Gerald Nash (Louth, Labour) | Oireachtas source

I thank the Chairman for his kind invitation, which has afforded me the opportunity to present the general scheme of the low pay commission (national minimum wage) Bill 2015 for the purposes of pre-legislative scrutiny. The general scheme of the Bill was approved by Government in January, and, together with a regulatory impact assessment, has been published on my Department's website and forwarded to the committee.

It is fair to say that we have seen a paradigm shift in the economy over the past few months. Unemployment has dropped by a third since 2012, reaching its lowest level in six years, and it may dip below 9% over the next 12 months. The number of jobs has increased cumulatively by nearly 100,000 since the low point of the crisis, with 29,100 net new jobs having been created in the last year alone, of which most are full-time, as evidenced in CSO reports. The Exchequer deficit at the end of February stood at €205 million compared with €1.7 billion at the same time last year. Tax revenue has increased by €925 million, primarily as a result of the improving economy. The social protection bill has fallen by €240 million in line with falling unemployment levels. Our debt servicing costs have fallen by 17.8% over the year.

These figures illustrate the success of the Government's twin-track approach of creating the conditions for job growth and helping people back to work. The Action Plan for Jobs is accelerating Ireland's transition to a sustainable jobs-rich economy, while the Pathways to Work programme is ensuring that as many people as possible who take up work are from the live register. There are, however, far too many people still jobless, and we are working to build on the success to date and create full employment within the next three years.

One consequence of the beginning of the recovery that can be seen is that workers feel that recovery should be reflected in wage packets. A return to wage bargaining is already visible in certain sectors of the economy. IBEC's recent pay survey found that 57% of companies plan to increase basic pay in 2015. According to that survey, the median pay increase is set to be 2%. Other surveys suggest this figure might be higher. Making work pay is a cornerstone of this Government's agenda, and the setting up of a low pay commission was one of the key commitments in the statement of Government priorities agreed between the Taoiseach and the Tánaiste in July last.

Under the provisions of the National Minimum Wage Act 2000, the national minimum wage can be adjusted currently by ministerial order following a recommendation in a national agreement, under section 12; in the absence of such a recommendation, following an examination and recommendation by the Labour Court on foot of a request by a substantially representative organisation of employees or employers, as provided for in section 13; or unilaterally by the Minister, under section 11, whether or not a recommendation under section 12 or 13 has been made, taking into account a number of criteria set down explicitly in the 2000 Act.

The Economic and Social Research Institute, in its 2006 analysis of the last Labour Court recommendation proposing an increase to the national minimum wage, concluded that adjusting the minimum wage by a substantial amount on an irregular basis, with lengthy gaps between increases, as happened in the past, rather than having regular, smaller and fairly predictable pay rises, is more likely to have a detrimental impact on employment and contribute to uncertainty for employers and actual and potential employees.

The most recent figures from the Central Statistics Office's quarterly earnings, hours and employment costs survey show that 4.7% of all employees, or just over 73,000 workers, were being paid the adult experienced national minimum wage rate of €8.65 per hour or less in quarter 2 of 2014. Throughout the crisis the Government has been committed to maintaining employment rights, particularly those protecting the most vulnerable workers in our society. In many cases those rights are being enhanced. Where changes have been made or new legislation introduced, we have sought to improve them. On low pay alone, one of the first actions of this Government was to restore the minimum wage to the level that existed before the last Government cut it by €1 shortly before it left office.

The low pay commission, which will be chaired by Dr. Donal de Buitléir, was officially launched on Wednesday 26 February by the Taoiseach, the Tánaiste, the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, and myself to operate on an interim administrative basis, and the commission held its first meeting the same day. The principal function of the low pay commission will be, on an annual basis, to examine and make recommendations to the Minister of the day on the national minimum wage, with a view to ensuring that the national minimum wage, where adjusted, is adjusted incrementally over time, having had regard to changes in earnings, productivity, overall competitiveness and the likely impact any adjustment will have on employment and unemployment levels.

Alongside examining the national minimum wage, the low pay commission will also be asked to examine matters related generally to the functions of the commission under the Act. This work programme will be agreed by Government and presented to the commission in February of each year. In addition, in the discharging of its function, the commission will be required to make recommendations that are evidence based using a suite of agreed data sets or, where required, based on bespoke research undertaken at the behest of the commission. This approach draws on that adopted in the UK, where, since 1997, the recommendations of the UK Low Pay Commission have brought about a progressive increase in the minimum wage that has had little detrimental effect on the functioning of the economy or the labour market. In this context, I would like to express my thanks to the Chairman of the UK Low Pay Commission, David Norgrove, and his colleagues in the UK working in this area who, in recent months, have so freely given of their own experience and time during the preparatory work we have undertaken in establishing our own commission.

The commission will be statutorily independent in the performance of its functions. While not provided for in the general scheme of the Bill, it is intended that the low pay commission will adopt a consensus-based approach to its reports and recommendations. Work should always pay, but I am also conscious of the need to balance a basic statutory minimum pay rate that is fair with one that is sustainable and that allows employers to continue to create high-quality jobs. In this context, a particular function of the commission will be to ensure that any advice or recommendations it makes to the Government are evidence based, utilising agreed data obtained by carrying out research and consultations with employers, workers and their representatives and taking written and oral evidence from a wide range of organisations. This is to ensure that any suggested changes to the national minimum wage have minimum adverse effects on employment and competitiveness.

It is important to note that, alongside these hard data, the commission will consult people - workers and employers - who are directly affected by the national minimum wage. This real lived experience will be vital for the commissioners when deciding what rate the national minimum wage should be. The commission has already commenced its work. As members will be aware, the low pay commission recently asked for submissions from members of the public and interested parties. The closing date for receipt of submissions will be 5 p.m. on Monday 13 April. I expect that the commission will submit its first report to me by the middle of July.

The changes proposed in establishing the low pay commission on a statutory basis are essentially taking much of the politics out of setting the national minimum wage. It is very much in keeping with the dignity of work agenda that I am pursuing, and it complements other work such as the study on zero hours contracts and low hours contracts by the University of Limerick which we have commissioned and which has just commenced.

The heads of the Bill are largely self-explanatory, and given the limited time we have today, I do not intend to go through them individually. I am happy to clarify any particular issues which might arise and which members may wish to raise now. If any issues arise in the future, they may feel free to contact me or my officials.

It is appropriate to draw members' attention to head 4.

As it was decided to establish the low pay commission, LPC, on an interim basis in the first instance, transitional provisions were included in head 4 to ensure that the activities, reports, associated costs and membership of the non-statutory basis LPC would be regarded as activities, reports, associated costs and membership of the statutory LPC on the coming into effect of the Act. However, subsequent examination of the issue and legal advice obtained from the Attorney General has indicated that as the LPC will have been established on a statutory basis before any recommendation with regard to the minimum wage is made, such provisions are not in fact required. On that basis, I propose not to include them in the published Bill. I was anxious to bring the members' attention to that.

Again, I thank you, Chairman, for undertaking the pre-legislative scrutiny process on this important Bill and I look forward to hearing the views of committee members on the general scheme. It will assist us in our job of drafting the Bill.