Sometimes when people write about economics, it is easy to forget that behind every economic statistic is a personal story.

Each sanitised economic figure when shorn of its personal testimony rarely reveals much. That is the point of aggregated data: it serves to dehumanise. But this process misses the central political point, which is that each economic data publication should move us to think about the society we live in because each figure is a father, mother, husband, wife, daughter, brother or sister.

Behind this antiseptic world of economic data are the human stories, perhaps most poignant when we are talking about people who have no work.

In recent weeks I have been getting a lot of emails from people who feel that our welfare system is acting as a disincentive to work. I have been getting emails from people in work and people out of work. I believe this to be a fascinating spot where the welfare system meets the wage structure.

If, as most of the letters suggest, the system is acting as a disincentive to either go back to work or for those in work to work harder, then we have a major problem.

At the same time, I also realise that nothing should more anger someone stuck on benefits through no fault of their own, than a reasonably well-off economist who writes in the paper, complaining about welfare rates. So you are not going to get that here.

Instead, I am going to relate a story, which came in to me from the north-west from an unemployed middle-aged man with children.

Dear David,

I am a 54-year-old sales & marketing executive who has now been out of work for just over four years. I have worked for both multinationals and indigenous firms alike. I have been on benefits for the last four years. My wife works part-time and brings home c €250/wk. (c €13,000 p/a). I am getting the jobseekers allowance for me €173/week and FIS (family income supplement) of €168/week.

I have three teenage kids who have medical cards and we get a bin waiver of around €200/year. One of my daughters is at university and she gets her fees (and registration) paid and has a maintenance grant of some €2,500/yr. Without this, we could not have afforded to send her to university.

My younger son hopes to attend university. I will also claim the grant and same maintenance support for him.

Regarding my mortgage, I have an arrangement with my bank to pay €100/wk off my mortgage until my financial situation improves. At an interest rate of 4.4pc, those payments just about cover the interest and reduce my remaining mortage balance of €89,000 by about €1,200/year.

Now here is the rub – if I were to return to work or take any paying placement job, the family would lose all the university support, all our medical cards, the bin charge waiver, the dole and the FIS. I’ve provided this box calculating what I would lose.

Then of course the bank would demand full monthly payments on the mortgage of about €1,400/month or about €16,800 a year.

So David, I calculate that the cost of returning to work is €45,552 and this is the cash value. In order to earn this amount of disposable income, I would require a salary of between €68,000 – €69,000 and subtract my wife’s €13,000 P/A.

I want to work and I want a job but why would I take a job that ends up with me having less income than I have now and not being able to provide for my family?

The minimum wage is roughly equal to my jobseekers allowance & FIS and I’d prefer to work, but the loss of benefits (third-level grants and medical cards) is the killer.

The system doesn’t work!

We are stuck in a rut with no way out, bar the black economy. There are ways around this impasse, but why should I have to revert to subterfuge, the black market and deceit instead of the Government getting its act together and sorting this mess out?


Can you hear the frustration in this father’s voice? Can you sense the gradual realisation that he is in a financial cul de sac? If he tried to go straight and get a job, he loses so much that he would have to get a very well-paid job for all the sums to add up

And as he remains out of work, he knows that the chances of getting a very well-paid job begin to decrease because people want to employ people who are already in jobs.

On the other hand, he knows that he could do a few ‘nixers’ to supplement his income.

This means working in the black-market, but why should he break the law simply to do the right thing by himself and his family?

Some may argue that this is an isolated case and doesn’t imply a general problem. But that is not what the people who actually run this country – the Department of Finance – actually think.

In 2011, the boffins in Merrion Street did some calculations on this problem.

They divided the gross income when unemployed by the net after-tax income when a person is employed. This is called the replacement ratio. They suggested that anything above 70pc would be a serious disincentive to looking for a job.

Department of Finance figures reveal that – particularly for a couple with children – you would have to earn a massive salary for there to be a clear incentive to drop benefits and go back to work. Indeed, even at twice the average national wage, most people are still in a position where going back to work isn’t that attractive. These figures would tend to back up the suggestion from the letter writer.

I realise there are different interpretations put on these figures, but the letter from a father after four years out of work is indicative of a major problem at the core of our system.

If we choose to carry on as things are, why should he try for a job unless it pays him extremely well? And – another way of looking at things – why would an employer pay these high wages if what is driving up the wages isn’t potential employer productivity but the necessary cushion needed above benefits to make the job attractive?

We can put our heads in the sand because the answers are too awkward but that’s hardly a strategy.



David McWilliams writes daily on international economics and finance at

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