One of the legacies from the pandemic was the Government’s recommitment to introduce a living wage by 2026, replacing the current national minimum wage. This policy would go some way to recognising the contribution of the many indispensable frontline workers who earn the legal minimum rate of pay, or just above it.
In the absence of normal workplace pay negotiations, many working people in retail, hospitality, transport and domestic waste collection depend on minimum wage increases to make ends meet.
To date the Government has made some progress on its commitment. Indeed, Minister Peter Burke in Dáil Éireann recently reaffirmed the pledge to introduce the living wage, thus “eradicating low-wage employment for all workers”.
It has been reported in The Irish Times that the Low Pay Commission, comprised of union, employer and independent members, unanimously recommended an 80 cent increase to the minimum wage for 2025, with an ultimate target of 60 per cent of hourly median wages set by Government.
As with any policy, it is important that decisions are based on facts and not soundbites.
Firstly, the cold reality is that Ireland has a low-pay problem. Many are living in a low-wage Republic. One in five workers are low paid, a figure that has remained relatively unchanged in two decades, despite periods of boom and bust.
Unsurprisingly, women are much more likely to be low-paid, in part reflecting how we undervalue care work in society. Low-paid employment is not restricted to students or teenagers, with one in every five low-paid workers in Ireland aged over 50. According to the Society of St Vincent De Paul, more working people in full-time employment are accessing food banks and homeless services. This is not normal.
Ireland has one of the highest rates of low pay in the EU, contributing to one of the highest levels of market inequality. Along with the lack of good jobs and the rising cost of living, this level of inequality is a risk to social cohesion, according to the government’s own National Risk Assessment.
Secondly, what is the impact of minimum wage increases on businesses? The evidence is clear. In response to a parliamentary question, Minister Dara Calleary revealed that there were 629 new hospitality businesses “incorporated” from January to May 2024. This compares to 155 business closures during the same time, a ratio of four new businesses for every closure. In retail, the picture is similarly robust.
There were 528 new businesses set up compared to 168 closures, a net increase of 360 over the first six months of this year. This does not suggest that minimum wage increases are a barrier to new start-ups.
A living wage also has benefits for businesses. The National Economic and Social Council has argued that reducing low-paid jobs can cut business costs by reducing spending on recruitment, administrative and training associated with high staff turnover.
And it went further, saying that job quality and fair pay can improve productivity, enhance financial performance, improve service and product quality, increase innovation, and enhance customer service and organisational reputation.
Of course, workers also spend their wages, with those on low-income spending more of take-home pay than higher earners who tend to save more. This boosts consumption and spending in the economy.
A higher minimum wage is unquestionably good for workers, businesses and the economy. The Government has a decision to make, not just about a modest minimum wage increase, but about its vision for Ireland.
Will it tackle in-work poverty and inequality by establishing a living wage? Will it raise the living standards of the lowest paid? Will it promote best business practice which results in best business results? Or will it bow to short-sighted pressure and abandon its commitment to “make work pay” and keep large parts of Ireland’s domestic economy mired in a low-road business environment?
Ultimately, it’s a political choice.
This article was written by Darragh O’Connor, Head of Strategic Organising & Campaigns at SIPTU