Oireachtas Joint and Select Committees
Tuesday, 3 March 2015
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
Low Pay and the Living Wage: Discussion (Resumed)
I remind members, visitors and those in the public Gallery to ensure that their mobile phones are switched off for the duration of this meeting as they interfere with the broadcasting equipment, even when in silent mode.
We are here today to resume our discussions on low pay and the living wage. I welcome Mr. Gerry Light, assistant general secretary of the Mandate trade union, Mr. David Gibney, communications officer with Mandate, Mr. Jimmy Kelly, regional secretary of the Unite trade union, Mr. Michael Taft, research officer with Unite, and Mr. John King, divisional organiser with SIPTU.
It would have been helpful if the joint committee had been notified in advance of Mr. O'Connor's absence.
I draw witnesses' attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.
I remind witnesses that presentations should not be any more than five minutes' duration as a number of guests are scheduled to present today. Members have been circulated copies of the presentation. I invite Mr. Jimmy Kelly to make the first presentation on behalf of the Unite trade union.
Mr. Jimmy Kelly:
I thank members for the invitation to make a submission on low pay and the living wage. My colleagues and I will seek to cover all aspects of this issue. If possible, I will share the allotted time with Mr. Michael Taft.
Ireland is a low pay and high cost economy, which means Irish workers have less purchasing power than their peer groups across Europe. This is a long-term phenomenon rather than an outcome of the recession. When addressing issues of low pay it is necessary to consider workers' pay packets and what is known as the social wage, namely, the compensation workers receive through access to public services and social protection supports. On each of these measures - direct pay and the social wage - Irish workers lose out. This is especially evident when wages in traditional low paid sectors, such as hospitality and retail, are compared across Europe. In these sectors, Irish workers are at a particular disadvantage when compared to their European counterparts.
It is argued in some quarters that we need to keep wages low to maintain competitiveness. This argument is a distortion and misrepresentation of competitiveness. The most competitive economies in Europe have high levels of investment, infrastructural quality, health and education, use of technology and innovation, to name but a few elements. They also have high wage levels, which are critical to an economy's competitiveness. It is not possible to build a prosperous economy on low wages.
Ireland's low wage economy is a direct contributor to what is described as in-work poverty. Approximately 350,000 members of the workforce or one in five employees are categorised by the Central Statistics Office as living in deprivation conditions. Not only is this economically irrational, but it is socially obscene.
An increase of €1 in the national minimum wage, a strong joint labour committee system, an end to precarious employment as well as a right for part-time workers to take up more hours are necessary measures to boost economic growth and vindicate the right to a decent wage. They should be seen as the first step towards the goal of implementing a living wage.
I ask Unite's research officer, Mr. Michael Taft, to address some of the specific aspects of the Irish low wage economy.
Mr. Michael Taft:
Mr. Kelly outlined the overall position. To put the matter in perspective, in the hospital and retail sector, compensation in Ireland falls considerably behind compensation among our peer group, namely, other northern and central European countries. To reach the average level would require a substantial increase in compensation, in some cases of more than 20%.
A similar pattern is evident in the statutory wage floors. When factoring in purchasing power and a worker's full compensation package, the national minimum wage falls well below the purchasing power of our peer group. In more than half the countries with minimum wage legislation, only 5% of workers rely on minimum wage protection, whereas the figure in Ireland is close to 10%. Given that these figures are taken from EUROSTAT data for 2010, it is likely that the percentage here will have increased.
Regarding affordability, Ireland has always been a high profit country, even when one factors out the inflated levels of profit arising from multinational accountancy practices.
This is certainly the case in the wholesale and retail sector where Ireland's profit levels are above the EU average. Hospitality profits are lower than the EU average but the underlying indicators such as turnover, gross value added and labour productivity approximate European levels. This suggests the problems are structural in the sector. Whatever they might be, it is certainly not the case that wages are the problem.
As Mr. Gerry Light pointed out, there are 350,000 people in the workforce who are officially categorised as living in deprivation, that is, one in five people in the workforce. There are also three other areas where low pay has a high cost. First, there is a cost to the Exchequer where tax revenues are reduced and social protections are increased, for example, the family income supplement. This subsidy to low pay employers reduces the State's ability to invest in our economic and social infrastructure which negatively impacts on all of us. Depressed take home pay reduces consumer demand. This is exacerbated by precarious workers where they are unsure of next week's income. Essentially, the low paid are prevented from fully participating in the consumer economy to the detriment of economic performance. Finally, low paid negatively impacts on firm performance, in particular, firms dependent on domestic demand and in need of increased turnover. These firms need more customers coming to their door with more money in their pocket, therefore, wages are an indispensable element of increasing demand capacity. It is often stated that the wages must wait for the economy to recover; this is to view the process in a static and backward way. Economic growth occurs because of wage increases. A wage strategy that benefits the low paid is an important element in the growth and equality toolbox. The question is if whether the economy can afford not to have wage increases and the answer is "No".
Mr. Gerry Light:
I thank the Chairman and the committee for inviting us to appear before the committee. By way of introduction, Mandate Trade Union is one of the country's largest private sector unions representing some 45,000 workers across retail, distribution, administration and the licensed trade. Not surprisingly, our membership is predominantly female who work in the main part-time hours and, significantly, the sector in which we are active accounts for more than 250,000 workers or approximately 15.5% of the entire workforce.
The importance and value of retail work has significantly increased largely due to the hollowing out and loss of decent employment in other traditional sectors such as construction and manufacturing during the years of economic recession. In many instances, the earnings derived from retail have become the principal income for many households.
Many of the relevant background issues pertinent to this important debate being considered today were highlighted when we presented before this committee in September 2013. Therefore, I urge committee Members to revert to our previous presentation along with what we have to say today in order to build a comprehensive brief on this crucial issue to many thousands of low paid workers and their dependants.
The growth of precarious work and low insecure wages is no doubt the fuel that drives income inequality both in Ireland and globally. However, we suggest that the problem is particularly acute based on recent research emanating from TASC entitled Cherishing all Equally - Economic Inequality in Ireland.
As we emerge from many years of economic recession and associated austerity policies which imposed hardship on many of our citizens, it is time to fundamentally address the type of society that will emerge and the degree of influence open to us in shaping it. Do we repeat the mistakes of the past by placing the greed of the market ahead of the needs of our people? Much emphasis has recently been placed on the importance of work in building both economic and social prosperity into the future. The slogan of "work must pay" is one which is commonly recited. However, we must ensure we go far beyond the rhetoric and ensure that this aspiration becomes a reality for the many thousands of current and prospective workers who are not only entitled to it, but deserve it. Clearly there exists a moral imperative on behalf of the State and employers to create a fundamental shift in how we view the world of work and ensure that the "jobs at any cost strategy" does not become counterproductive.
Based on previous experiences, if left to their own devices far too many employers will ignore this call for a fairer and more decent workplace.
One only has to listen to some of the submissions made to this committee during the past few weeks-----
We would be more interested in hearing what Mr. Light has to say rather than hearing him criticise people who are here. He will have heard my earlier reference requesting witnesses not to refer to people who are not present. I ask him not to mention any other organisations or companies, by name, in his presentation.
Mr. Gerry Light:
Okay. Based on the evidence to which I have pointed, it is very disappointing that in general this is all low-paid workers can look forward to in respect of employers, in particular, taking a different view to the world of work that we need to create as we emerge from recession into some kind of economic recovery.
We would argue that some of the suggestions centrally have as their focus an attempt to move away the responsibility from employers to pay a fair and decent wage and to move that burden back on to the State through increased social transfers. Far too many employers subscribe to the call for wage restraint because wage increases might cause damage to economic recovery. Surely a more courageous and creative attitude must be demanded from employers. They cannot be allowed to wash their hands of their collective responsibility towards building a sustainable economy along with a fairer society.
In the face of this determined resistance by large groups of employers, the State, for its part, must set out a clear vision and create a culture whereby a fairer sustainable deal is achievable for not only low paid workers, but all workers. That is a moral imperative and essential if we are to create a society in which the general discourse around issues such as statutory minimum and living wage thresholds can take place in a balanced manner ensuring that the voices of all parties can be afforded the respect, dignity and influence that they deserve. The traditional power shift between labour and capital has dramatically increased in favour of the latter, particularly during periods of heightened economic recession. This reality is most apparent in the fall in disposable incomes and the subsequent dramatic decline in domestic consumption which has occurred in recent times. The shift in this power balance is also linked to the numbers of workers who are trade union members. The right to collectively bargain in a meaningful way must be a cornerstone of any new order that emerges over the coming years. In this regard, the proposed introduction of legislation in this area is to be welcomed but employers must not be allowed an easy route away from the obligations which are placed upon them. For far too long many employers, through our voluntarist model of industrial relations, have been allowed adopt a dismissive and hypocritical approach to the real value of a worker's constitutional right to become a member of a trade union. I do not know whether it is order, and I am sure the Chairman will guide me on this, for me to mention a particular employer.
Mr. Gerry Light:
In general terms it is manifested in the example of an employer I will not name in its attitude in writing to its 10,000 employees where it stated that the company "wholeheartedly endorses" the right to join a union, however, in the course of the same correspondence it states "the Company will not enter into direct discussions with a Trade Union". It must be pointed out that this letter was written in the context of an ongoing dispute we are having with this extremely profitable Irish employer which, not surprisingly, centres around the core issue of decent work.
The existence and outcomes from a robust, meaningful collective bargaining environment not only has the direct effect of lifting workers out of precarious working conditions but also lessens greatly the pressures and obligations on the State to provide support structures which prevent more workers being exploited and moving deeper into workplace poverty. Many employers are prepared to do the right thing by their employees and enter into collective agreements with Mandate to produce working conditions which are decent and fair.
