There has been considerable increase in the cost of a Minimum Essential Standard of Living (MESL) across all household types according to a new report from the Vincentian MESL Research Centre at SVP.
The report launched today found that in the twelve months to March 2023 the core MESL cost has increased by an average of 10.6% nationally, 12.9% for urban based households and by 5.7% for rural households. The cumulative increases in the core MESL costs, over the three years to March 2023 were 18.9% nationally, 17.8% for households in urban areas and 21.2% for households in rural areas.
The annual MESL analysis is the only work of its kind in Ireland. It captures the change in the cost of the minimum basket of goods and services needed to enable people to live with dignity. The 2023 MESL comes at a time of exceptional increases in living costs, which is placing particularly acute pressure on the cost of a socially acceptable minimum standard of living.
These rates of increase exceed the average change in prices as measured by the CPI, due to the sensitivity of the MESL basket to changes in food and energy prices.
Robert Thornton MESL Research Manager said; “It is notable that, unlike in recent years, the rate of increase is higher in urban areas than rural areas primarily due to rising gas prices for urban home energy needs.
The overall level of change has been primarily driven by the rising cost of home energy (over the last two years) and food in the year to March 2023. The analysis finds that cost of the MESL food basket has increased by an average of 20.8%, in the year to March 2023. The MESL food basket is more exposed to increases in staples such as milk, butter and bread which have each increased significantly in price.
In the MESL household energy basket, rising gas and electricity prices have pushed urban home energy costs up an average of 67.8%. While a reduction in home heating oil prices combined with rising electricity prices have seen rural energy costs rise by 6.2% in the year to March 2023.
Cumulatively, from March 2020 to March 2023, the MESL home energy costs increased by 117.1% for urban based households and by 75.8% for rural based households. Previously, the MESL analysis has found that rural home energy costs (based on the use of home heating oil) were higher than urban home energy costs (based on the use of natural gas), this position has now reversed.”
The report also identifies the rising risk of energy poverty. This is due to the base rate of income supports generally, and particularly energy related supports (Fuel Allowance and Household Benefits Package), not being maintained relative to rising energy and minimum living costs.
The majority of MESL basket categories showed an increase in costs. However for rural based households, Transport and Car Insurance each showed decreases of -0.9% and -5.7% respectively. Education is notable with an average decrease of -6.0%, this is primarily due to the introduction of the new Free Primary Schoolbooks Scheme.
According to the report while the extraordinary inflation levels peaked in October 2022, the current levels remain extremely high. The current forecasts indicate the potential for approximately 6.3% increase in MESL costs over the remainder of 2023 and into 2024.
Robert Thornton said; "The MESL provides an evidence-based indicator of the current cost of the goods and services required to enable a socially acceptable minimum standard of living. In this way, the MESL expenditure data serves as a benchmark to assess the adequacy of social welfare supports and the national minimum wage.
“While this report focuses on the position of minimum living costs and adequacy of incomes in 2023, a tranche of ‘once-off’ supplementary payments were announced alongside Budget 2023. These were paid to households in the last quarter of 2022 in response to the rapid inflationary pressure which developed over the course of 2022.
“The impact of these supports falls between the points in time examined in the annual MESL series. A supplementary overview of the effects of these additional supports finds that the package of additional ‘once-off’ supports supplemented the base social rates in 2022. Consequently, the trend of income adequacy and inadequacy remained relatively stable between the first and last quarter of the year, despite the significant increase in MESL costs over the period in question”.
The core MESL cost excludes housing, childcare and the effect of secondary benefits which are then included in calculating the cost of MESL for 6 specific household types, All would have different circumstances and the MESL determines the income adequacy and inadequacy of each group depending on whether in employment or depending on state support. For example;
Costs of children: The analysis again demonstrates that the cost of a MESL is highest for older children, aged 12 and over. The direct MESL needs of older children cost approximately €149 per week, and social welfare supports meet 61.5% of these costs. This demonstrates an erosion of the progress towards providing an adequate income for this age group, as the relative value of the higher QCI rate for children aged 12 and over has not been maintained.
Older single adult: The cost of a MESL for an older single adult living alone has increased significantly from 2022. Income supports have not kept pace with this rate of change. When in an urban area net household income from the State Pension (and secondary supports) is found to meet 90.4 – 93.4% of MESL needs (Non-Contributory and Contributory pension respectively).
Urban single adult: The cost of a MESL basket for an urban single adult in full-time minimum wage employment increased by 7.8% in the year to March 2023. Home energy costs increased by 46.9% and food costs increased by 21.8%, The increase in MESL costs has resulted in the inadequacy of a full-time minimum wage salary deepening, with an income shortfall of €162 per week. The National Minimum Wage will provide for 70.9% of this household’s MESL expenditure need.
The full report can be found at (https://www.budgeting.ie/publications/mesl-2023/)