Mr. Mark Fielding:

I thank the Chairman and members for the invitation to address the joint committee. As they are aware, I represent small and medium-sized businesses in Ireland and I am the CEO of the Irish Small and Medium Enterprises Association, ISME.

I wish to touch on a number of issues that are of vital importance to small and medium employers and also to those affected by poverty. Depending on to whom one listened in the period 1999 to 2000, the national minimum wage was supposed to address poverty by either reducing or eliminating the problem. However, the survey of income and living conditions produced by the CSO in 2012 showed that the level of consistent poverty had increased since 2004 and that deprivation rates were steadily increasing. It is clear, therefore, that the introduction of the national minimum wage, in order to get rid of poverty, has not actually worked. I am sure Fr. Peter McVerry would agree with me in that regard. The number of people who are homeless stands at its highest point ever in the history of the State. People are not living in poverty because the minimum wage or their hourly rates of pay are too low. There are, for example, individuals who earn above the minimum wage and are living in poverty. People are living in poverty because they are either not working or not working enough. They need jobs, not an increase in the minimum wage.

As members will be aware, 360,000 citizens are unemployed. There are also 86,000 involved in activation schemes which, for want of a better expression, means that they are also unemployed. This means that, in total, almost 450,000 citizens are out of work. Of these, 96,000 have been unemployed for three years. That is where the problem lies; it is not down to the position on the minimum wage. Net income inequality in Ireland is close to the EU 28 average. The Irish wealth distribution rate also roughly reflects the average which obtains in other developed countries. The only explanation for the uneven spread in income inequality - in the context of earned income - relates to the fact that a huge number of people live in households in which nobody works. In 2013 almost one in four of those aged under 60 years was living in a household in which no one was in employment. That is double the EU average. It is, in fact, the highest proportion in Europe without exception and significantly higher than in even Greece or Spain. When an unusually large proportion of the population are not earning an income, it is not surprising that there is an uneven distribution of earned income.

As far as ISME is concerned, the concept of a national minimum wage was wrong from the very outset because it confused the roles of the Government and employers and placed the onus on the latter to pay a wage that sometimes was not economic. Businesses can only afford to pay the value of the labour they purchase. It is uneconomic for them to do otherwise. During the period in which the national minimum wage has been in place, it has actually been increased by 55%. However, we still have not eliminated poverty. As stated, the level of poverty is increasing. In the context of who is paying the national minimum wage, the National Competitiveness Council defines competitiveness as all those factors affecting the ability of Irish businesses to sell goods and services in international markets. The council believes competitiveness is not an end in itself but a means of achieving sustainable improvements in living standards and quality of life.

If that is the case we know that between 2000 and 2008 we have had a huge loss of competitiveness in the region of 39% to 40%. It has come back slightly between 2008 and 2012 but we are again in the process of losing some competitiveness and in the background there is another call for an increase in the minimum wage. The knock-on effect of the minimum wage will have an effect on wage values across the economy.

Taking into account the inflation figures of the past 12 years the ratio of national minimum wage to price levels at today's value would be about €7.40 rather than €8.65. The solution we propose, rather than have a national minimum wage which puts the social responsibility on an employer, is that the Government would introduce an incomes policy which would include an earned income tax credit. The amount of that credit could be a function of how much one earns and one's family size. That process could remove all tax and other deductions on income that equates to about two thirds of the average industrial wage, ensuring that individuals can earn up to €20,000 per annum before being taxed. That could be targeted so that money goes to actual workers living in poverty. It has the advantage of removing low paid employees from the tax net. It enhances the progressive structure of tax policy. It is making gainful employment more rewarding than the live register. It fulfils the Government's obligation to redistribute income through the tax system, which is not an employer's function. It takes the onus and cost of income distribution away from employers. When low-wage workers are supported through tax cuts and rebates, then, being more equitable, all taxpayers share the financial burden. We recommend that the Low Pay Commission investigate and cost this proposal as part of its work in the coming months.