Mr. John King:
I thank the Chairman and the members of the committee for their invitation to address them today. For the purpose of my presentation I will talk about the hospitality sector, a sector of the economy where workers are in a very unequal relationship with their employer, where pay at the level of the national minimum wage is the norm, where there are no other conditions of employment, and where the prevalence of zero-hour contracts is very high.
I will give the members some statistics. Central Statistics Office figures for workers confirm that the average hourly rate of pay at quarter four 2014 remains below the average hourly rate at quarter four 2010.
There was a significant increase in the numbers on the minimum wage between mid-2011 and mid-2014, and we know that at the end of 2013, 12.5% of all part-time workers claiming jobseeker payments worked in hotels and restaurants.
With regard to the employment created in the industry, CSO figures confirm that the recovery started in early 2011 and there has been a 23.1% increase in employment between 2011 and 2014. Part-time employment increased by 14.1% and full-time employment increased by 15.5%. Between 2011 and 2013, there was a reduced employer PRSI rate if an employer's workers earned less than €356 per week. The employers in the sector also have the favourable Government policy of a lower VAT rate and international tourism numbers are now at pre-recession levels. There were 7.6 million visitors to Ireland in 2014, a figure which increased by 9% on that of 2013. Domestic tourism numbers have increased by over 2.2%, with total spending in 2013 by tourists at €6.54 billion, which is an increase of more than 10% on the figures from 2013.
In the restaurant sector we have identified some organisations with considerable profits and in the hotel sector there is evidence from independent research indicating that 90% of hoteliers anticipated revenue growth in 2014. Occupancy levels in hotels also increased in the same year, along with average revenue per room and average profit levels per room. Our submission also has examples of significant sales and purchase transactions in the hotel sector, which is hardly evidence of a sector that is experiencing anything other than a boom.
In mid 2011, the Oireachtas approved a favourable VAT rate of 9% for this sector. A SIPTU survey in the restaurant sector indicates that the VAT rate was not passed on, to a significant extent, to the consumer by way of price reduction. The cost to the Exchequer in a full year of this VAT reduction is approximately €350 million, and the total will be approximately €1.4 billion by mid-2015. The line from the two organisations which look after employers in this sector is that the VAT rate has been solely responsible for the increase in employment, but that does not stand up. The recovery in the sector started prior to the VAT reduction and it is demand-led. It can be attributed to the significant increase in international tourism, primarily from the UK and North America, with such tourists spending more when they are here. These factors are related more to the exchange rate between the euro and sterling or the dollar.
The only way workers in this sector can have the issue of low pay addressed to enable them achieve a living wage and be able to gain or benefit equally from the recovery and be able to provide for themselves and their family is through the joint labour committee, JLC, process. This JLC process is enshrined in legislation approved by the Oireachtas in the Industrial Relations (Amendment) Act 2012. Following a review under this legislation, a statutory instrument was introduced, SI 28 of 2014, for the establishment of a hotels joint labour committee, with the JLC in place before 2011 for the catering industry remaining in place. However, hotel and restaurant owners are exercising a veto over this piece of Oireachtas-approved policy, which is having the effect of ensuring that tens of thousands of workers remain in work poverty. It also ensures the means by which employers continue to pass the obligation to the State of paying a living wage to these workers by way of welfare support. Not alone are these vested interest groups being allowed to exercise this veto over the will of the Oireachtas, they are also bringing Ireland and the State into breach of International Labour Organization conventions.
It is in the presentation, which we have all received and had the opportunity to read. I want to be fair to everybody.
I invite Senator Cullinane to commence the questions. I urge him to ask questions rather than give a speech, if possible. It is important that we get as much as possible from the engagement, given that there will be a second session after this.
I welcome the witnesses and thank them for their presentations. Representatives of a number of employer organisations appeared before the committee last week, so this is our second set of hearings on this issue. Obviously, we are examining low pay and a living wage, as well as income and economic inequality across the economy.
There is a clear conflict between what the employer organisations have said, and will say, and what the trade unions say. That is probably no surprise. The problem is that we all appear to be saying the same thing, that we want a fair economy and workers to have decent wages, but the approaches are certainly not the same. I am interested to hear the witnesses' views on what the employer organisations have said, because there are differences even in terms of the data that are provided. It would helpful to hear their views. The Irish Business and Employers Confederation says that the minimum wage is appropriate, competitive and affordable while also taking account of changes in the cost of living. It goes on to say that the living wage comes with a fiscal cost as it will hurt employment. What is their view on that?
The Irish Small and Medium Enterprises association said that the real concern for workers is not a national minimum wage subject to tax deductions, and that such a concern would be the responsibility of the State. It talked about the social responsibility of the State and said it is not the responsibility of employers to deal with wealth redistribution. We hear that from all of the employer organisations. ISME said it is not the responsibility of employers to be wealth distributors in the economy and that increasing the minimum wage is a blunt instrument in addressing poverty and only serves to increase the cost base of business.
Those are the arguments they have made against increasing the minimum wage and moving to a living wage, or increasing wages generally in the economy. What is the response of the witnesses to that? In terms of the three constituent trade unions, do they support an increase in the minimum wage? If so, at what level? Do the individual unions support a living wage and how would they envisage that being implemented and over what timeframe?
The second question relates to the challenge workers face. Perhaps the witnesses could give examples of the human cost of the facts that we have. The Unite presentation referred to almost 400,000 workers who are working but who are living in poverty, with huge levels of deprivation, and the 20% of the workforce on low pay. What is the human, social and economic cost of that?
My third question is about precarious work and under-employment. While we can increase the minimum wage hourly rate or increase wages generally, that does not achieve much for a worker on a low-hours contract in terms of their overall situation. How important is dealing with precarious work and under-employment when dealing with the issue of low pay and in-work poverty?
Finally, the employer organisations appear to be saying that we should continue building an economy on low pay. They are against increasing the overall tax take, despite the fact that we have one of the lowest levels of tax take in the EU. They are also against wage-setting mechanisms and collective bargaining. Are there examples of countries that have much better and more robust employment legislation, better and fairer progressive taxation systems and better wages that are more competitive than us? Where do we fit in competitiveness terms given that we have such high levels of low pay, low levels of overall taxation and rate very badly in respect of weak wage-setting mechanisms?
Mr. Gerry Light:
I will attempt to answer all of the questions. The Senator spoke first about the responsibility of employers. Employers are very good at telling us what is not their responsibility.
As we argue in the submission, it is about time that employers stepped up to the plate and told us what they are responsible for. It is not too big a call to ask them to create the best possible secure employment that they can on the cusp of a recovering economy. That was clearly enshrined in our submission.
I know my colleagues will pick up on other points in respect of current thresholds in place. Over the course of the past week, the low pay commission has come into vogue with respect to whether it would be appropriate to increase the statutory minimum wage. The model is that if any movement is to be achieved, it would be done with an evidence-based process. From the Mandate perspective, I share the views of the relevant Minister and we have an aspiration for the wage to be increased appropriately at the earliest possible time.
With regard to the relationship between a living wage and a minimum wage and whether both can be enshrined in legislation, there is nothing wrong with being able to demonstrate clearly how this can done, as it has been quite recently by groups such as Vincentian Partnership. It demonstrated what it takes to have a basic standard of living which allows a person and family to exist in a society. Society means nothing if a person cannot live in a very basic form within it. The movement in this respect is important and we keep this as a clear aspiration. We are moving on a very deliberate path towards the creation of a living wage.
I am confident my colleagues will pick up the other issues I have not addressed. There is no danger in having a minimum wage and seeking to increase it in an appropriate and timely fashion. We have had the current legislation for a number of years, which has a clear provision for employers to be able to argue inability-to-pay clauses. I ask members to consider the number of cases which have come before a court sustaining that argument. There have been very few, and one could count them on the fingers on one hand. That tells us much. There is much bluff and bluster about whether we should have a minimum wage and if it should be increased. This is an evidence-based process so if a business can prove it cannot pay the minimum wage, it can make a case. Very few of them do that.
Mr. Gerry Light:
Without getting into the figures, there is much under-employment. Over recent weeks, Government spokespersons have pointed to the fact that a considerable number of jobs recently created have been full-time posts. The problem with under-employment is that people are already trapped in existing jobs, so there is a real danger that we will miss them and take our eye off that ball. We should ensure that, wherever possible, we should try to improve the lot of people who are under-employed. Unfortunately, I did not get to read out a significant part of our submission which seeks the introduction of a code of practice that allows meaningful access to full-time employment for people who are currently under-employed or who are part-time workers. That is already in an existing code of practice from 2001, which was enshrined in an EU directive as far back as 1997 and transposed into Irish law in 2001. One of the clauses has been largely ignored and so has the opposite effect of what was intended. Therefore, the code of practice has been used to drive people from full-time work back to part-time work. Now is the time to strip out that commitment and give it status in its own right, as well as developing meaningful codes of practice. That would help in a major way in the battle against under-employment and helping those trapped in it.
Mr. Jimmy Kelly:
The Senator asked what employers have to say. We are well aware of statements from employers organisations fitting what the Senator described. If we were to wait for the day when employers announced that they would introduce a living wage, it would never happen. Employers are driven by other motives, and trade unions are seeking to have decency implemented in workplaces. If we are to move towards having a living wage, we must start with improvements in the minimum wage.
