Dr. Karina Doorley:

In large part price indexation is used because it is cheaper for the Exchequer. That is it in a nutshell. That is if the aim is to at least try to keep poverty and inequality constant; again, we are not saying that should be the aim and there can be targeted measures to try to decrease levels of inequality. If these measures are being implemented and we are trying to keep things constant, wage indexation is necessary. Otherwise there is a gap between people who rely on welfare and those who have wages. There would be disparities between those in time.

In some countries there has been much change over time. It used to be that there was price indexation but in particular over the great recession many countries moved from wage indexation to price indexation, purely because of the cost of wage indexation, which is higher.