Mr. Ultan Courtney:

Good morning Chair and members of the committee. I thank members for the opportunity to meet with them all again, following our meeting last September, and to discuss with the committee the Low Pay Commission’s work and our recent report and recommendations on the national minimum wage. I am chair of the Low Pay Commission. I am joined today by Dr. Walsh, who has served as a member of the Low Pay Commission since 2019. He is an independent expert on the commission, with expertise in labour economics. He is also a lecturer in the School of Economics at University College Dublin. I am also joined by Ms Pyke and Mr. Gilmore from the Department of Enterprise, Trade and Employment, who form part of the secretariat to the Low Pay Commission.

Before I begin, on behalf of the Low Pay Commission I would like to pay our respects to Professor Dónal O'Neill who sadly passed away last week.

Professor O’Neill served as a labour market expert on the inaugural commission from 2015 to 2018. More recently, he co-authored the Maynooth University research report on the introduction of a living wage in Ireland, which played a major role in informing the Low Pay Commission’s deliberations on the living wage last year. Dónal made major contributions to our understanding of various labour market issues. His research examined unemployment, inequality, the gender and racial wage gap, education and intergenerational mobility, and was published in some of the world's leading economic journals. He will be sorely missed.

Regarding the Low Pay Commission and the national minimum wage, when we met last year, I outlined the role and function of the Low Pay Commission. It is important to again set out our role and the parameters of our work in order to provide context to any discussion on our work and our recent report and recommendations.

The Low Pay Commission was established in 2015 as an independent body. Our statutory function, pursuant to the National Minimum Wage Acts, is to make recommendations to the Minister for Enterprise, Trade and Employment on the appropriate rate of the national minimum wage. It is important to reiterate that the commission’s role is to recommend a national minimum wage, but it is Government that decides on the rate. The National Minimum Wage Acts include a provision whereby Government can choose not to accept the commission’s recommendation and opt to implement a different rate, although heretofore, the Government has always accepted and implemented the commission’s recommendations regarding the rate of the national minimum wage. Our key focus, and what we see as our main responsibility and mandate, is to ensure that in making research-based recommendations on the national minimum wage we seek to find a balance between a fair and sustainable rate for low-paid workers and one that will not have significant negative consequences for employment and competitiveness.

The Low Pay Commission comprises eight members and me as an independent chair. The Commission has equal numbers of employee and employer representatives, and independent members that have particular knowledge and expertise in relation to economics, labour market economics and statistics, like my colleague Professor Walsh who has joined us today. This ensures that we have a wide spectrum of expertise and experience available to us, allowing us to take a more balanced view when making our recommendations.

As I outlined at our last meeting, the National Minimum Wage Acts provide clear parameters for the Low Pay Commission in its consideration of the appropriate rate of the national minimum wage. These include the cost of living, earnings and income distribution, competitiveness and the likely effect that any proposed recommendation will have on future levels of employment. Statute requires incremental adjustment to the national minimum wage.

The Low Pay Commission’s remit has changed slightly since I met with the committee last year, as it now also has the responsibility to make recommendations to ensure the Government decision that the minimum wage will be set at 60% of hourly median wages by January 2026 is fulfilled. This decision was made on the recommendation of the Low Pay Commission which included a number of other recommendations on how best to implement the main recommendations on the rate.

On moving towards a national living wage, since its establishment, the commission has each year recommended an increase in the minimum wage. This has resulted in the minimum wage increasing from €8.65 in 2015 to €11.30 today. When we met last year, we awaited a Government decision on the living wage. Last November, the Government agreed to the introduction of a national living wage, with no regional or sectoral variations, set at 60% of hourly median wages by January 2026. This will be achieved through incremental changes to the national minimum wage over a four-year period, unless otherwise agreed by the Government on the advice of the Low Pay Commission. This Government decision was based on the recommendations of the commission.

The first step towards reaching a living wage was the 80 cent increase to the national minimum wage that came into force on 1 January 2023 and increased the minimum wage to €11.30 per hour. Last week, the Government agreed to accept the Low Pay Commission’s recommendation to increase the national minimum wage by €1.40 to €12.70 per hour from 1 January 2024. This significant increase of 12.4% is the largest increase in the minimum wage since its creation in 2000. This increase represents the next step in the progression to a living wage.

