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Why Work

Friday, April 24, 2009

I recently had a long conversation with a friend of mine who lost his job.
He was in a reasonably good job and after a little bit of overtime was
earning a gross salary of €35,000 per year.

So I asked him the obvious question of how he was going to cope now with
four children to feed and, I have to be honest, the answer startled me.

He was actually a lot better off and now in a position to go out golfing
every day while his children are at school.

Frankly, I did not believe him until I sat down and did the sums. On a
salary of €35,000, his annual net income after the mini Budget was €28,854,
after all deductions.

Now he is on the supplementary welfare allowance which -- with a wife and
four children -- gives you €443.90 per week, or €23,083 annually.

As he also has a mortgage, he is entitled to mortgage interest supplement
which pays all the interest on your mortgage. In his case, this was €1,200
per month of his €1,500 mortgage, or €14,400 per annum.

He is also entitled to back-to-school and footwear payment of €905 per year
for four children, a medical card which is worth, on average, say €500 per
year (probably more) and a heating supplement which I cannot quantify.

In total, he now has tax-free income of €38,888, an increase in his net
income of €10,034 per year for working on his golf handicap.

Based on the calculations after the mini-Budget, you would need to earn
more than €47,000 per year if you have four children to justify continuing
to work.

This is even before taking into account the costs of working, such as
petrol, car maintenance, tolls, lunches and so on.

Now in any civilised society, and especially in a society in a deep
recession with a huge welfare bill, surely the government must give people
an incentive to go out and work

Making the child benefit taxable or means tested later this year is just
going to make the situation worse and encourage more people to give up work
and rely on the State to live.

It could even drive our small economy to collapse as the welfare bill gets
bigger and bigger as more people, including myself, ask: why should I
bother to go out to work when it is basically costing me money to work?

Unless something radically changes, I will be joining my mate on the golf
course very soon.


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