We believe there should be an immediate increase of €1 per hour in the minimum wage. As stated by Mr. Light, zero hours contracts do not provide people with a decent week's wages. A person on a zero hours contract in respect of which he or she is being paid the minimum wage might only get a decent wage for a few weeks at a time. My sister works in Dunnes Stores. Often a person is employed on a full-time basis, for which he or she gets full pay for a couple of weeks, only to be told at short notice that he or she is only required one particular day the following week, despite that he or she has to meet the same financial commitments. This is intolerable for workers and is leading to what has been described as in-work poverty. I am old enough to remember that when a person got a job, it meant he or she got some financial independence. That is what work is all about. It is not about becoming a millionaire. Now people are being driven to having to take on two jobs to have a decent standard of living. The situation will become even more intolerable unless there is a move to increase the minimum wage to that of a living wage. To move us in this direction, Government procurement contracts need to start with that type of principle.
Mr. John King:
SIPTU supports the call for an increase in the minimum wage and for the introduction of a living wage. However, a couple of factors must be borne in mind. First, when the minimum wage was first introduced, the then Minister declared that it needed to be maintained at two-thirds of the median wage. It is currently probably less than 50% of the median wage. Had the line proposed by the Minister been held, it would now be between €10.40 and €10.80 per hour. Second, Ireland is one of two EU member states that have not increased their national minimum wage in the past seven or eight years. The only country that has not increased the earnings of the poorest of the poor in its country is Greece.
In terms of impact, people on the current minimum wage are unable to participate in society. It leads to poverty, social deprivation and so on. It also means people cannot provide for their means never mind their wants. It means that a cohort of our people are struggling to survive every week to provide the basic means for themselves and their families. In regard to what would happen if the minimum wage was increased, it should be borne in mind that the minimum wage is not an ideal measure for labour cost competitiveness. In this regard, other things must be factored in, including employer PRSI contribution costs. Ireland has one of the lowest employer PRSI contribution costs. While the minimum wage in some countries might be slightly below or above ours, employer PRSI contributions in those countries are significantly higher. As stated earlier by one of my colleagues, and this is evidenced in various submissions made, there are other structural labour costs that tend to be of more interest to employer groups than the rate of pay.
The issue of under-employment and wage-setting mechanisms is addressed in our submission. The national minimum wage is the minimum threshold of decency that should be extended to all people in this country. However, it deals only with the proposed hourly rate of pay. We believe that the Oireachtas should grapple with the issue of vested interests and employer groups not co-operating with the wage-setting mechanisms, because they enable workers to have some kind of equal bargaining relationship with their employers in setting reasonable hours, overtime rates and minimum sick pay in the event of their falling sick in order that they do not have to rely on State supports and so on.
It is evident that, in most of the European countries, even in countries where there are no national minimum wage rates, workers in sectors of those economies tend to be covered by sectoral collective bargaining agreements. Where employers are refusing to co-operate with Oireachtas policy that workers should be covered by way of sectoral mechanisms, we ask the committee to help find the means by which the Labour Court can be guided to deal with the issue.
I thank those who have made presentations. Mr. Kelly gave the figure of a €13 billion fall in household consumption from 2008 to 2012, which is massive. That hit the sectors SIPTU is focusing on, primarily retail services, and that figure of €13 billion has not been made since 2012. In that context, how can the loss be made up? What would they say to employers who say their hands are tied by that loss? The unions would say we have to look at other issues in the hotel and hospitality sector, such as loans and so on, but I would like to focus on that one issue.
Mr. Light commented that many employers are prepared to do the right thing by their employees and they have returned €30 million to the domestic economy through pay increases that the unions have negotiated. Will he explain what is the common denominator with regard to those employers? With regard to the employer whose name we are not allowed to mention, Mandate has a survey in December's Shopfloorwhich showed that 76% of staff in that organisation are, in the phrase Mr. Light uses, on "flexible contracts", and Mr. Kelly summed up what that means. Some 88% of them feel their hours were not fairly distributed and 85% said insecurity over hours and rostering is used as a method of control. That speaks to me of zero-hour contracts being, as I described them previously, like the situation of the navvies in England. What work are the unions doing around that to bring a degree of fairness or to get to the fair and decent workplace? I put that question to the three witnesses as they all deal with that area.
To conclude, I point out that the cost of employers' PRSI contributions was doubled overnight on 1 January 2013, or perhaps 2014, as part of a jobs initiative. Many employers were not even given that information until they got their wages bills in that first year, yet many of them just took it on board.
Mr. Michael Taft:
With regard to the loss of €13 billion of demand in the economy, we acknowledge in the submission that it is difficult to promote wages during a period of austerity, recession and stagnation without undermining firm performance. However, I would make these points. First, we are now at the beginning of a different type of position. We are seeing wage increases and a large part of this is because of trade unions working with their members in workplaces and negotiating pay increases. Second, employment is starting to rise. Third, the Government has ended nominal austerity. In other words, it has stopped imposing costs on both the household and business sectors. Of course, Unite and other trade unions have been saying that if it had done this much earlier, we might have been getting out of the recession earlier.
There are two processes happening which could vindicate the promotion of wages. First, we have a more promising economic and fiscal background. Second, we would make the point that where companies can pay a minimum wage or a JLC rate that is struck, they will be able to assist those firms which are unable to pay and, therefore, take a postponement under the minimum wage and JLC legislation. If firms that can afford to pay do not pay, they hurt a number of sectors. Obviously, they hurt the workers, who do not get the pay, they hurt the Exchequer, they hurt the wider economy due to depressed demand, and they also hurt those other businesses that are reliant upon the spending power of workers. In the first instance, we are entering a different economic and fiscal cycle.
Second, it is about ensuring that those companies that can pay the increase do so and, thus, help out those companies who badly need that spending power.
Mr. John King:
On the zero-hour contracts, we will participate in the study being undertaken by the Department in regard to the effect and prevalence of zero-hour contracts. However, I would tie that response to my earlier commentary regarding the employees in certain sectors of the economy who, because of the low levels of trade union density and a lack of advanced forms of collective bargaining therein, have no real means by which they can influence the conditions under which they are forced to work. We believe that the Oireachtas should insist by way of policy that workers in particular sectors are covered by collective agreements, be that joint labour committee or registered employment agreements, so that employers are not allowed to exercise a veto and thereby affect workers' piece. It is fundamental that vested interest groups are being allowed to cherry-pick the Oireachtas policies with which they want to comply. We believe the Oireachtas needs to deal with this issue. We believe also that it is only through the joint labour committee structure that workers will have an opportunity to influence their working conditions and ensure they get proper, decent and regular hours of work.
Despite the establishment of the joint labour committee structure in the late 1940s, we had to introduce the minimum wage in 2000-01. If the JLC structure is so good why was it necessary to introduce legislation around the minimum wage?
Mr. John King:
The joint labour committee system which, as stated by Deputy Calleary, was set up in the 1940s was designed to operate in sectors of the economy in which there were not high levels of trade union density and where it was felt workers would be prone to suffer the worst forms of exploitation and so on. This dates back to the Trade Disputes Act 1906. However, the joint labour committee system does not cover every worker in the economy. It covers only particular sectors of the economy. It is necessary that the minimum wage apply in at least those sectors of the economy that are not covered by a joint labour committee. During the period between the introduction of the minimum wage in 2000 and the collapse of the JLC system in 2011, only a small percentage of the Irish workforce was covered by the national minimum wage. Following the troika process in 2010 and the High Court decision in this area, tens of thousands of workers failed to be covered by that protection. They lost all of their conditions of employment and were collapsed to levels of the national minimum wage. We want to put in place forms of engagement for those workers which ensure they get minimum legally enforceable conditions of employment, which is more than just about the minimum hourly rate of pay. Within this collective bargaining process can begin a process of engagement with employers within industries to bring people, by agreement, towards a living wage as distinct from €8.65 per hour with no frills attached.
On the PRSI issue, the Government introduced a favourable PRSI rate, in addition to the VAT rate, for employers whose workers earn less than €356 per week. In other words, employers would pay less PRSI in respect of employees earning less than €356 per week. The evidence is that this facilitated a move towards the creation of part-time employment, which is one of the reasons for the level of under-employment and incentivised zero-hour type contracts. While this was reversed in 2014 significant damage had been already done to people on full-time contracts, in that they lost hours and were displaced. My commentary in regard to Ireland's PRSI levels relative to our European partners stacks up, notwithstanding that which may have taken place with the PRSI rate.
Employers in this jurisdiction pay much less than their counterparts in most of our European Union trading partners.
Mr. Gerry Light:
I will break down the question into three component parts. The Deputy referred to the common denominator in respect of employers who are willing to deal with trade unions and do the right thing by their employees. The common denominator is that they agree to sit down with the trade union and, in doing so, they do the responsible and morally correct thing by their employees. Long before any collective bargaining legislation has to be placed on the Statute Book, they agree to be seen to do the right thing by coming to the table willingly and openly. There is no doubt that without this type of attitude and approach, not much headway will be made in dealing with the issues of low paid workers.
On the key measures, the trade unions believe the awards we have achieved have been understated. Over the past two years, some €30 million has gone back into the economy and not only directly benefited low paid workers and their dependants, but delivered the many other benefits for the economy highlighted by my colleagues. This is a crucial issue.
We must be careful, in the more general and open debate that is taking place on decency thresholds, whether it is the statutory minimum wage or a living wage, to apply the following simple mathematical formula: the hourly rate multiplied by weekly hours equals the wage. We can become much too narrowly focused and claim an increase of 20 or 30 cent in this or that rate is great but the reality encountered by low paid workers in the workplace is that employers can completely mitigate the benefit of any increase with the stroke of a pen. The simple way to do this is by reducing hours of employment or in some cases eliminating them. The key element in any debate is to place this formula on the table and examine the issue in a holistic fashion. We must not rely excessively on increases in rates. While such increases are important, we must look beyond them at the various component parts.
