Small businesses have taken aim at Government plans to increase the minimum wage in next week’s budget, claiming further increases to their costs will be “devastating”.
The national minimum wage is expected to rise by 65 cent in the budget, which would be an increase of just under 5 per cent, bringing it to €14.15 per hour. If implemented, it would bring weekly pay from €526 to €551.85, an annual salary of €28,696.
Up to 200,000 people earn the minimum wage in Ireland, many of whom are employed in small and medium sized enterprises in the retail, hospitality and service sectors.
Officials from Isme, the representative body for such businesses, told the Oireachtas enterprise committee on Wednesday that the minimum wage should not be used as a mudguard against spiralling cost of living pressures.
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“When you look at our minimum wage, it is second in Europe in absolute terms,” said chief executive Neil McDonnell. “Once you start measuring it on purchasing power basis, it falls right down because our costs are too high.
“The current minimum wage is €27,000 per year. That’s €2,200 a month. What’s the average rent across the country right now? It’s in excess of €1,800 a month. The minimum wage is never going to be able to pay the rent demands that are out there.
“The only way we deal with that is decrease the cost of rent – not increase the minimum wage.”
Isme chairman Finbarr Filan said further increases to business costs would be “devastating”, insisting he was “not an alarmist”.
“We have faced an onslaught of costs over the past two to three years, but the biggest driver is the minimum wage costs, because that’s gone up by 35 per cent in four years,” he said. “It’s really hard for any business to sustain those costs ongoing.
“Isme has always supported a minimum wage and we all want our workers to be well paid, but it has to be at a level that is sustainable. Three years ago, I highlighted that if wages go up by the percentages that were targeted there was going to be carnage – and there is.
“If you look at the Revenue data for corporation tax paid by small businesses, 88 per cent of them pay less than €5,000 a year, and 50 per cent pay none. That means they are breaking even, or making a loss. That is all being driven by these increased costs.”
More generally, Mr McDonnell said the current threat to corporate tax intake has made the case for growing indigenous businesses all the more urgent.
“We have effectively had a number of soft budgets because corporation tax has ballooned over the past number of years, yet this year you have seen how potentially under threat that corporation tax golden goose is,” he said.
Mr McDonnell said he knew of at least one US drug company that has already stopped funnelling its profits through Ireland in response to threats from US president Donald Trump.
“There, straight away, is going to be an immediate loss of corporation tax, so we cannot rely on it,” he said. “We do not knock foreign direct investment, but putting all our eggs in that basket isn’t going to work.”