As it now has responsibility to make recommendations to ensure the Government decision that the minimum wage will be set at 60% of hourly median wages by January 2026 is fulfilled, a central focus of the Low Pay Commission is what is called the “bite” of the minimum wage, that is, the minimum wage as a percentage of the median wage. The Low Pay Commission estimates that the current €11.30 national minimum wage is 51.8% of the forecast median wage for 2023. To get from 51.8% of median hourly earnings to 60% by 2026 in the space of three years requires significant change in the minimum wage. The Low Pay Commission has discretion to recommend speeding up or slowing down the transition to the 60%. Therefore, the commission considered a range of options for increasing the minimum wage in 2024.

Due to the minimum wage being forecast at 51.8% of the median hourly wage in 2023, well below the 60% target, and the fact that Ireland is experiencing strong economic growth and very low levels of unemployment, the commission recommended speeding up the transition to the 60% target. For these reasons, the commission recommended that the national minimum wage be increased by €1.40, or 12.4%, from €11.30 to €12.70 on 1 January 2024. The commission has estimated that a national minimum wage of €12.70 will represent 55.1% of median wages in 2024. This recommendation was supported by eight of the nine members of the commission. One of the issues that featured in the discussion was our recommendation about potential supports to employers to assist with the transition to the living wage.

The Low Pay Commission estimates that 148,100 people earned at or below the national minimum wage in 2022. Therefore, it is expected that at least that number will see an increase in their wages arising from this increase in the minimum wage. For someone on the national minimum wage working a 39-hour week, this translates to a pay increase of €54.60 per week, or more than €2,800 per year. It is estimated that a full-time worker on the minimum wage will see an increase in their net take home pay of approximately €2,300 on an annual basis.

On protecting employment and national minimum wage employers, it is a legislative requirement that the Low Pay Commission gives consideration to the likely effect that any proposed order will have on levels of employment and unemployment. That is something that the Low Pay Commission has given a great deal of attention to. Since its establishment, through its research partnership with the Economic and Social Research Institute, ESRI, the commission has produced numerous studies on the employment effects of changes to the minimum wage. These studies show that increases in the national minimum wage have had little effect on employment. While this is encouraging, the commission is always seeking up-to-date data and research to inform its recommendations and to closely monitor any findings on this issue. We have also paid close attention to the international evidence of the employment effects of changes in the minimum wage.

The Maynooth University report on the introduction of a living wage in Ireland examined this international evidence. Significantly, it stated: "Based on our reading of the international evidence, we believe there is some evidence that a statutory wage floor set at 60% of the median wage of all workers could be implemented without substantial effects on employment." It must of course be acknowledged that increases in the national minimum wage affect some employers more than others. While the commission recommended that the living wage should apply equally across sectors and regions, we also suggested that consideration should be given to how employers with a significant number of low-wage employees can be supported during the progression to a living wage. This was an important recommendation of the commission and a significant component of the transition to the living wage.

The issue of the introduction of supports for vulnerable businesses was an important part of the Low Pay Commission’s deliberations this year. The employer representatives on the commission in particular saw the introduction these supports as critical to their continued support for the transition to a living wage. Therefore, I welcome the announcement of the increased cost-of-business grant, which has funding of €250 million to provide a targeted refund to businesses who are ratepayers and will be paid through local authorities, and will benefit up to 130,000 micro and small businesses. However, I am aware that the detailed terms and conditions attached to the grant are to be finalised. This is something that the Low Pay Commission will continue to pay attention to.

I will now turn to recent and forthcoming reports and research. Following acceptance by Government of our recommendations for the 2024 minimum wage, the commission is now focusing on the issue of sub-minimum or youth rates. Last year, the Low Pay Commission was asked to revisit the issue of sub-minimum rates. We have received a research report authored by ESRI, under the terms of the commission’s research partnership with ESRI, on youth rates. This summer, the commission held a stakeholder consultation on these rates. We are currently examining the issue and we intend to submit a report to the Minister for Enterprise, Trade and Employment, Deputy Simon Coveney, before the end of this year.

Before I conclude-----