While I do not propose to refer to a specific employer by name, everyone present will know which company I am talking about. What we have to do to bring about engagement-----
Mr. John King:
Unfortunately, the statistics I cited, particularly those on the number of part-time workers, are fairly typical. This exacerbates the problem. If the position is bad in the unionised sector where we have uncovered some of the problems I have cited, one can only imagine what is occurring in the non-unionised sector.
In respect of the employer in question, unfortunately, SIPTU will announce the result of a nationwide ballot of our members this Friday. Our members had to address the very serious question of whether they are prepared to engage in a form of industrial action simply to get a renowned and profitable indigenous retailer to come to the negotiating table and discuss the relevant issues with representatives of the trade unions. We simply want the company in question to make its case before the Labour Court but it is refusing all of these legitimate and responsible-----
The rules of engagement in this committee are read out for a reason, namely, to provide legal protection for witnesses and members. It is with the utmost respect that I ask all those present not to be facetious or bandy about comments about companies we know or do not know. The rules are in place for a reason and not for the fun of it. I urge witnesses to desist from alluding to people who are not present. I am advising them of the position for our protection.
With respect, people are entitled to offer an opinion on the work practices of an employer. The purpose of this meeting is to hear from the witnesses about the reality of low pay for many workers. A number of highly profitable companies are employing people on low hour contracts. It is outrageous that witnesses are not allowed to discuss that issue because it is the elephant in the room. Furthermore, what is being said would also be said outside this hearing.
I fail to see why there is any difficulty with any of the witnesses either naming the organisation involved or talking about it because it makes a mockery of what we are trying to do if we put a muzzle on people who come into the hearing.
I remind Senator Cullinane that nobody is trying to muzzle anybody. If the Senator wants me to get him legal advice, I will certainly do that before the next meeting. I will move on with the hearings and invite Deputy Tóibín to contribute.
Mr. John King:
I respect that and do not want to over-indulge on anybody else's time. However, I want to reiterate the point the Senator has just made. Everything we have put before the committee today is on the public record. There is nothing new or anything that we believe is in any way dangerous, but I will be guided by the Chairman. Everything is on the public record. If I may, I will finish the substantive point in respect of what we have to do. It is a fact that we have to ballot our members. It is a fact that the decision will be known next Friday and it is a fact that it is highly undesirable that we had to go to that length to have a major retailer come to the table and discuss legitimate issues of concern with us. They are all matters of public record and fact.
Sometimes when we discuss these issues we nearly get lost in the human side, that is, that there are families who cannot afford to feed their children, heat their houses, clothe their children and get them ready for school. These are people who are working full-time. On a humanitarian level alone, there is a necessity to focus on the issue of low pay. We have an exceptionally uneven wage scale in Ireland in terms of the highs and lows and I believe the minimum wage is an extremely important part of that. I agree with some of the speakers that it is not the only issue. There are the major issues of public services, tax, conditions of employment and purchasing power. We have a low pay commission, not a minimum wage commission, and if the low pay commission was to do what it says and pass the advertising standards, it would look at all those issues that feed into low pay and make recommendations to the State on what should be done to alleviate this humanitarian disaster in society. It is not only employees who are on low pay. In certain scenarios there are employers who are on low pay. One of their concerns is the relationship between the minimum wage and unemployment.
In an effort to create an evidence-based discussion, is there any research of which the representatives are aware that either negates or suggests there is a clear relationship between the minimum wage and people losing their jobs? We know many people are on the minimum wage, as highlighted by Mr. Gerry Light. There are also many people on the minimum wage working for very profitable businesses. A committee like this or an executive should be able to identify how many people on the minimum wage work for companies that cannot afford anything more than the minimum wage and how many work for extremely profitable businesses that could easily afford to compensate above the minimum wage.
I had a look at the Small Firms Association document. There appears to be a conflict about evidence from Mr. Michael Taft on the purchasing power element of low pay. Mr. Michael Taft stated that when purchasing power is taken into consideration, low pay is even lower in the State. Obviously the Small Firms Association has stated that is not the case. Can Mr. Taft identify where the evidence for his statement has come from and we will speak to the Small Firms Association on the issue?
My final point is on purchasing power. The last thing we want is wage inflation which leads to a reduction in purchasing power, where workers are no better off but wages have nominally increased within society.
Representatives of the Nevin Economic Research Institute, NERI, appeared before the committee last week and made a good point in setting out that if the State provided proper public services, it would mean that the living wage could be reduced. The costs of all our public services put pressure on families' wage resources. In what ways do the representatives of the unions believe that purchasing power could be increased within the economy, other than by increasing the minimum wage, which I would support?
Mr. John King:
The first point I would make about purchasing power is that workers in Ireland deserve a pay increase. The vast majority of them, as we know from the figures that have been released, are low paid. A far bigger percentage of workers are on rates of pay below the medium pay level and certainly below the average level than are on rates of pay above it. They have not received a pay increase. It is only right that workers, and low paid workers in particular, should benefit from the recovery that is taking place.
The taxation issue or the issue of the development of public services is a much bigger question. We want there to be a progressive taxation system that would be capable of funding the delivery of proper, decent public services for all our citizens. I believe it was the Taoiseach who said last week that work should pay. We believe there should be a clear distinction between the two and that those who are required to rely on public services should have the standard of public services we all deserve in the 21st century. Our view is that people who go out to work deserve to be treated with dignity and respect and paid properly for the work that they do.
As I understand it, the low pay commission at this stage will be used as a means to guide Government policy on what the minimum wage rate should be. In that context, reference is also made to "and related matters". It will be interesting to see the scope it will have in interpreting what related matters might be. In conjunction with that, a review is being carried out by, I believe, the University of Limerick on the zero-hour contracts. Facilities are now provided, both in the minimum wage legislation and in the reform agenda for the reintroduction of the joint labour committee system, for employers to be able to plead inability to pay in certain circumstances. Workers in this economy have carried the brunt of the adjustment necessary by way of income reduction or a reduction in spending power and so on. That has led to some of the stagnation that has taken place within the domestic economy. All of our European partners, bar one, saw the sense in maintaining consumer demand in their domestic economies and all of them, bar one, increased their minimum wage. A strategy of not increasing wages, or reducing wages or take-home pay, is not only detrimental to the interests of the workers, but it is also counter-productive to the maintenance and creation of demand in the economy, which will be essential if we are to sustain a recovery from this crisis.
Mr. Gerry Light:
I wish to pick up on a few of the issues raised. The notion of low pay and precarious work conditions is bad enough but when it is experienced in profitable companies, it is particularly galling. For far too long and far too often the value and output of the contribution of workers have been conveniently set aside. We, and particularly employers, talk about competitiveness at every opportunity and we talk about productivity levels, but some of the biggest and most profitable corporations in this world are retail operations.
They produce billions every year in both turnover and profit. We must look at that issue, point the finger and ask the questions, where appropriate, of those who can clearly pay but resist doing so, as well as of those who may have a genuine case. As I said earlier, the only place one can make such a case is around the table, with employers facing workers' representatives. Ultimately, if there is disagreement, then the institutions of the State can be called on to make a call on the situation. There is nothing wrong with that; it is a fundamentally safe way to conduct business.
A question was asked as to whether there is any evidence to support the view that minimum wage legislation leads or contributes to higher unemployment levels. I have said publicly many times that it is not in any trade union's interests to force employers into a room and get them to pay money that they do not have because that will ultimately end up in the loss of employment and the closure of businesses. Why would one do that? The potential for higher levels of unemployment can be adequately catered for within the current structures that exist, namely, the inability to pay clause. Employers can go to court and let the most appropriate body in the land make the judgment call. If an employer genuinely believes that having to pay the minimum wage or honouring some other commitment will be detrimental to his or her business, he or she can make that case and let the court make the decision. That is a very safe mechanism and whether we have credible evidence for or against the argument, that safety net is there. However, as I said earlier, it is a mechanism that is very rarely used for very obvious reasons.
Mr. Jimmy Kelly:
I wish to address one of the points raised by some of the members. All of the scary monsters put forward by employers about what will happen when we move in the direction of decent pay do not stack up. Let us look at what we have created in this proud republic of ours. Not so long ago we had full employment, an end to forced emigration and the start of inward migration for the first time. We moved into that good space and nobody can say that the crash and crisis was linked to workers being paid proper wages. It was based on greed, the property bubble and the behaviour of the banks. None of it was connected to workers being treated decently. We are making an argument which fits in with what Deputy Tóibín described, in terms of consumer demand being needed at local level. I try to relate what we discuss with what happens locally in terms of local economies and local communities. Moving in this direction not only achieves what my colleagues have described in terms of decency at work, but it also generates spending at local level through increased consumer demand. These are the benefits upon which we must focus, rather than suggestions that the world will end if workers start getting paid properly.
Mr. Michael Taft:
I wish to cover three points briefly. In terms of studies or analyses of the impact of an increase in the minimum wage on unemployment, originally such analyses were very model-driven, with supply and demand curves for wages. The assumption was that the more expensive labour became, the less demand there would be for it; in other words, increases in wages would result in rising unemployment. This assumption was superseded some time in the 1970s and 1980s when economists left their desks, went out into the real world and actually analysed what was going on in an empirical sense. They found that raising the minimum wage or the statutory wage floors had very little impact on employment. It is hard to know exactly where the wage increase fits in because there is a lot of noise in the labour market but essentially, they found nothing. There was no negative impact and I can supply some of those studies to the committee.
The second issue is about where we took our information from. As the committee can see in the notes, the information on hourly compensation was taken from EUROSTAT's national accounts.
