With jobs so scarce, a tough love policy may not achieve much at present except reducing consumption and pushing more people into a negative-equity trap.

Rather than tinkering with benefit levels, we need to take crisis and create opportunity to review what’s gone on over the last decade - huge rises in pensions, minimum wages, benefits/allowances and non-monetary benefits which was politically helpful and given the inflationary environment essential in some cases but has undoubtedly created perverse incentives and disincentives in a difficult employment environment.

We need people to go out, take chances and create jobs with their severances rather than put them under the bed and claim the dole, and we need to make it absurdly easy for the few hiring employers to do so.

On topic, (speaking from personal experience), I made a very unexpected move from higher middle income to social welfare income about 18 months ago.

One thing about living on social welfare is that you have little or no discretionary spending, so real income is much more important than nominal income. ie I could increase my real income by shopping in Lidl rather than the outlets I normally used.

Some costs also fall because of the change of circumstances, eg transport, in nominal terms, took a very large fall (although perhaps not in % of income terms).

Basically, the only costs that matter to the lower income groups are the essentials. Food, Housing, Heat and Power.

Any cut in Social Welfare rates would have to be accompanied by a very clear and sizeable cut in one of those to maintain real incomes. (and prevent considerable unrest).

I started a new thread. A proper discussion of the real and nominal income distribution is hard enough.

The prices of jimmy choo shoes and BMWs are falling like there is no tomorrow, these are items of the middle class basket.

Food(okay maybe not now), public transport and council house rents have all increases,. these are the items of the poor man’s basket.

http://www.finance.gov.ie/documents/publications/reports/2009/Dfincapacityreview09.pdf

Well worth reading for any that want to get an insight to the way the place works (or is supposed to work)

Very interesting paper and a useful contribution to the debate. One thing I’m confused about is how people who don’t live in social housing but have recently become unemployed - e.g. graduates who can’t get jobs and live in private rented accommodation, professionals like architects, engineers, solicitors etc. who are now dependant on SW but live in negative equity housing and likely facing a mortgage interest rate hike in the near future - will be affected by any cut in social welfare rates?

I salute your courage in entering this minefield. I expect you’ll attract some flak from the following direction (http://www.thepoorcantpay.ie/mission-statement) which extracts selectively from the CPI by detailed sub-indices to make the case that the lowest income deciles aren’t any better off. I expect it would require very fine parsing of the HBS data to reconcile this position with your suggestion that a modest cut in social welfare payments might be justified.