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Low Pay, Poverty and Social Security

Author

Listed:
  • Tim Callan

    (Economic and Social Research Institute (ESRI))

  • Brian Nolan

    (Economic and Social Research Institute (ESRI))

Abstract

Directing support towards those in employment but on low incomes is one of the most serious challenges facing social security policy, whether based on Beveridge or other models. Beveridge saw family allowances - universal cash transfers for children- as the mechanism for eliminating want for those at work. Means-tested transfers to those in work, tax allowances or exemptions, and minimum wages are other widely-used policy options. Here the links between low pay and poverty and the effectiveness of different strategies for helping the "working poor" are examined, using a sample of Irish households. Measuring poverty using relative income poverty lines, only 10-15% of households below such lines are headed by an employee, with up to 20% containing an employee. Using a measure of poverty which combines income and direct indicators of deprivation, households headed by an employee still only account for about 12% of "poor" households. Only a minority of employees below conventional low pay standards, at most about 20%, are in poor households, whether poverty is assessed using income alone or income and deprivation indicators. Of employees heading of poor households, only a minority are low paid but most have child dependants. While most of the first-round gains from a minimum wage do not to go poor households, about 40% of poor employee-headed households do benefit. Tax exemptions for children have quite limited effects, but a substantial increase in universal Child Benefit, partly financed by making it taxable, has a major impact on the working poor.

Suggested Citation

  • Tim Callan & Brian Nolan, 1992. "Low Pay, Poverty and Social Security," Papers WP036, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:wp036
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    File URL: https://www.esri.ie/pubs/WP036.pdf
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    References listed on IDEAS

    as
    1. Nolan, Brian, 1992. "Low Pay in Ireland," Research Series, Economic and Social Research Institute (ESRI), number GRS159, August.
    2. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-764, July.
    3. Foster, James E & Shorrocks, Anthony F, 1988. "Poverty Orderings," Econometrica, Econometric Society, vol. 56(1), pages 173-177, January.
    4. Paul Johnson & Graham Stark, 1991. "The effects of a minimum wage on family incomes," Fiscal Studies, Institute for Fiscal Studies, vol. 12(3), pages 88-93, August.
    5. Callan, Tim & Nolan, Brian, 1991. "Concepts of Poverty and the Poverty Line," Journal of Economic Surveys, Wiley Blackwell, vol. 5(3), pages 243-261.
    6. Beckerman, W, 1979. "The Impact of Income Maintenance Payments on Poverty in Britain, 1975," Economic Journal, Royal Economic Society, vol. 89(354), pages 261-279, June.
    7. Callan, Tim, 1991. "Income Tax and Welfare Reforms: Microsimulation Modelling and Analysis," Research Series, Economic and Social Research Institute (ESRI), number GRS154, August.
    8. Brigitte Buhmann & Lee Rainwater & Guenther Schmaus & Timothy M. Smeeding, 1988. "Equivalence Scales, Well‐Being, Inequality, And Poverty: Sensitivity Estimates Across Ten Countries Using The Luxembourg Income Study (Lis) Database," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(2), pages 115-142, June.
    9. Richard V. Burkhauser & T. Aldrich Finegan, 1989. "The minimum wage and the poor: The end of a relationship," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(1), pages 53-71.
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    Cited by:

    1. Callan, Tim & Nolan, Brian & Whelan, Christopher T., 1996. "A Review of the Commission on Social Welfare's Minimum Adequate Income," Research Series, Economic and Social Research Institute (ESRI), number PRS29, August.
    2. Watson, Dorothy & Maître, Bertrand & Whelan, Christopher T., 2012. "Work and Poverty in Ireland: An Analysis of CSO Survey on Income and Living Conditions 2004-2010," Research Series, Economic and Social Research Institute (ESRI), number BKMNEXT226, August.

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