Approval given by Cabinet to proceed with ‘living wage’ plan

The Government is to proceed with a plan to replace the minimum wage with a living wage by 2026 with the Minister for Enterprise announcing that Cabinet has approved a measure that will benefit “many hundreds of thousands of low paid workers in Ireland”.

The move is in line with a recommendation of the Low Pay Commission and the transition is intended to take place over years – 2023 to 2026 – with the potential for the precise time frame to be shortened or extended depending on economic circumstances over the period.

“If economic circumstances allow, it can be done more quickly than four years, if economic circumstances don’t allow, they can take a little bit longer, but the aim is to do it within four years,” said Leo Varadkar on Wednesday.

The plan involves setting the living wage at 60 per cent of national median earnings, with this figure to be assessed each year and increases set accordingly. In June of this year, when Mr Varadkar initially announced the proposals, the formula would have provided an hourly figure of €12.17 compared to the existing minimum wage of €10.50, a difference of €1.67 per hour.

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An increase to the €10.50 figure of 80 cent for 2023 has since been announced and it has previously been projected that the figure might be around €13.70 by the end of the four-year process of transitioning to the 60 per cent of median earnings figure.

“At the moment about 164,000 people are on the minimum wage,” said Mr Varadkar. “But every time the minimum wage has increased, the number of people who get an increase is much larger. It’s several hundreds of thousands of people because of the knock-on effect on people who are on just above the minimum wage getting an increase as well.

“The decision to benchmark it at 60 per cent of our the median wages is based on research carried out by Maynooth University which has been published and indicates that we can raise wages to that level without there being an adverse effect on unemployment or hours worked.”

He said employer groups and other stakeholders had been consulted on the current move and that “once the national living wage is in place, and we hope that will be by 2026, a further review will be carried out with a view to the possibility of raising the benchmark to 66 per cent of median wages.”

The Living Wage Technical Group, which includes representatives of trade unions and organisations working with the poor, argues for far quicker progress to the 66 per cent figure and says the living wage should currently be €13.85.

One of its members, Siptu’s Michael Taft, gave the Government move a qualified welcome.

“If they are calling 60 per cent a living wage, it is not,” he says. “Right now we are at about 51 per cent, so a move to 60 per cent is progress; €13.10 is better than €11.30, nobody can question that that represents an increase in living standards. But the minimum wage used to be 57 per cent of median earnings and if it had remained at that level, we wouldn’t have had a whole lot of ground to travel now.”