In terms of the purchasing power parity, I am sorry I did not footnote this but I will forward our tables to the committee. The purchasing power parity was also taken from EUROSTAT. It refers to each country that equates to the actual individual consumption, which is the preferred parity for our workers' wages. I will forward on the data.
Finally, if we replace collective provision with private provision, then we should not be surprised that prices will rise and the reverse is the case. For instance, recently an RTE programme compared public services provided by French and Irish hospitals and it was shown that it costs €7 for a person to go to a GP in France. If employee compensation was increased to provide for health care, and in most EU countries the majority of health care is expended through social insurance and employee compensation and not through the Exchequer, we can see the benefit of falling GP costs and, similarly, with child care. We all know of the situation where child care costs between €100 and €200 per month because it is provided as part of public service provision rather than €1,000 per month, and upwards, in the private sector.
There is an ability and we would invite employers to consider the following. A stronger, collective provision of services for people will mean that they do not have to demand as high a wage. If one does not pay out €1,000 per month, rather €100 or €200 per month, then a dynamic will be generated in wage setting. One of the problems we had was that wages rose in the pre-crisis period because they had to keep up with inflation, especially inflation induced by housing. If we can reach equilibrium whereby more of those services are provided through collective provision, we can have wage structures which are more egalitarian, promote living standards, remove in-work poverty and still provide a basis of a profitability for employers.
Mr. David Gibney:
I wish to comment on Deputy Tóibín's argument about underemployment and using the word "underemployment". He also referred slightly to who is behind statistics and that sometimes people get caught up in words like "underemployment" that do not explain exactly what it means. The real term should be "involuntary part-time". They are not workers who work part-time. They are workers who seek more hours but cannot access them. I will explain the impact such a situation has on workers. At present, 147,000 workers in this economy work involuntary part-time and cannot access more hours because of a number of reasons, which I will go into shortly. The current figure of 147,000 represents a 60% increase on the number for 2008. The most recent statistics show that as a percentage of the entire workforce, we used to have 0.4% of the workforce as involuntary part-time or underemployed but that percentage has risen to 7.8%. Ireland was the best country in the EU 15 countries for underemployment, but now we are the second worst in that group. The reason is twofold. The first reason is a lack of statutory protections. As Mr. Light alluded to earlier, the part-time worker directive was never fully implemented. That means workers do not have a code of practice in place at the moment to seek more hours when they become available on a shop floor, for instance.
Other EU countries have a contract called an honest contract. For example, if a person gets a ten-hour contract but is regularly asked to work 15 hours, or one is regularly working 25 hours, the excess hours above ten hours are paid at a rate of time and a half. That means an employer is incentivised into giving his or her employee an honest contract. That means it would be cheaper for employers to increase a worker's hours to 25 rather than pay the 15 extra hours worked at a time and a half rate of pay.
As people will be aware, Ireland also has very weak collective bargaining laws. As Mr. Light mentioned earlier, that has led to a situation of collective bargaining agreement and negotiation rights with employers.
Not only have we managed to win €30 million in pay increases, as mentioned earlier, but the increase to the State was €3 million, when one takes into account employer PRSI contributions, not to mention the reductions in social welfare transfers. We also said in our submission that there is increased revenue through VAT, income tax and employees' PRSI. Those workers in a position to bargain collectively and get better pay and terms and conditions have made a massive contribution to the State.
At the moment we have neither strong statutory protections for workers nor full collective bargaining rights. The 15 other EU states are ahead of us in respect of involuntary part-time positions, because they offer at least either strong statutory protection or access to robust collective bargaining mechanisms. The committee might consider that.
I think I will upset the six witnesses by saying a minimum wage is not the way to go. The witnesses should accept that each time the union demands more money from an employer, it weakens the chance of that employer taking on more employees. That cannot be in the unions’ interest or the employees’ interest. It is much more important they have a job than that they take so much money off the employer they put the company out of business.
In my company many years ago the question of a national pay rise cropped up. We decided we wanted the best employees to come to us. We automatically paid everybody an increase. Other employers, our competitors and the employers’ organisations criticised it. Within a very short time ours was the place where people wanted to work. They came to us and their brothers, sisters, cousins and neighbours tried to get jobs with us. I can think of five of our non-Irish competitors which went the other way and cut costs. They were all gone within ten years. This case is not being taken into account. Every time the unions pressurise an employer to pay costs that make him less competitive, they damage his opportunity to employ more people and to pay more. What we did many years ago worked very well. We paid more and became the best employer.
It happened last week in the United States where Walmart, the biggest retailer in the world, announced that it would give an increase to its 500,000 employees. It gave as the reason that it wanted the best employees. That was not its policy in the past. That is the case the unions should make, rather than forcing it on employers which are having difficulty now, as many are. The unions could find a different way of encouraging them to succeed, and I take Mr. Light’s point that very few have actually gone to the point of claiming inability to pay. The way to go about it is to encourage the employer to do a better job, to get the best employees, to pay more and I believe they will succeed on that basis. The living wage concept is fine but the minimum wage is the wrong direction. The unions should change their attitude. That is a comment for all the witnesses.
Mr. Gerry Light:
Maybe because of our past, I would suggest that pay increase came about for the many thousands who worked in Superquinn at that time as a result of our engaging in a very constructive collective bargaining environment. With the greatest respect, I think the Senator’s proposal to us today is utopian in the extreme.
I refer to it in our submission. It suggests that a job at any cost strategy is the way to go. Surely we have to have regard to the quality of the employment we are creating. The number one consideration must be that in an effort to take people off social welfare and put them back into work, we do not worsen their lot. That can happen if we have little or no regard for the quality of employment. Work must pay and must be seen to pay.
I will refer to an entity outside of the jurisdiction. The Chairman can pull me up on that but Senator Quinn named it and he was not pulled up. I refer to Walmart. As a result of the pressures in recent years and the general thrust generated by society for fairness and decency, it has done what it did last week. I could not believe what happened and I wiped my eyes when I read the article. For many years the labour unions in America have been following the company and attempting to get it to do the right thing, at significant expense to them. There is now a chink of light at the end of the tunnel as a result of the lobbying that was carried out in respect of campaigns around decency and fairness.
I will make a final point. We have not come before the committee to look for a pay increase on behalf of our members. This is a societal issue. We are proposing a pay increase which will be applied to all workers who find themselves in part-time, low-paid and precarious work. We are trying to do the right thing for them. We are prepared to engage with the relevant employers that do business with us and allow us, as much as they will allow, to make the case for it.
I have said on a number of occasions that if we fail to agree, we will go to the Labour Court and let it make the decision. That is crucially important. This issue is broader than the trade unions. It is about the society we are looking to build as we emerge slowly from the years of doom and gloom into a better place for all of our citizens, not just those who are employed but for everybody.
Mr. John King:
I respect Senator Quinn's views. It may not be a surprise to him that I am diametrically opposed to them. As I have stated repeatedly, all low-paid workers and the vast majority of other workers in our economy have gone without a pay increase for a significant period and have shouldered a significant burden in terms of the adjustment in our economy. I do not want to go any further into the matter. There are different views.
We ask that where the Oireachtas approves and decides on policy, low-paid workers in certain sectors of the economy should be covered by collective bargaining agreements to give them some equality of influence in their bargaining power with employers. Some employers refuse to engage. We ask the Oireachtas not to accept that and to define the means by which the Labour Court is guided to deal with that. Interested groups have been before the committee which are happy to take revenue out of our hard-pressed Exchequer at a cost of some €350 million per year and take from the State by way of what is paid to Bord Fáilte and other organisations to fund their advertising campaigns and so on. They gladly take favourable Government policies, yet refuse to accept others. Within the JLC structure is the means by which engagement can take place to reach agreement on issues about pay and conditions of employment.
I did some sums. I tried to equate the €350 million which has to be found through the Exchequer to implement the reduction in the VAT rate for the tourism sector and associated industries since 2011, plus the approximately €300 million or €350 million spent each year on subsidising people in work through family income supplement. A minimum of €2 billion of taxpayers' money has been spent in the past three years on subsidising work directly and indirectly.
As Mr. Michael Taft said earlier, if there were better and less costly public services, there might be €2 billion more to go towards reducing what people have to pay. It would help, in this context, if we did not have to subsidise work.
Can I ask each of the representatives for a comment on the reduction in the VAT rate? It has obviously done some good - nobody can say it has not. I have a question for Mr. John King. I read an article in The Irish Timesabout a PricewaterhouseCoopers report which stated that, by next year, Dublin hotel rates would return to pre-2007 levels. This is the very same sector we are subsidising to the tune of €350 million and the same sector which is refusing to engage in improving the working conditions and rates of pay for people who work in the sector, many of whom are in the €8.65 per hour category and who do not get a full week's work.
In the context of the point about inaction through the JLC mechanism, can the witnesses elaborate on what exactly they meant by saying the Labour Court could be guided to deal with sectors which do not engage?
Mr. Gerry Light:
Perhaps Mr. John King can answer the question about the VAT rate specific to his sector. The attitude to the VAT rate is typical and we express this view in our submission. It is not true of every employer but it certainly seems that many of them want to have it every way. It raises the question of why we needed a statutory minimum wage and why, now, we are having a worthwhile discussion around the living wage. It is necessary because swathes of workers cannot properly bargain within their industry or sector. If an employer group within a particular sector is given advantageous or favourable treatment, such as by way of a reduced VAT rate, there has to be a dividend for everybody, not just for some. Employers cannot continually and robustly argue against meaningful collective negotiating mechanisms at the same time as arguing against the need for a statutory minimum wage or a living wage. Do they ever ask themselves why we need such things? They argue against every measure which is socially and morally progressive. Ultimately, it leads back to those arguments put forward at the beginning of the meeting. One of the consequential effects of those arguments is to illustrate the need for a living wage and a minimum wage in the first place.
