Lone parents are a marginalised group. And the recession hit them hard. In 2008, they suffered deprivation at a rate of 32%, but by 2012 this had increased to 49%. Over the same period, their employment rate fell from 59% to 48% and the unemployment rate rose from 9% to 25%. In January 2014, the group One Family reacted ‘with distress but not surprise’ at figures showing lone parent families had the highest deprivation and consistent poverty rates among all groups.
The reasons for this are numerous. There have been cuts to the One Parent Family Payment, cuts to the One Parent Family Tax Credit, and cuts to the Family Income Supplement. As well as this, employment prospects worsened – in particular relating to flexible employment, which allows lone parents to work and to care for their children – and taxation of income increased, meaning that lone parents were hit from a number of angles.
Recently there have been well-documented changes to the welfare system for lone parents. The Government has said that these will incentivise unemployed lone parents to enter the workforce. The assumption is that welfare traps are preventing this.
But are there?
To find out, let’s do a case study. We’ll take three lone parents, each with a child in pre-school and a child in primary school. One works and is paid the average wage, one works and is paid the minimum wage, and one is unemployed. Firstly, we want to show net weekly income taking into account wages and welfare supports. And we want to chart it over time. In doing so, we take account of changes to:
· Minimum wage, average wage, and jobseekers payments;
· Tax credits;
· Income tax, PRSI, and USC;
· One Parent Family Payment;
· Family Income Supplement; and
· Child Benefit.
This is shown in the graph below.
The graph tells two stories.
1. During the last years of the Celtic Tiger (2005-2007), a worker on the average wage saw a 13% increase in income, a worker on the minimum wage saw a 16% increase in income, and an unemployed lone parent saw an 18% increase in income.
2. From the onset of the recession in 2008 up to and including 2014, all of our lone parent types saw their incomes fall: the average wage worker’s income fell by 1.4%, the minimum wage worker’s income fell by 1.7%, and the unemployed worker’s income fell by 8.6%.
So what we are seeing is that working lone parents’ net weekly incomes before childcare costs declined only marginally during the recession in spite of numerous cuts. Unemployed lone parents were harder hit, whilst their job prospects worsened with the recession.
But the analysis above is only half the picture. The greatest difficulty facing employed lone parents is affording childcare, and unemployed lone parents face this challenge when they seek to enter the workforce. So, in comparing the groups across the years, we need to take account of changes to the cost of childcare, as well as the introduction of the Early Childhood Care and Education (ECCE) scheme, which grants some free childcare to all parents. In the case of the latter, we align the cost of childcare for the pre-school child with that of the primary school child from 2010, as ECCE only provides for childcare for part of a day. For a lone parent working full-time, they will need to top-up to pay for the afternoon, when the pre-school child and the primary school child are cared for. The graph below shows the trend in weekly income taking account of childcare cost.
The picture is stark. And again it is broken into two phases.
1. From 2005 to 2009, childcare costs made a lone parent worse off by working. An unemployed lone parent was respectively €50 and €100 better off than a lone parent on the average industrial wage and a lone parent on the minimum wage, in each year until 2010.
2. Since 2010, a lone parent is only marginally better off working in a job paying the average wage than unemployed. Working in a minimum wage job now costs a lone parent €50 when compared to being unemployed, so the gap there has halved. The driver of the narrowing gap has been the ECCE scheme. So that has been a partial success at supporting the incomes of working lone parents.
There are some clear observations to be made:
1. Although the recession limited employment prospects for lone parents, becoming employed would not necessarily have increased their weekly income.
2. A lone parent should only enter the workforce if he or she can earn at least the average wage: otherwise he or she is worse off.
3. Lone parents’ greatest barrier to escaping poverty is not his or her job prospects, but rather the cost of childcare: this is clear from comparing the two graphs.
All of this is new analysis. All income, taxation, and welfare changes since 2005 have been accounted for. And the data for childcare is a national average: hence lone parents living in Dublin will face higher costs and so are even worse off working than not working, wages held equal.
The July changes to the welfare system are designed – according to the government – to move lone parents off welfare. This misses the point. The first graph shows that welfare traps do not exist: in every year since 2005 a lone parent is better off leaving the office than not going at all. But when they arrive at the childcare facility to pick up their children, they would be better off not having worked at all, unless they earn at least the average wage.
All of this shows that current government policy is misguided. It needs to recognise one very simple conclusion: there aren’t welfare traps, there are only childcare traps.
 ‘Winners and Losers? The Equality Impact of the Great Recession in Ireland’, McGinnity, Russell, Watson, Kingston, & Kelly (Equality Authority and ESRI, 2014)
 Press Release, One Family, 21 January 2014
 We use these three stylized groups for ease of analysis. Many lone parents will have incomes and situations different to the stylized examples shown here.
 The data here is taken from ‘Indecon Report on Support for Childcare for Working Families and Implication for Employment: Report for Donegal County Childcare Committee’, Indecon (November 2013)