Tom Ferris is a Consultant Economist specialising in Better Regulation. He was formerly the Department of Transport’s Senior Economist

Low Pay Commission recommends an increase in the

National Minimum Wage

The Low Pay Commission has just recommended that the National Minimum Wage should rise to €9.15 per hour. This represents an increase of 5.8% on the current rate of €8.65. The full report, issued on 21 July 2015, is available on the website.

Basis for Recommendations

Donal de Buitlear, who chairs the Commission, did not get unanimous agreement for the report—but he did produce a very comprehensive report supporting the case for the proposed increase in the National Minimum Wage. The report examined submissions from interested parties and consulted directly with workers and employers in relevant economic sectors on the minimum wage. It also took into account a range of considerations including:

  • The available evidence that suggests that moderate increases in the minimum wage will not lead to significant loss of jobs;
  • The Irish economy is recovering although it still faces risks particularly in the external environment;
  • The number of people in employment is increasing;
  • Unemployment remains high but has declined particularly in the last year;
  • Competitiveness has improved, partly due to exchange rate movements and it is important that this trend is maintained;
  • While inflation has been relatively low, the minimum wage has effectively remained at its current level for the past eight years;
  • It is of critical importance to enterprise development that the design of both the tax and PRSI systems creates the right conditions for job creation, including the incentives (from both employer and employee perspectives) for employees to work additional hours and to increase pay where appropriate.

Tracking the National Minimum Wage

The National Minimum Wage was introduced in Ireland under the National Minimum Wage Act 2000.In April 2000, the Irish government set a £4.40 minimum wage (equivalent to €5.58). The current rate is €8.65. It has remained at that rate since 2007, except for a period in 2011 when it was cut by €1 by the previous Government. The current Government reversed that cut in July 2011. The table tracks the ups and downs of the National Minimum Wage since 2000.

    

Not everybody agrees

The recommendations have the support of six of the nine members of the Low Pay Commission. Of that six, the three members with a business background believe that the change of rate should be implemented but not sooner than the second quarter of 2016. Three members did not support the recommendations at all, and produced their own minority reports. Patricia King,General Secretary of the Irish Congress of Trade Unions, and Gerry Light of the Mandate trade union stated in their report that

“We disagree with the recommendation as set out in the substantive report of the Low Pay Commission with particular reference the recommendation to increase the hourly rate of the National Minimum Wage by 50c”.

And Edel McGinley, director of the Migrants Rights Centre Ireland stated in her minority report that she was

“...unable to endorse the 50c recommended increase of the LPC as it does not adequately respond to the needs of workers on the minimum wage”.

What next?

Speeches by the Taoiseach and the Tanaiste at the launch of the Low Pay Commission report indicate that this is a report that will not gather dust on a library shelf. The Taoiseach, Enda Kenny, said that

“The recommendations of the Low Pay Commission will be addressed in the Budget in October, alongside changes to the taxation system and the welfare system, so that all elements of our plan to make work pay will reinforce each other."

In turn, the Tanaiste, Joan Burton, said

“The evidence is now in, the Commission's recommendation is clear and I look forward to implementing that recommendation in due course. Any potential anomaly in the PRSI system arising from the Commission's recommendations will be addressed at the appropriate time in the context of the Budget”.

The Low Pay Commission has only completed the first stage of its work in recommending an appropriate rate for the National Minimum Wage. It is now up to the Government to implement the recommendation.

The Members of the Commission are:

  • Dr Donal de Buitléir, Chairperson, Director of PublicPolicy.ie.
  • Vincent Jennings, Chief Executive Officer, Convenience Stores and Newsagents Association Patricia King, General Secretary of ICTU
  • Gerry Light, Assistant General Secretary, Mandate Trade Union
  • Caroline McEnery, Director, The HR Suite; HR & Business Solutions
  • Edel McGinley, Director, Migrant Rights Centre Ireland
  • Mary Mosse, Lecturer in Economics, Programme Director for Postgraduate Research, Department of Accountancy and Economics, Waterford Institute of Technology
  • Tom Noonan, Chief Executive, Maxol Group, Former IBEC President;
  • Professor Donal O’Neill, Department of Economics, Finance and Accounting, NUI, Maynooth

The Commission has been appointed for a three-year period. Its future work will focus on getting a better understanding of the impacts of low pay policy in Ireland on both employees and employers, and the wider economy. As well as examining other aspects of the low pay environment, the Commission will be reviewing the National Minimum Wage on an annual basis. There are many interested parties who will follow the Low Pay Commission’s deliberations with a keen interest.