Examining the Hidden Cost of Poverty by Micheál Collins

Micheál Collins


This blog is based on a report commissioned by the Social Justice Team at the Irish Society of Saint Vincent De Paul. Click here to access the report.

Living life on a poverty income is an all too common phenomenon in rich societies across the developed world. In Ireland, it is the reality for approximately 15% of the population: around 700,000 people living in 270,000 households across the state.

By necessity living life on such a low income imposes costs on these individuals and families. Making ends meet involves personal sacrifices, restricts options and limits opportunities; for many it is not always possible to find ways to make ends meet. These individual costs of poverty are large scale and leave effects that last years and at times generations.

Alongside these individual costs, poverty is responsible for other costs. In particular, the presence of poverty in a society triggers demands on the public purse. These hidden costs derive from the identification of poverty as a determining factor in the need for, and demand for, a wide range of public services and policies ranging across almost all areas of public policy. Poverty triggers needs and responses by the state, not always at the ideal level of adequacy, but nonetheless involving resources that are allocated to addressing the outfall from current and past experiences of poverty.

Building on past work in the UK (from Donald Hirsch and Glen Bramley among others), Canada, New Zealand and the US a new report highlights the additional public service costs that Irish society carries as a result of current and past experiences of poverty. It does so to establish a heretofore absent benchmark for the recurring annual costs to the state of poverty, and to highlight for all members of society, whether they are above or below the poverty line, the costs incurred by society as a result of poverty.

The report examines the cost of poverty categorised into six broad areas of public policy and expenditure:

  • Health Care
  • Children and Families
  • Education and Training
  • Housing
  • Justice and Emergency Services
  • Certain Welfare Supports

Within these broad categories the report examines a total of twenty-five individual areas or expenditure programmes, accounting for a total of €27.9bn in annual expenditure by the Irish state. While the report establishes a range of expenditure costs (from conservative to an upper limit), the main estimate determines an annual public service cost of poverty of almost €4.5bn (£4bn).

Expressed in per capita terms the main estimate implies that poverty imposes a public service cost equivalent to a sum of €913 (£820) per person in the Irish state each year. Relative to the number of households in the state, the annual public service cost of poverty is just over €2,600 (£2,300) per household. Compared to the overall income and expenditure of the Irish Government, the main public service cost of poverty figure is equivalent to 5.1% of total General Government Revenue and 5% of total General Government Expenditure. Put another way, €1 in every €20 collected by the state from taxes, social insurance and charges ends up being allocated by the state to make up for the way that poverty damages people’s lives.

Reports such as this highlight that the existence of poverty is impacting everyone in society and not just those on incomes below the poverty line. In particular, a large amount of the money raised and spent by the state every year is associated with the ways that poverty damages peoples’ lives. Second, the results point towards the potential for a new suite of public policies focused on addressing and reducing the current experiences of poverty and their past consequences. These have the potential to create a virtuous circle for society, where the lives of the least well off are improved while simultaneously freeing up government resources to focus on other public policy priorities. Some of these savings have the potential to arise in the short-term while others, in particular those associated with legacy impacts of poverty and disadvantage, will take time to appear. In some areas, states will need to embrace a social investment approach by increasing commitments and spending in the short-term so that the substantial medium to longer-term savings can be realised. As Kvist (2013) notes, the returns from such policies “vary over the life course” but have the potential to be substantial and of benefit to all in society irrespective of their location above or below the poverty line.

Finally, these recurring large public service costs underscore the importance of social policy measures aimed at preventing poverty. At the very least Governments and societies should be committed to avoiding further increases in these recurring costs. Such a perspective is even more important in challenging economic times such as this, when we know the negative socio-economic fallout from the Covid-19 pandemic is likely to fall heaviest on those in our societies with the least capacity to absorb its impact.

Micheál Collins is Assistant Professor of Social Policy at University College Dublin and the author of the report.

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