Richard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

Question 246: To ask the Minister for Finance the additional cost to the State for each person that loses his or her job in 2009; and if he will make a statement on the matter. [4769/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

Job losses have an impact on the Exchequer finances in two ways — through additional social welfare costs and reduced tax revenue. The exact additional cost depends on individual circumstances, for example; whether the individual is married or single, whether he/she is signing on with the Department of Social and Family Affairs for full benefits or signing on due to reduced working hours, and, crucially, in terms of tax forgone, on the amount of income that they would have previously been earning.

With regard to social welfare payments, it is estimated by the Department of Social and Family Affairs that each 1,000 increase in the Live Register in 2008 added €11.55 million to expenditure on Jobseeker Allowance and Jobseekers Benefit payments and in 2009 will add €11.77 million. Receipt of secondary benefits is linked to the circumstances of individuals and as such it is very difficult to disaggregate jobseekers from other social welfare recipients in receipt of such benefits.

With regard to the loss of tax and PRSI revenue, a specific cost is not possible to compute without knowing the specifics of each individual's personal circumstance. However, based on a number of assumptions outlined below, an overall aggregate estimate of the likely tax forgone for every 1,000 people losing employment is approximately €8 million in a full year, based on 2008 figures.

The assumptions underlining this figure are:

The 1,000 workers are made up of workers earning the minimum wage, the average industrial wage and twice the average industrial wage;

There is a 30:55:15 distribution between those earning the minimum wage, average industrial wage and those earning twice the average industrial wage, broadly reflecting the economy wide situation; and

The breakdown by marital status also broadly follows the economy wide breakdown.

No account is taken of the following:

Employees' pension contributions or other salary sacrifice arrangements;

Minor tax credits or income tax reliefs such as health expenses relief, rent relief, trade union subscriptions;

The impact of any redundancy packages;

Whether the employee takes up alternative employment in the tax year; and

The timing of the job losses within the tax year.

The above factors are crucial in determining the actual cost in any one year and could reduce the cost significantly in that year.