Mr. Michael Taft:
A reduction in VAT is one of the tools of a countercyclical fiscal policy. In other words, it is what governments do when a recession hits. The British Government did it and, back in 2008, the Irish Congress of Trade Unions called for the Irish Government to consider it. It is a Keynesian tool used by governments whenever they get into this type of situation. There is nothing wrong with it per seand it can be very effective when it is targeted. However, an implied social contract is involved. In other words, people who receive benefits have responsibilities. If the social contract is not adhered to, and if one party decides, "I will take all the benefit but will not treat the economy, the workers or the exchequer correctly and, instead, I will grab all I can", that person fails to realise that the reason they got the benefit in the first place was because it was a social intervention in which we all share. The committee may wish to put questions to employers on the VAT reduction and the fact that, having received benefits through a number of policy instruments, they also have a social responsibility to ensure those benefits extend to everybody. That is the only way the entire economy benefits.
Mr. John King:
I will try to avoid being repetitive. When the VAT rate was introduced in 2011, it was a time when evidence from the CSO suggested the sector had turned a corner.
Employment was starting to grow and there was an increased number of tourists. There is no great evidence that the VAT reduction was passed on to any significant extent by way of price reduction, and we certainly know that the employees did not benefit from it. This was introduced at the same time that the sectors were able to benefit from the reduced employers PRSI rate, where their employees earned less than €356. That is what led to a lot of the boom in employment. When one digs down into those figures, one can see that a lot of the growth in employment in the industries within those particular timeframes was in part-time employment.
To recap, what I say is somewhat repetitive in relation to what Mr. Taft said in that where industries or sectors are able to avail of favourable Government policy, they should, equally, be required to comply with Government policy in relation to other matters. I remind the committee that by not co-operating with this piece of Oireachtas policy, they are actually bringing the Irish State into disrepute with a signed International Labour Organization, ILO, convention relating to workers in hotels, restaurants and similar establishments, which states the best method to determine rights for workers in these industries is by way of a collective bargained agreement. I put it to the Oireachtas that within the ILO there is specific reference to the development of skills and so on in the hospitality sector. Since the collapse of the joint labour committee, JLC, system, the majority of pay rates have fallen to €8.65 an hour. It is not surprising to us but it might be surprising to the committee that at the same time the employers are saying they do not want to pay any more than €8.65 an hour and they do not want the JLC, they are the apprenticeship commission bemoaning the fact that they cannot attract good calibre craftspeople such as chefs into the industry. That is no wonder considering they will not agree to engage in order to pay them a decent wage with decent conditions of employment.
On the point about the Labour Court being guided, the system of industrial relations in Ireland under the 1946 Act is based on voluntarism. The 1946 Act provides the basis for the joint labour committee system. The intent of it is that it produces what is known as an employment regulation order, ERO, which is a legally binding document. At the start of the process, the initial engagement is voluntary. What we are saying is that there are other aspects of industrial relations in this jurisdiction that specify that where an employer refuses to engage voluntarily, the Labour Court is guided to be able to deal with the issue. I will outline two references in that regard. For instance, under the Industrial Relations Act 1969, if a union requests a meeting with an employer and it refuses to engage, the union can refer the matter to the Labour Court under section 20(1) and the Labour Court will hear the case whether the employer shows up. The employer is invited to participate and will be asked for his or her views or opinions and to make a submission, but the Labour Court is guided to deal with the issue if the employer refuses to engage voluntarily. That means the employees get an opportunity to at least have their case heard under the industrial relations mechanism provided by the State.
Under the 1969 Act, section 11 enabled the Labour Court to set fair employment rules following consultation with representatives of employers, workers and industries. It fell off the Statute Book in the 1990 Act and we ask the committee to recommend to the Government that the measure be re-enacted so as to say that if employers decide they do not wish to voluntarily engage, which is their right, then the Oireachtas should not accept that because it is Government policy that there would be such a mechanism and that it will find a way to guide the Labour Court to do it.
This guidance of the Labour Court could be done under the provisions of section 11 of the 1969 Act. The section would enable the Labour Court to deal with the issue and also allow the Oireachtas to implement its policy of ensuring low paid workers are covered by the protections of a joint labour committee.
I remind members, witnesses and those in the Visitors Gallery to ensure their mobile telephones are switched off for the duration of the meeting as they interfere with the broadcasting equipment, even when in silent mode.
I welcome, from the Small Firms Association, Ms Patricia Callan, director, and Mr. A.J. Noonan, chairman, who is the managing director of Rhonellen Developments. I draw witnesses' attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter to only a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.
Presentations should not be of more than five minutes' duration. Members have been circulated with the presentation submitted by the Small Firms Association. I invite the witnesses to make their presentation.
Mr. A.J. Noonan:
I congratulate the Chairman on her appointment and wish her luck in her new role. I hope she has as much success as her predecessor, the Minister of State, Deputy Damien English.
I listened with a certain amount of amusement to the contribution of the previous delegation and the proceedings at the recent party conferences. This is the year of the sheep in China but to many in Ireland, 2015 appears to be the year of the pay rise. Rather than it being the year of increased productivity, tax equality for the self-employed or increased competitiveness, it is the year of the wage increase, for which small businesses and businesses in general are expected to pick up the tab.
I remind the committee that small businesses throughout the country do not have a representative on the low pay commission, bearing in mind that it is many small business people who will be picking up the tab. I firmly believe that the low pay commission is but a fig leaf for an increase in the minimum wage, and I have grave concerns about that. It is basically an increase in the cost of production. This is the Government reneging on its responsibility in terms of the redistribution of wealth. Businesses are not about wealth redistribution - we are about creating jobs and creating wealth for distribution. I heard the previous union speaker say that if businesses have an inability to pay they should go the Labour Court. The reason business people do not go to the Labour Court in some cases is embarrassment about their inability to pay; instead, they will make a couple of people redundant. That is what will happen on this occasion also. Some 4.7% of the population are on the minimum wage. They will be the first in line for the door. For the unemployed who are trying to get jobs, this is a missed opportunity to give them jobs. I met people from two companies last week in preparation for this meeting. One who works in the food business said that due to costs he would automate his business. The balance will move towards automation - in other words, redundancies. The other company had nobody on the minimum wage but if it went up it would have people on it, and the owner said he would be forced to make people on the higher rate redundant. As an employer I have grave concerns that this is what is going to happen. There will be another whopping increase of, I think, €1. That is €40 per employee, and for 40 employees this amounts to massive increased costs for employers. I will invite Ms Patricia Callan to go into the more detailed aspect of our presentation.
Ms Patricia Callan:
Our submission has been circulated. Essentially, the National Minimum Wage Act 2000 is very clear in terms of what one is meant to consider in determining that rate. In our submission we have gone through each issue one by one and set out the reason we feel it is a valid argument for not having an increase in the minimum wage at this moment in time. We have gone further, arguing that we should freeze the minimum wage at its current rate so that it is not up for discussion for the next three years. The reason we have taken this decision is that there is a very strong sense that growth is returning to the economy, but from our members' perspectives it is all about stability, getting one's feet on the ground again and rebuilding the balance sheets. Many people are still heavily in debt and have not been paying themselves as they are trying to invest in the business again, and they really cannot have cost increases imposed upon them. This is the nub of the issue and it is where it differs from other discussions about pay rates. If businesses are levied with an increase in the national minimum wage there are no productive gains, so it is actually just a cost. It is very hard for any business operating on low margins to absorb costs at that level.
In terms of the low pay commission, as our chairman has mentioned, we were disappointed, given that many of our members who put themselves forward - real business people who are running real enterprises and employing people on the minimum wage - were not selected. The process was a written application and selection. There were no interviews and there was no sense on our side that those involved were trying to have the low pay sectors represented or, on the other side, low-paid workers. Where can they be seen? We need to have another look at the commission. I am concerned that if we establish this body and we are all meant to support it, it has to be independent and outside politics. We have to stop senior politicians from saying they expect a €1 increase. One cannot expect something if one puts it into the hands of an independent commission. Certainly, we need serious reassurances as a country about the process of the low pay commission.
I will take the committee briefly through the review methodology. In terms of the analysis - I am aware of this from the previous presentation - if people want more detailed charts and sources, we can forward them. In essence, we did an assessment of inflation, which is one of the biggest indicators. People always say one has to keep pace with the cost of living but, in fact, at the end of 2014 the cost of living in Ireland was 0.6% below 2008 levels.
Therefore, there is no reason to say that the minimum wage should be increased at this time. We have calculated that the minimum wage is 19% above the level established at the time of its introduction. If it had risen in line with inflation it would be just €7. By any metric, the minimum wage rate is very good compared to the cost of living index.
In terms of the movement in earnings of employees, all the unions have said that the race to the bottom is terrible, but during the crisis the number of people on the minimum wage fell. Therefore, that is not a valid claim. Some 4.7% of the workforce were on the national minimum wage at the end of quarter two of 2014, compared to the 2007 estimate of 4.9%.
We have also done an assessment in the context of median wages. Much of the discussion in the literature is about this concept, in that the ratio of the national minimum wage to the median wage has an important impact in terms of whether jobs are likely to be lost when it is increased. Because of our position on that metric, we believe, in the context of the literature, that it is likely that we will lose jobs if the minimum wage increases, because our overall wage bill will be too high and businesses will not be able to afford it. We have examined the sectoral and regional impacts in this respect. The minimum wage is a very blunt tool. It applies regardless of the type of business one is employed in or where in the country one is based. We all know there are huge variations throughout the country and that is why we are opposed to the use of this blunt instrument. It will have a destabilising impact in the sectors most represented in our association - namely, the accommodation and hospitality sector, retail and other services, and those services being provided outside the greater Dublin region.
