoth €13 billion.

There are three reasons why any careful analysis of Ireland’s spending should pause on this figure for a moment. Firstly, spending on the state pension is one-eighth of the entire current budget, and over one-tenth of the entire public spend for next year including infrastructure. Secondly, it highlights the fiscal cost of the political urge to chase the grey vote. As every politician knows, older citizens are the most persistent voters – but keeping them sweet means far less cash for other measures.

Pensions win votes… and deplete the kitty

And thirdly, the fact that this bill is unlikely ever to get any smaller. People are living longer, and Ireland’s growing population is getting proportionately older. Many European countries are further along this curve already, with declining birth rates meaning a higher proportion of pensioners to workers. Ireland will face the same demographic shift in future years, which is precisely why the government’s building up a giant savings pot to address it – even if it’s now borrowing for the purpose.

On the flip side, there might be a small trimming of another major payment. Child Benefit will cost a touch over €3 billion next year, but declining birth rates – and the fact that rates have been unchanged for over a decade – means we can expect the cost of those fixed payments to start declining. But factor in plans for a second means-tested tier of child benefit, as a direct response to persistent child poverty, and the overall cost goes higher again.

There are other major categories where Social Protection spending has grown slowly higher. Income supports for those of working age will cost almost €4.7 billion – up by 5% in one year – and while that includes the two major jobseekers’ payments, it also includes the working and one-parent family payments. Few would argue against either payment; both are crucial to helping vulnerable families put food on the table. A country with high employment doesn’t mean universally high standards of living.

But the second-biggest chunk of its spending, after the pension, is on payments to carers, the disabled and those with long-term illnesses. Disability Allowance cost around €2.5 billion this year and will be more in 2027 given the Budget’s commitment to a ‘cost of disability’ payment. Carer’s Allowance, paid to those who cannot work full-time due to care commitments, is another €1.4 billion. Whatever about the volume of claimants for those payments, demand for them is relatively inelastic.

We can afford these in good times. But in bad?

The point of this whistle-stop tour through public payments is to illustrate that, whether by accident or design, full employment does not mean full independence from public support. With the government now taking a more cerebral approach to value for money, it may be wise to reflect on whether this rising spend is caused by wider eligibility, a more generous system, or some combination of both. Has some statistician done any modelling on the cost of those payments – even if the rates remain unchanged – in years or decades to come?

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A large welfare budget is not, in and of itself, a problem. The measure of any nation, as the saying goes, is how it treats its most vulnerable.

But consider the possibility of an economic downturn: America taking firmer steps to repatriate the pharmaceutical industry, say, or the bursting of a speculative AI bubble leading to major downsizing within the technology industry. Not alone are companies like Google, Microsoft, Apple and Eli Lilly among Ireland’s biggest taxpayers, they’re also among the biggest employers, and sustain huge numbers of indirect jobs too. Think about how many other suppliers would go to the wall if those giant clients weren’t there any more.

Think of how many people would suddenly require the State’s safety net to get by, coupled with a fall in the income tax and corporate tax revenues that a slump would bring. And remember, too, that Ireland has recently introduced Jobseeker’s Pay-Related Benefit, where someone’s welfare payments after being laid off are now linked to their previous wage and only taper down over time. A 2027 or 2028 wave of layoffs would cost far more than a 2008 one – this, I was previously told, was part of the reason why it took successive ministers like Regina Doherty and Heather Humphreys several years to drag the plan into existence.

The breadth and volume of payments in Ireland’s welfare system is easily defended. Identify any single category of payment, and you can point to an easily defined cohort of justified claimants. But a system built in good times must also be there in the bad ones – and one must credibly wonder just how much bigger the bill would get, and how affordable it would be, when the good times run out.