Mr. Jonathan Hogan:

I thank the Chairperson, members, and staff for the invitation to appear before the committee. Mandate Trade Union represents almost 27,000 workers, primarily in the retail sector. The union also represents workers within the licensed trade and those in administrative roles. Many of these workers were operating on the front line during the pandemic. Our comments reflect their views on the cost of living, the minimum wage, and the report of the Low Pay Commission.

We remind the committee that the programme for Government contains a commitment to increase the minimum wage to a living wage by the conclusion of the current Dáil. We trust that the Government does not mean to renege on this commitment.

Our members are being squeezed between low wages and a high cost of living. The only viable solution to protect these workers is to increase their wages and reduce the cost of the essential public services that these workers rely on. To ensure our most vulnerable workers have an adequate income, the Government must increase the minimum wage to a living wage, which is just over €14 per hour, as a starting point. Mandate based this calculation on last year’s estimate by the living wage technical group of a living wage hourly rate of €12.90, which is based on a 39-hour working week. We added 8.5% to reflect the cost of inflation. The figure of 8.5% is the rate of price inflation projected by Nevin Economic Research Institute, NERI, this year. NERI projects further inflation of 4.5% in 2023.

Unfortunately, the Low Pay Commission’s recommendation of €11.30 per hour, a 7.6% increase, fails to keep pace with 2022 inflation rate and is just 80.7% of a €14 minimum wage. Matching inflation is the bare minimum expectation of workers. Anything less would be a pay cut. How can we have faith in a process that leads to pay cuts and declining living standards for workers? Wages in Ireland’s low-pay sectors of retail and hospitality significantly trail behind wages in the same sectors in other high-income EU countries. There is no competitiveness issue.

Mandate also notes the impact of the commission’s last three annual recommendations, which effectively amounts to a cut in real pay. The rate of nominal increase from 2020 to 2023 is 11.9%, but the rate of economy-wide consumer price inflation between January 2020 and August 2022 was almost 12%, at 11.9%. Does the commission believe there will be no further price increases between August 2022 and January 2023? This is not what any institutional forecaster or the European Central Bank, ECB, seems to believe. Even headline inflation understates the rate of price increases for low-wage workers. Lower-income households generally spend a higher portion of their incomes on the type of necessities, such as energy, food and rent that are experiencing the sharpest price increases.

The commission’s recommendation means that minimum-wage workers in 2023 will be even further away from earning a living wage. The recommendation also means that minimum-wage workers will have seen deterioration in their position relative to the median wage over the five years between 2018 and 2023. By any measure, we can see that minimum-wage workers are falling further behind.

The Low Pay Commission is failing in its mandate to protect workers, and we strongly oppose its recommendation because it is too low. In addition, we are calling for the removal of the discriminatory sub-minimum rates of the minimum wage. Such discrimination against young workers is a grave injustice that has no place in a modern economy or society. Equal work should mean equal pay.

On the economic impact, the commission will no doubt raise concerns about the impact of a higher minimum wage on the economy, yet the economic literature is clear in that minimum wages and minimum wage increases close to but above inflation do not have any meaningful impact on net employment. The current national minimum wage in Ireland is barely over half that of the median wage. This compares to 60% in countries such as France, Portugal and Luxembourg.

The economy and the labour market itself are in a strong position. We are now close to full employment and hours worked in the economy are at record levels. The unemployment rate is just 4.3% and the job vacancy rate is higher than pre-pandemic levels. There is an excess of labour demand over labour supply.

Low-paid sectors experienced a rapid recovery in 2022. Net business income exceeds pre-pandemic business income in both the restaurant and retail sectors. The seasonally adjusted retail sales index in July was 10% higher than its level on the eve of the pandemic. The hotel sector has also made a robust recovery.

It is clear that wages are not driving the current inflationary spike; it is being driven by supply-side factors related to supply chain problems, commodity market shocks and the energy crisis. In this context, increasing the minimum wage to the living wage would have a minimal impact on price growth.

Of course, wage growth is far from keeping pace with inflation. If the economy gets into a dynamic of falling real incomes, consumer spending will fall and businesses will fail. That is the reality. NERI advises that a combination of tightening monetary policy and falling real incomes could push the economy into recession. On the other hand, a higher wage will result in higher consumer spending. Low-wage workers have a high propensity to spend and a much higher propensity to spend domestically. Unlike high-income households, low-paid workers cannot afford to save or, indeed, spend their money on expensive foreign luxuries and holidays. Their wage increases flow back to businesses across the domestic economy. Any negative impact of higher wages on business costs will be offset by the benefits arising from the increase in domestic demand. In addition, higher wages tend to drive a positive dynamic of more motivated and engaged workers and, therefore, improve goodwill and promote effort-based productivity. Better wages also lead to reduced employee turnover, therefore, lowering recruitment and training costs. Loss of experience itself means a loss of productivity. Overall, higher minimum wages increase aggregate demand and facilitate higher productivity dynamics within the firm.

Mandate believes the Government should enable workers to improve their own wages directly with their employer. The best way to do this is to implement enhanced collective bargaining legislation and through union access to legislative rights. Increasing the hourly rate of pay for workers is irrelevant if their employer cuts their hours or refuses to give them extra hours. Collective bargaining is the only way to protect workers from unscrupulous employers and ensure they receive an acceptable weekly living wage. Legislative access for workers who wish to avail of extra hours that become available to improve and secure higher incomes is an absolute need within the sector in addition to securing increases in hourly rates of pay.