For us the level of unemployment is the most serious issue. People seem to have forgotten that we have a shockingly high level of unemployment.
Ms Patricia Callan:
Even by the end of this year, if everything goes right and all the small businesses survive and all the multinational investment comes through, we will still have an unemployment rate of 9% and 180,000 fewer people at work. That means we are looking at locking even more people out of the labour market. When we look to the live register, it is interesting to note that employers are already experiencing skills shortages. We are still seeking to recruit people with skills from abroad because of the mismatch. We have low-skilled workers on our live register and young people with no experience. If it does not make sense to hire a worker on that basis, a business will not do so if its costs are too high. That is a basic metric of which we need to be aware.
With regard to national competitiveness, we have one of the best minimum wage rates in the world. Ours is the fifth highest in Europe. The rate in Luxembourg is an outlier, and the rates in Belgium, the Netherlands and Germany are the same as ours. When account is taken of the purchasing power argument in this debate, we drop only by one percentage point. We would go further in arguing this point and say that this cannot be looked at in isolation. In many other countries, people on lower rates of pay are taxed much more than people here and they have access to much better public services. We need to look in the round at the taxation and income policy element in term of public services as well as the national minimum wage.
I welcome the two witnesses from the Small Firms Association, SFA. Mr. A. J. Noonan said he was amused at the contributions from the trade union representatives, but I do not think there is anything amusing about the issues we are discussing. We are examining the issue of low pay. The facts from EUROSTAT, the OECD, the CSO, the Think-tank for Action on Social Change, TASC, and the Nevin Economic Research Institute show that 21% of workers in this State are on low pay, 350,000 workers in this State suffer from deprivation and there is a big problem in terms of in-work poverty. That is the reality. We are dealing with that issue and those facts. How we can create a more sustainable and a fairer economy and what are the responsibilities of the State and employers in achieving that fair economy? That is what we are about. I have a some questions with regard to the SMA's contribution.
To come back to the living wage concept, I wish to refer to part of the presentation which we did not get to. The presentation suggests that it is not the job of businesses to redistribute wealth but to create wealth which can then be redistributed by Government. At the very start of the presentation, reference is made to the fact that the business community and small firms in particular are a key driver of economic growth. The economy is not something that acts in isolation. The economy has to be there to serve society and citizens. Employers have a responsibility in that area too. My first question to the witnesses relates to the responsibility of employers to create and achieve a fairer economy and better income equality.
We heard earlier from Mr. Taft from the Unite trade union. In her presentation, Ms Callan spoke about taking purchasing power into account in the context of the fact that we have the fifth highest national minimum wage in Europe and that this is broadly the same picture, but that is not what EUROSTAT says. The facts say something else-----
I am posing the questions. My point is that we are getting different figures from Mr. Taft and from Ms Callan. I looked at the EUROSTAT figures and they show that we drop significantly below the European average when one factors in the price of goods and services.
The witnesses are obviously against an increase in the minimum wage and I would imagine that they are also against wage increases in the economy generally. However, they also made the point that we have a difficulty with regard to the provision of public services. That is one of the problems which leads to both income and economic inequalities. We heard from IBEC at a previous meeting and it agreed that child care provision, health care and housing are very important instruments when dealing with economic equality. All of the employer organisations are arguing against increasing the minimum wage and are calling for wage restraint. They are also against any increases in taxation, whether that be corporate or income taxes. In that context, where is the money going to come from to provide the services we need if we want to achieve a fair economy? Is it fair or right that we have 21% of workers on low pay? Is it right that we have 350,000 workers suffering from deprivation? Is it right that some employers who can pay more refuse to do so because they do not want to? Is that right?
The witnesses expressed the concern that an increase in the minimum wage could cost jobs. What evidence is that argument based on? Can the witnesses provide evidence that increasing the minimum wage by €1 would actually cost jobs across the economy? Where does that assertion come from? We are trying to lift our domestic economy by increasing domestic demand. The very firms and businesses that the witnesses represent would be the ones to benefit the most from any wage increase because people would have more money in their pockets to spend.
There are people who are on the minimum wage who cannot afford to meet their basic needs. There are people on low pay who are suffering because they live in deprivation. That is the reality for those workers. I am asking the witnesses, as representatives of employers' organisations, what responsibility employers have to meet that challenge and to deal with the very real situations those workers face. I do not see anything in their presentations which lends itself to any real solutions for those workers, that cohort of people who suffer because of low pay. What is the witnesses' solution for them?
Mr. A.J. Noonan:
First and foremost, to deal with the Senator's initial point about amusement, I am amused at the trade union movement and amused that people think that employers have all of the solutions and plenty of money.
Many small business people do not get paid the minimum wage. Many small business people in this country have not taken a wage for two or three years. Therefore, I would be very careful. Obviously, your politics and my politics will never be in the same equation, because you actually want to tax more and you want us to pick up the tab.
You asked what responsibility employers have. We have a responsibility to create wealth and thereby create jobs. It is up to Government to redistribute that wealth. It is not our job to redistribute wealth. It is not our job to increase taxation. It is our job to keep our businesses going. Far fewer people are self-employed now than in 2008, as a result of many of the policies that this Government has implemented.
I have grave concerns about the attitude towards the national minimum wage and the question that we have a responsibility. I have given two evidence-based examples from my conversations last week of companies which will have to let people go for different reasons. First, they are unable to afford to keep the people on. Second, it is now possible for one of the companies to automate its processes and thereby create wealth in the organisation. That is our job. That is my view anyway as an employer of 24 years standing.
You mentioned fairness. Why do you as a-----
Ms Patricia Callan:
In the presentation, I gave figures on the profitability of small businesses. Let us be real. If a person running a business is not making money, she is going out of business and everyone who works for her is going to lose their job. No matter what anyone says about the societal implications, the big picture or macroeconomic implications, if a person running a business is not making money, she will go out of business and everyone who works for her will lose their jobs.
At all points we must ensure that the basic principle is that we have to make a profit. Profit is not a dirty word. Essentially, we need risk takers to establish businesses and we want a more productive and supportive environment for them to do so. Let us broaden the bigger concept in terms of what will solve all our economic issues. Why not make risk-taking easier? Why not have social welfare for the self-employed? Why not have equity in tax treatment for the self-employed? Why not have capital gains tax for entrepreneurs set such that it makes sense to sell a business here rather than move operations abroad? There are far more big issues that we could get into in that context.
Let us return to profitability and the dynamic of our economy. Fully 97% of all companies employ fewer than 50 people, of which 84% are micro-firms employing fewer than ten people. Some 53% of all people on the national minimum wage are in three sectors: hospitality and accommodation, retail, and other services. The average profit in those firms ranges from €14,549 up to €21,470. I do not know why people have picked an increase of €1. I would love to hear the justification for a €1 increase. Where is the economic analysis on the basis of what is actually in the legislation around that? Does the Senator really believe a blunt instrument like that, which simply increases business costs, will work? A business owner has no way to recoup that in her margins or her ability to sell. At a basic level, how is she going to stay in business? That is a critical point in all of this.
The argument around the domestic demand is a lovely one. We all love the idea of being paid more, having more money in the economy and it being circular. Again, if a person running a business has an inability to pay, then she is not actually going to stay in business. I was struck by the unions emphasising the use of that clause. I have been in this business for some time and there is no one in my memory running a company who would risk her business reputation by going to a third-party institution which she does not know, because she is not experienced in third-party institutions, and say publicly that she has an inability to pay. That would simply kill her business entirely. She would be gone out of business in the morning.
Ms Patricia Callan:
We have to think about business logic as well as real logic. On top of that, every other company would be equally put out on the basis that competitors are getting a better business cost base. Basically, our point is that we view this as an entry rate into employment. Certainly, in terms of the relativities of pay, it has always been a concern for us that wages are seen to move in line with it. We need to see pay increases return across our economy. That makes sense for all of us, but it has to be moderated and justified on the basis of productivity. It was interesting to hear the views when we were discussing the matter with large companies. As with small companies, there is no such thing as a flat-rate increase for employees any more.
Every single business makes an individual decision on a person's productivity level. Outside unionised industries the decision is made purely on the basis of productivity. Unions behave differently but have very little representation in the private sector. I do not see us ever going back to flat rate increases. I hope that the public sector follows suit and rewards productivity.
I understand Rhonellen’s position because it was stated in its presentation that it is against increasing the minimum wage. We can agree to disagree on the impact that would have on businesses, competitiveness, job losses and so on. If the company is not prepared to support an increase in the minimum wage, how does it stand over 21% of workers being on low pay? How does it stand over 350,000 workers suffering from deprivation? What is its solution? Our job as legislators is to solve problems. The witnesses have not given me any solutions other than being against-----
Ms Patricia Callan:
One cannot simply say every individual deserves to be paid X rate of pay. We are a small open economy operating in a globalised world where we must price our goods and products at a price to sell internationally. We need that money to come back here to support our domestic demand businesses. It is not as simple as asking what we are going to do to solve the problem of low pay without considering the overall structure. If we do not have any businesses or jobs, everybody is on welfare and the amount of tax paid is much lower because there is nobody to pay taxes and the economy collapses. We should build consensus and work towards societal goals but we must be realistic about the fact that if we do not have our economic fundamentals right, none of those aspirations can be delivered upon.
