Impact of minimum wage increase on work hours yet to be seen

Almost from the moment she took over as leader of the Labour Party in the summer of 2014, Tánaiste Joan Burton gave a commitment to establishing a Low Pay Commission to review the rate of the national minimum wage.

However the debate on whether the minimum wage rate should be raised proved to be extremely polarised, with employers strongly opposed to any such an initiative and trade unions and those representing the low paid very much in favour.

Ultimately last summer the commission recommended to the Minister for Business and Employment Ged Nash that the national minimum wage rate should be increased from €8.65 per hour to €9.15.

However, reflecting the divisions on the issue across the economy, the commission split down the middle with trade union and migrant rights activists disagreeing with the overall conclusion of the group.

In a minority report, the general secretary of the Irish Congress of Trade Unions contended that an hourly increase of €1.35, which would bring the minimum wage to €10 an hour, was “reasonable and proportionate”.

Edel McGinley, director of the Migrants Rights Centre Ireland, said in her minority report that the rate of the national minimum wage should be increased to €9.65.

In its conclusion, the commission said while it was not possible to be definitive, based on Irish and international evidence, moderate increases in the national minimum wage are unlikely to have a significant adverse effect on employment as long as they did not impact on PRSI costs.

The Government has now moved in the Budget to deal with anomalies in the PRSI system which the Taoiseach had described at the time of the launch of the Low Pay Commission report as “quite stark”.

The report said an increase in the hourly minimum wage of 37 cent to bring the level to €9.02 for a single adult working 39 hours a week would generate a net annual gain to the employee of €548.95. The cost to the employer would be €814.14.

However, an increase of 45 cent, to bring the level to €9.10, would result in the worker being worse off in net terms by €70.81 while the cost to the employer would be €990.17.

The Government in the Budget has now moved to formally implement the increase in the minimum wage as recommended by the commission and to deal with the PRSI anomalies.

The Government has argued that the increased minimum wage rate would benefit more than 122,000 workers when it comes into effect in January.

However economists and trade unions will watch carefully to see what impact the higher minimum pay rates will have on the number of hours offered by employers to low-paid workers, an issue of great importance in determining the overall income of workers and an issue on which the commission seemed less certain.