Penrose Dáil remarks on the Living Wage

15 October 2019

‘Living Wage’ Motion

Remarks, Willie Penrose TD

It is very timely that we should be discussing the National Minimum Wage and the Living Wage.

Labour’s position is unambiguous: No one working full-time should be living in poverty.

Labour supports the Living Wage, and we want to see a genuine living wage become the minimum standard that applies to low paid workers in Ireland.

While I am speaking on the topic of the Minimum Wage, I want to refer to the remarks made by the Government at Budget Day and since in relation to raising the Minimum Wage.

Just today, the Taoiseach said that the recommendation of an increase of 30 cent to the Minimum Wage, to €10.10, will proceed in January unless there is a disorderly Brexit.

He said that withholding the increase is “in line with the recommendations” of the Commission.

That is not strictly true.

What the Commission’s recommendations state is that “The Commission acknowledges that in the event of a ‘hard’ Brexit the Government may need to review the recommended rate.”

This is not a recommendation to postpone the increase.

There is an economic argument that a higher rate might be more appropriate, given the need to boost demand in the economy in the event of an economic downturn.

The suggestion that the government might hold off deciding on the rate in the event of a hard Brexit is not provided for by law.

The law is clear. The Minister has three months from receipt of the recommendations to make a decision.

The recommendations of the Low Pay Commission which have just been published are dated July 2019.

It would be interesting to know when Minister Regina Doherty received them.

She does not have the luxury of taking a wait-and-see attitude towards Brexit.

The Minister can decide to set a contingent minimum wage rise, with the option of changing her decision in the event of a disorderly Brexit, but this is not what the Commission recommended and therefore she is obliged to lay a statement before both Houses of the Oireachtas outlining the rationale for her decision.

Economic analysis shows that raising the wages of the lowest paid does not cost jobs in the economy.

There is no evidence to support the Government’s threat – and it is a threat – to suspend the increase to the minimum wage.

With inflation running at 1.5%, the 30 cent increase will barely match the rising cost of living, which is why it is so important that we take the politics out of setting the minimum wage and focus on the evidence.

In that regard, the work of the Living Wage Technical Group – based on research on the cost of meeting a minimum essential standard of living by the Vincentian Partnership for Social Justice – makes a very valuable contribution to our understanding of the cost of living.

Today the Living Wage is €12.30 per hour, whereas the National Minimum Wage is €9.80; a whole €2.50 lower.

This gap was not as great twenty years ago.

When a National Minimum Wage was first introduced in 2000, it gave workers a guarantee that they would be able to meet the basic cost of living.

In 2000, the minimum wage was set at two-thirds of the median average income.

Two-thirds of the median income is commonly used as a threshold for poverty, for example by the European statistics agency, Eurostat.

The goal of the Minimum Wage, when it was first introduced, was clearly to bring full-time workers above the poverty threshold.

Unfortunately, this did not last long.

In the 2000s, the cost of living rose very quickly.

The minimum wage was also increased, but it did not keep pace with median incomes.

Ten years later, in 2010, the minimum wage was only 44% of the median income.

The minimum wage had fallen in value by a third.

The National Minimum Wage should not be a political football.

The State is directed by the Constitution to ensure that citizens (men and women equally) can meet their needs as a result of their occupations.

A good job is the best route out of poverty, and if we are to build an equal, fair society, we have to make sure that work remains an attractive option for anyone who wishes to improve their circumstances.

That is why Labour sought to ensure that the National Minimum Wage is based on evidence.

Labour was instrumental in passing the National Minimum Wage (Low Pay Commission) Act 2015, which created the Low Pay Commission.

The role of the Commission is to consider evidence and to make a recommendation about at what level the minimum wage should be set.

This reduces the discretion of the Minister of the day to ignore evidence when setting the minimum wage.

When the Minister receives a recommendation and report from the Low Pay Commission, he or she shall – within three months – either declare a national minimum hourly rate of pay in the terms recommended by the Commission, or else set a different rate or else decline to make an order.

And if the Minister does anything other than what the Commission recommended, he or she must lay a statement before both Houses of the Oireachtas outlining the reasons for that decision.

The Low Pay Commission is an important mechanism to hold Ministers to account with respect to the National Minimum Wage and that is why Labour has proposed an amendment to Sinn Féin’s motion to include reference to the Commission.

Specifically, where the original Motion ends with a call to Government to “Introduce a living wage of €12.30 per hour in 2020” The Labour amendment calls on Government as follows to “Instruct the Low Pay Commission to ensure that the national minimum wage becomes a genuine living wage from 2020 onwards”.

The intent of this amendment is for the Government to modify the remit of the Low Pay Commission so that it sets a National Minimum Wage at the level of a living wage, now and into the future.

It is important that this Motion acknowledges the valuable role of the Low Pay Commission, and thereby ensures that all future iterations of the minimum wage are at least set at the level of a living wage, which is currently €12.30 per hour.

As the Sinn Féin Motion rightly points out, proportionately more woman than men tend to work in jobs paying the minimum wage.

Young people are also disproportionately likely to be in low paid work.

However, around half of those on a Minimum Wage are over the age of 24. It is by no means limited to young people.

There are full-time workers who are trying to pay rent and put food on the table based on a Minimum Wage or a Euro or two more per hour.

The OECD points out that low pay in Ireland is more frequent than in nearly every other country in Europe.

Nearly a quarter – 23% – of workers in Ireland are “low paid”.

There are whole sectors of the economy – like retail, farm work, security and childcare – where the great majority of workers are on a rate of low pay that is less than a Living Wage.

There is a growing gap in our country between those with good jobs that pay several times a Living Wage, and those on low pay who cannot meet a basic standard of living despite working full-time.

Some small employers may worry that a higher minimum wage will not be affordable.

However, the law allows for any employer to make a declaration if they cannot afford to pay the minimum wage.

This rarely – if ever – occurs.

But if we move towards a genuine living wage, this mechanism might be used more often, and that is what it is there to do.

Some people might worry that a higher minimum wage might lead to fewer jobs.

However, successive economic studies – including by the IMF – have concluded that setting higher wages for the very lowest paid in the economy has little or no effect on employment levels across the whole economy.

Higher wages for the lowest paid ends up spent in the local economy, which is beneficial in terms of creating and sustaining jobs.

Higher minimum wages are not a “silver bullet” for in-work poverty.

We have sought to outlaw zero-hour contracts, but there are still many workers who do not have certainty about their hours on a weekly basis, or who are working part-time because they cannot secure full-time work.

As far as Labour is concerned, it should be the goal of government and society to attain genuine full employment, which means a full-time job for everyone who is able to work full-time hours, and a level of pay that is sufficient to avoid poverty or deprivation.

Everyone working full-time should be able to attain a minimum essential standard of living, which should be based on evidence of the cost of essential goods and services, and set relative to the median income in society.

For these reasons, Labour will be supporting tonight’s motion on a living wage.

I hope that Sinn Féin will reciprocate and support Labour’s amendment that includes the role of the Low Pay Commission.

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