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Financial package will ‘significantly cushion incomes’ from Covid-19 job losses

The research simulates the impact that large numbers of job losses will have on families’ incomes.

The financial aid package unveiled by the Government will significantly cushion incomes from Covid-19-related job losses, according to a new study.

Published by the Economic and Social Research Institute (ESRI), the research simulates the impact that large numbers of job losses will have on families’ incomes, with and without the additional measures announced by the Government last month.

It finds that the flat-rate Pandemic Unemployment Payment of 350 euro per week does most to support incomes, reducing the number who lose more than 20% of their disposable income by around a third.

Barra Roantree, an author of the report and an economist at the ESRI, said: “The Government’s policy response will significantly reduce the number of families who see extreme reductions in their income as a result of job losses related to the ongoing Covid-19 pandemic.


(PA Graphics)

(PA Graphics)

Press Association Images

(PA Graphics)

“However, the rise in unemployment will bring significant costs to the exchequer: around 800 million euro per quarter for every 100,000 individuals who lose their job.”

The research also finds that the additional cost of the Government’s Temporary Wage Subsidy Scheme (TWSS) may be minimal, in part because its current design is less generous to lower earners than the Pandemic Unemployment Payment they would receive if laid off by their employer.

Karina Doorley, an economist at the ESRI and another author of the report, said: “A central aim of the Temporary Wage Subsidy Scheme is for companies to retain links with their employees so they can resume activity faster once necessary public health measures have been relaxed.

“Ensuring that both employees and employers have an incentive to take up this payment is important to ensuring it achieves this objective.”

The report estimates that a rise in unemployment will reduce direct tax revenues and increase welfare spending by around 800 million euro per quarter for every 100,000 individuals that lose their job.

It also estimates that before accounting for the Government’s policy response, around 560,000 families will be financially worse off in their medium unemployment scenario where roughly 600,000 individuals lose their job.

Most of these – 400,000 – would lose by more than 20% of their disposable income.

Accounting for the measures announced by the Government, this figure falls to between 200,000 and 300,000 depending on how many are retained in work through the TWSS and whether employers make additional payments to eligible employees.

The report said: “While most instead see reductions of less than 20% of their disposable income, some low-earning working age families may be financially better off in the short-run.

“This is because the level of PUP exceeds their income from work and they are allowed to retain eligibility for Working Families Payment.

“Although work incentive effects are of little importance while public health measures are in place, our simulations suggest careful consideration should be given to how these supports will withdrawn in the future as public health measures are lifted and the economy begins to recover.

“We estimate that the pandemic unemployment shock will result in higher income families seeing larger proportionate falls in their incomes than lower income families.”