Changes to the minimum wage have tended to occur annually on January 1st in recent years. But for a long time after the rate was first launched in the Republic in 2000, it was usually adjusted on April 1st each year, the anniversary of its introduction. Curiously, this is still the date most often used for minimum wage changes in a range of other countries such as Britain, New Zealand and Canada.
The association between the minimum wage and All Fools Day is an apt one, when you consider the regular base quality of public debate around issues of low pay. Too often, the discussion slides into the Punch-and-Judy trap that bedevils most public interactions between groups with allegiances respectively towards workers or employers. We’ll go bust if we have to pay staff more, say the employers. Oh no you won’t, say workers. Oh yes we will. Meanwhile, for the rest of us, our heads throb as they shout.
The union Unite in mid-September accused the Government of ‘ripping up’ a commitment to introduce a living wage before its term ends, on the evidence that the plan to raise the minimum wage by just 80 cent in the new year was too slow of a start
Both sides have been at it again in recent weeks over the Government’s plan to fulfil a promise to put on a statutory footing the concept of the “living wage”: a rate of pay considered the minimum for an acceptable standard of living, compared to the what the rest of the workforce can afford.
Various calculations put it at somewhere between €13.10 per hour for next year, as indicated by the State, and €13.85 per hour, as suggested by the Living Wage Technical Group, a left-leaning body. Both rates are well above the legal minimum wage, which is currently €10.50 and will rise to €11.30 in January.
[ Isme warns of economic cost of introducing living wageOpens in new window ]
Groups sympathetic to workers argue, loudly, that the Government isn’t doing enough to raise rates. In all likelihood, it will never do enough for them to accept. Meanwhile, groups representing smaller businesses claim, as they always do, that raising the floor on the rate of pay will damage productivity and cost employment. History, and empirical research, shows this is usually not the case.
And so the debate, as it tends to, remains awash with exaggeration and hyperbole. For example, the union Unite in mid-September accused the Government of “ripping up” a commitment to introduce a living wage before its term ends, on the evidence that the plan to raise the minimum wage by just 80 cent in the new year was too slow of a start.
Last week, the Government announced that a living wage of 60 per cent of the median workers’ rate would be fully introduced in 2026 after the last of four top-ups on the minimum wage, the first of which is January’s 80 cent rise. The Government’s term of office is due to run out in the middle of 2025. So, assuming it goes the distance, it could be six months or so late with the promise it made in the Programme for Government. A little tardy, perhaps. But hardly a promise “ripped up”.
[ Approval given by Cabinet to proceed with ‘living wage’ planOpens in new window ]
About 25 years ago, when the debate on introducing a legal minimum rate of pay first raged in this State, it was mostly the employers who tended towards hyperbole. When the initial rate of IR£4.40 (€5.59) was proposed by the Government in 1998, to be introduced two years later, Ibec, the main employer lobby, was reported to have said it was “a strategy for competitive failure, for unemployment, for poverty”. Small business groups predicted disaster.
All nonsense
This was all nonsense, of course. When the first minimum rate was introduced, Ireland was the last country among the then members of the European Union to take the plunge. At the time, about 200,000 workers were earning less than this modest rate and so got an immediate pay rise. The rate rose quickly to €8.65 per hour by 2007.
As retailers and hospitality employers... enter a period of uncertainty due to the economic squeeze, it is understandable that they might worry over a pre-baked series of four annual rises
As Ireland entered a bailout in the financial crash, Fianna Fáil cut the minimum wage by €1 per hour just before it left office in 2011. There was never much evidence that this cut would achieve anything. The point of it may have been to make room further up the bed for future pay cuts among better-remunerated workers, who might want to maintain a relative margin over the minimum.
But when Fine Gael and Labour took power shortly afterwards and immediately reversed the cut, businesses again complained loudly about the unfairness of it all. Yet it didn’t cause any damage. The rate started rising again in 2016 and here we are, with the economy effectively at full employment at a minimum rate that will shortly be double the one that was first brought in.
As retailers and hospitality employers, the ones most likely to be paying the minimum wage, enter a period of uncertainty due to the current economic squeeze, it is understandable that they might worry over a pre-baked series of four annual rises to the floor rate of pay. They should console themselves with the fact that predictions of disaster over changes to minimum pay haven’t come to pass before. It isn’t the wages of the lowest-paid workers that will do most to dictate their fortunes. It will be the overall state of the economy.
The Government’s plan to replace the minimum wage with a living wage of 60 per cent of median earnings, with a view to hiking this threshold to 66 per cent, does have a whiff of pre-electioneering about it. As they go into the next general election, the Government parties will be able to argue that a new minimum rate, branded as a living wage and tied broadly to the wages of higher-paid workers, is about to become a reality.
But will it do the Coalition much good? The Irish Small and Medium Enterprise Association, which has often grumbled about raises to minimum rates in the past, was quick this week to criticise the four-year schedule of hikes out to 2026.
But it also wasn’t wrong when it said that if the Government really wants to help lower-paid workers, it should focus more attention on giving them access to lower-cost housing. There is no point in hiking the minimum legal rate every year if it is just only going to be eaten up by rent.
