Mr. Seamus Coffey:

I agree that low pay is an issue, but I do not consider that we have an unusually high level of low pay in Ireland. While there is an overall rate of 20% of PRSI, if one looks at the detail, we do not have 20% of people in a worse position than in other countries.

In reply to Deputy Peadar Tóibín's question on the minimum wage and employment, I say, "What a question for an introductory course in economics?" It is a question addressed to all first year students and seems to have a standard answer in theory which is that while a minimum wage harms some people, that is, those who cannot find employment, it benefits those in employment whose pay it brings up. One has winners and losers. While that is the theory, we have no evidence that suggests one answer over the other is right. Various studies show a very large employment effect of a minimum wage that will reduce the numbers, while others show very little employment effect. If one looks at the evidence, it goes both ways. One issue is how to obtain the data to check. Studies have been conducted in various counties and the USA that border different states where minimum wage rates are higher and some find a substantial employment effect, in particular in low-pay sectors, including service sectors, food and retail. However, other studies including different variables do not find any employment effect. I cannot give a definitive answer as it depends on which study one wishes to choose. One will hear people say there is a very strong employment effect, but I could equally find a study that indicates there is none. It is very difficult to say what impact an increase in the minimum wage would have on employment. In theory, economics suggests it has an effect, but we do not know in practice.

When it comes to the self-employed and the part-time employed, an important indicator the CSO collects is the number of people who are workng part-time and underemployed - those who are essentially forced into part-time work and would wish to work more. Up to 2012, that figure had increased and was increasing substantially as people were on reduced hours and days. Thankfully, we have seen that rate fall for the last two years since the start of 2012. The number is down by approximately 35,000. Whereas at the start of 2012, 195,000 people counted themselves as working part-time and underemployed, the figure is now down to approximately 160,000. While it is moving in the right direction, we still have 160,000 people who would like to take on more work.

On the income gradient in Ireland, the distribution of income is unusual in comparison to that in other countries. Our disposable income is in line with that in other countries, but our earned income is not. If one takes the overall economy across everybody, Ireland has the most unequal distribution of earned income, but that is driven by the fact that we have so many who are earning nothing and not in the workforce. Equally, even within the workforce, if one takes workers only, the distribution of income in Ireland is unusually high. EUROSTAT has figures comparing the bottom decile with the top decile. In Ireland the median gap is approximately four, whereas the standard across the European Union is approximately three. If one takes a figure of €20,000 at the bottom, one is looking at a figure of €80,000 at the top. In other countries, the gap is not as wide. Our tax system may have a role to play in that regard. While they have lower incomes in Ireland, we tax less at the bottom and the gap in net terms is reduced. That is what the system does. There is no doubt, however, that the income gradient for earned income in Ireland is unusual.

In relation to the subsidy, one could argue that the figure of €300 million is a subsidy to employers. However, one could also argue that we have a €4 billion subsidy to deal with unemployment. I have no problem with the Government spending money. If people do not have the ability to earn or are not earning, it should provide it. The issue in Ireland is that there are so many schemes to get money to households that it becomes overly complex and people view the money as going to different areas. A broader, more universal approach would clean up many of the problems we have.