Opinion: Ireland's spending on welfare as a percentage of GDP and per head of population lags significantly behind other EU states

Is Ireland a generous welfare state? In the main, state spending on things like welfare and health are measured by calculating their percentage contribution to gross domestic product or GDP. GDP in its modern usage was developed by Nobel prize winning economist, Simon Kuznets, who did, in fact, warn against its use as a measure of a country’s overall welfare or progress.

Nevertheless, GDP still functions somewhat as the holy grail of economic measurements. It is also often the basis on which policy decisions are made and justified and so must bear scrutiny. Using figures collated and made freely available via Eurostat, the statistical office of the European Union (EU), it is possible get a sense of just where the Irish state ranks in Europe in terms of welfare spending as a percentage of GDP.

Setting the context, most recent Eurostat figures show that Ireland’s general government expenditure as a percentage of GDP stood at 26.3% in 2017, having fallen steadily from a high of 65% in 2010. This makes immediate sense, with Ireland having recently exited a period of intense austerity during which state spending would have naturally increased before gradually declining as economic activity re-emerged.

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Eurostat figures also show that 22.7 percent of people here were at risk of social exclusion or poverty in 2017. This chimes with figures released by the Central Statistics Office (CSO) for Ireland in 2017 which show that if social transfers were removed as a form of income, the overall at risk of poverty rate would jump from 15.7% to 43.8%. State welfare, then, is clearly an important social safety net.

Drilling down into the Eurostat figures, we can see that the ratio of government social protection expenditure to GDP in Ireland in 2017 was 9.5%. This varied considerably across EU member states from 9.5% in Ireland to nearly a quarter in Finland (24.9 %). France, Denmark, Italy, Austria and Sweden devoted at least 20% of GDP to social protection, while Ireland, Lithuania, Malta, Latvia, Romania, Czechia and Bulgaria each spent less than 13% of GDP on social protection. When using GDP as a measure, it is clear that Ireland is far from the top in terms of overall spending on social protection. In fact, we are very much at the bottom.

The state of government expenditure on welfare across the EU

It is also possible to use the data to see how Ireland fares in its spending with respect to particular groups. The group "old age", which includes pensions, accounted for 10.1% of GDP in the EU overall in 2017. It made up the largest part of social protection expenditure in all member states, with the highest shares being registered in Greece and Finland (both 13.8%), followed by France and Italy (both 13.4%). In contrast, Ireland (3.4%), Lithuania (5.7%) and Cyprus (6.0%) recorded the lowest shares. Again, it would seem that Ireland is somewhat of an European laggard here.

If we look at how Ireland does in the context of social protection spending in the areas of health and sickness as a percentage of GDP, the story is similar. We see that Ireland comes in at 1.9% in contrast to those higher up the table such as Denmark (4.4%), the Netherlands (4.1%) and Finland (3.1%). This is also the case with state spending on unemployment supports. In Ireland, this figure as a percentage of GDP sits at 1.1% for 2017, ahead of countries such as Bulgaria (0.1%) and Greece (0.5%), broadly in line with countries such as Luxemburg (1.1%) and Austria (1.3%) but some distance behind other member states such as Denmark (2.3%) and Finland (2.3%).

To use a sporting analogy, we are not playing Premier League football when it comes to welfare spending, but neither are we languishing at the foot of Division 4

If you move away from GDP and consider state spending in real money terms, the picture remains largely unchanged. Overall, Irish state spending on social protection when calculated per head of population comes in as just under €8.500 per year as of 2016. We don’t spend the least: that would be Serbia with €982 per head, followed by Bulgaria with €1,104. Neither are we anywhere near the top: that would be Norway (€18,650), closely followed by Luxemburg (€18, 361) and Switzerland (€16,404).

Though these figures paint a picture, there is undoubtedly a common-sense perception that Ireland, as a "welfare state", is overly generous. This myth is then populated with a plethora of "folk devils" such as the "welfare tourist", who has made his or her way here to avail of the generous welfare system, the "scrounger", who has 25 kids he never sees, lives in a palace and has never worked a day in his life; the "welfare mother" who has "churned out" a gaggle of children in order to live off the income the state provides and so on.

The problem with myths is that they usually have little basis in reality and often draw on extreme examples to justify a particular position. Less diplomatically, they are usually about 95% bullshit, 5% tenuous fact. Nevertheless, they are powerful, often becoming framing devices through which particular social stereotypes are mediated. Ireland is no different in this respect.

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Given this, and given the figures presented here, the question remains as to how generous Ireland is the context of welfare. How much of our perceived generosity is couched in fact and how much of it is myth and/or bullshit? To use a sporting analogy, we are not playing Premier League football when it comes to welfare spending, but neither are we languishing at the foot of Division 4. We are probably in and around Division 3 and could be doing much better.