Most low-income households had to make high-risk changes to their finances to cope with the cost of living crisis, according to the latest ESRI research.
Typical changes included entering arrears, taking on more debt, or eating into savings.
The research, conducted by the ESRI’s Behavioural Research Unit, said such decision are linked to damaging long-term effects, including on mental health.
The survey of over 1,600 low income households found that almost all respondents had reduced spending on essentials, like food, clothes, or energy.
However, it said most had been forced to do more, such as entering arrears, borrowing or eating into savings.
Households reported that these decisions resulted in high levels of stress. Those with children were more strongly affected and experienced higher stress.
The study found little evidence that high-risk changes to finances were linked to individual psychological traits, like financial knowledge or a tendency to prioritise immediate over future outcomes.
Instead, it showed such changes were predicted by life circumstances, such as pre-existing financial difficulties.
Vulnerable households did not obtain all available Government benefits during the cost of living crisis, it said.
Only half of those on very low incomes reported having a medical or GP visit card, and less than half of renters used the rent tax credit, rent supplement, or Housing Assistance Payment.
Just over one-third of households used the support services St Vincent de Paul, the free Money Advice and Budgeting Service or Citizens Information.
The study asked those surveyed why they did not obtain relevant benefits and many said they were unaware of the specific benefit or did not know what it involved.
Households found applying for benefits burdensome.
The Additional Needs Payment, Carer’s Benefit, Energy Hardship Fund and One Parent Family Benefit were reported to be time-consuming and frustrating to access.
Benefits that are not means tested, like child benefit, were found to be the least burdensome.
The households that reported the greatest difficulty accessing benefits were those on very low incomes and those regularly unable to afford essentials.
Co-author of the report Dr Diarmaid Ó Ceallaigh said the financial changes that households had to make were likely to have a lasting negative impact.
“The most deprived households and those with children would especially benefit from assistance beyond recent temporary measures,” he said.
Another report co-author Dr Lucie Martin said the complexity of the welfare system “may have blunted its effectiveness” during the cost of living crisis.
“Simplifying the welfare system, for example, though a single point of application or benefit calculators, might reduce the time, effort, and frustration involved, helping more vulnerable households to get the support they need,” she said.
Article Source – Low earners took on debt to cope with cost of living – ESRI – RTE