Ms Callan read out figures for those on the minimum wage but the figures from a previous speaker were that in 2011 those on the minimum wage stood at 10.8% and that had increased in 2014 to 15%. Someone’s figures are wrong. I am not saying whether they are Ms Callan’s or the previous speaker’s but there is a discrepancy there.
I accept there are businesses which are genuinely struggling at the moment and there are people who own those businesses who perhaps are not even receiving a wage. I want to park that, however, to talk about the people who are successful and have a measured profitability. Given that the workers in those businesses helped achieve that profitability for those companies, what is wrong with their getting a dividend through a better wage? In my four years on this committee I have never experienced such an engagement. This is quite an unusual conversation. I am very disturbed to think we should pay people what they are worth. It is like talking about cattle. I am very upset by the fact that somebody could speak like that. We are talking about people.
If a company is not viable and cannot pay the minimum wage to some people and does not believe that should exist, there is a question about whether that company should be in business. Unless somebody has a massive social conscience and sense of social responsibility and has set up a business as a social enterprise, it is my understanding that businesses do not employ people for the sake of it. If something can be made at less expense and the profit could be slightly larger, that would be the case. Would that not be the case in most businesses?
Ms Patricia Callan:
Exactly. The minimum wage is a floor, so it is a legal instrument. We are not talking about labour market dynamics in terms of the normal market pay rate. Obviously, that is critically important and does occur. I can clearly stand over our member companies and say that those making a profit are giving pay increases, but they are doing so on that person's personal contribution to the business, rather than in the sense that everyone should automatically get a pay rise. That is good and efficient in terms of introducing detailed performance management systems and metrics.
In most small companies people are a lot closer to their employees. They are their friends and relatives who live in the same town. This is not a them-and-us scenario at all.
Mr. A.J. Noonan:
Ms Callan has summarised it very well and is correct in her assessment that companies that are making money are giving pay increases. I would suggest, however, that it should be done through bonuses and not through the blunt instrument of a national minimum wage. The bonus positions should be made more tax deductible so that there is something in it for everybody, both employees and employers.
I welcome the Small Firms Association's representatives. Last week, their colleague, Mr. Mark Fielding, proposed that the best way of getting money back into people's pockets was through a taxation-based income return process. Is that something the witnesses would look at?
Figures have been quoted about our minimum wage being one of the lowest, but they include self-employed people who cannot afford to pay themselves. How many of Ms Callan's members are either not in a position to pay themselves the minimum wage or are paying themselves just around the minimum wage?
Figures were quoted for pre-tax profits, but how do they compare to European figures, including the UK? There is a flip-side to that. In January, the SFA previewed 2015 by saying that two thirds of firms were optimistic about growing and seven out of ten businesses expected to see strong investment levels. Surely if it is all that good and healthy, then workers should share in it as well.
Ms Patricia Callan:
It is a major part of our social obligation to accept that we should not look after the few who are privileged enough to be in employment at the expense of those who are unemployed. As a society, I personally think that is our key metric. People should have a right to work and it should be reasonable for them to do so.
As regards the profit levels of companies, they are specific for Ireland. I do not have international figures, but I have compared where we stand internationally as regards the minimum wage. Even if one takes the UK, which people love to comment on, we still have a higher minimum wage than the UK even though our exchange rate is particularly unfavourable at the moment.
Ms Patricia Callan:
Yes. Even in terms of the concept of the living wage, there are 900 companies in financial services. If that was to roll out here, it would mean something like 90 companies in Ireland signing up. Therefore, it is not a big success rate and does not make sense. We really need to focus on getting our economy back on track and getting more people back into work. The more people who are in work and paying taxes, the better. In terms of taxation, it is all about distribution and getting more, so one does not have to increase rates. In fact, our experience shows that when we reduced capital gains tax rates, returns went up.
As regards how we fund all our expenditure, we believe that having lower taxes and more people contributing will, in the end, be a net benefit to everybody.
I am sorry, Chairman, but I missed one question. There is a reputation issue concerning the inability to pay mechanism. A lot of businesses speak of the actual mechanism being completely cumbersome. Can Ms Callan talk us through the mechanism for the sake of the meeting?
Ms Patricia Callan:
To be honest, I cannot even recall how the mechanism works because no one has asked me that question for so long, but I can certainly find out.
The majority of our companies have never been anywhere near a State institution. They tend to work through issues one-by-one with people on the ground, or they ring people like me for advice. Rarely, if ever, do people end up with a third party and to do so would suggest to me that they had not managed the situation successfully. They do not have experience of the State apparatus. Even though it is notionally free it has become very legalistic and a lot more solicitors and barristers are involved. It is not just a matter of cash but management time and effort. If people are operating such a tight business that they feel they do not have the capacity to pay increases in the minimum wage they will not have the time or capacity to go to the Labour Court to argue that. An easier decision will have be made.
I agree that the rate of unemployment is disastrously high at the moment and there is a lot of poverty associated with that. I agree with the witnesses that purchasing power is the key issue for everybody. NERI came before the committee and said that if people's purchasing power increased in other areas it would decrease pressure on the demand for the living wage. That is maybe one area of agreement in this discussion. How do we increase purchasing power in the economy in general? There are 350,000 people in deprivation and we have moved from 0.7% underemployment to approximately 7.4%. That is a problem which the Oireachtas has to deal with because I am talking about families, about people going hungry and being cold and about children not getting the opportunity to which they are entitled. This gives rise to generational societal problems which cause major difficulties for cohesion in society and will be felt not just in our generation but in that of our kids too.
I believe if people work hard, use their smarts, take risks and invest money they are entitled to fair compensation and a fair profit but there also needs to be a fair wage. That balance is what is necessary in this country at the moment. We do not want companies to make supranormal profits and people to be paid poverty wages at the same time.
For competitiveness we need to look at every space in society, and wages need to be almost the last place we look. I agree that universal social charges should not be levied at higher rates for self-employed people who have exactly the same income as employed people. Ms Callan is correct that we should not arrive at an arbitrary figure but it could also be arbitrary that a person would seek a freeze for a few years. What exactly are the economic boxes that need to be ticked so that, in three years' time if we are sitting here again discussing the matter, the Small Firms Association might agree that an increase in the minimum wage was necessary?
The delegates from NERI said that minimum wage increases that are smaller but more frequent are better for businesses. Instead of an employer looking down the barrel of a €1 increase to the minimum wage, would it be more desirable to have a 25c minimum wage increase over a period of four years? This would be easier for businesses at the edge to adjust to.
A major issue in this discussion is that one side says the minimum wage does affect employment rates while the other side says it does not. There has been a lot of research into the question in Britain and an official study has found that there was virtually no negative impact on job growth from minimum wage increases. In a lot of the studies I have done, an equal number of people state that it does affect employment as state that it does not. Accordingly, in the round it has very little effect.
Mr. A.J. Noonan:
We were asked what measures could be taken to increase employment. The first answer would be to reduce taxation.
The second would be to introduce PRSI incentives for employers to take on employees. Deputy Tóibín and I have had many discussions on public procurement. A 1% increase in public procurement in Ireland would create 1,500 jobs. That would be a good thing. Capital gains tax relief could be introduced for companies disposing of assets. Increased mergers and acquisitions and increased transactions would increase the opportunities for businesses to be transferred, allowing a new generation to take over and grow. They are my initial comments; I can go into more detail if the committee wishes.
Ms Patricia Callan:
We have legislation that tells us what the metrics are. They are the things I have talked about today, such as assessing whether inflation is a justification for the minimum wage, in addition to movements in the earnings of employees, the level of unemployment and the employment inflation rate. It is all clearly labelled. The benefit for me of setting up a low pay commission is that we have all shared data - the committee has heard much conflicting data - and it is necessary for someone to put all of that together and figure out what is correct and what is not. It concerns me that our data seems to be so divergent even though we are all quoting from the same sources. The commission must do a thorough piece of work. It would be easier for employers to sell this concept back to our members if they could clearly see the justification on that set of metrics.
The problem in the past was that the Labour Court literally picked a figure out of thin air - I was not at those meetings, as the court would not take contributions or have hearings - and then one would meet the Minister and he would say it was about making sure work is attractive compared to welfare. That is my only concern and that is what we were repeatedly told.
What was said about underemployment is interesting. I would love to have a more detailed piece of work done around that, because what I hear from companies is actually the opposite. It is the case that they have had people on three-day weeks and they would love them to come back and work five-day weeks but the welfare system makes it unattractive for them to so do. Again, we can get into the practices of bigger corporations and specific instances that we heard about earlier, but understanding how the social welfare system interlinks with the labour market is something that we need to do a lot more on, because we do not have evidence in that regard. We have attempted to look at it through various groups in Departments, but no one has tackled it holistically.
The Government should fundamentally reform the entire social welfare system to make it easy to move in and out of work and to take account of hours worked and not have people penalised for coming to work when there are additional hours. The situation is not clear cut. It is also a concern for us because we have skilled employees at work and it makes far more sense in smaller companies, which is all I can speak for, to try to bring them up to full hours. The last time the minimum wage went up by €1 an hour, in many sectors that had minimum wage workers, they chose to reduce their hours from 20 hours to 15 hours. It was that black and white. It was a set number that made the difference in terms of maintaining welfare rates.
Again, I am not generalising about this; I know there are all sorts of other considerations, but it merits a much bigger discussion. We no longer work in a market where there is a five-day week composed of 39 hours, where one has a lunch break and goes home on Friday evening. The market is 24 hours a day and it is global and flexible. Workers can live with that too because a lot of workers have flexible needs and it might suit them to come to work for X number of hours because they have other commitments. Once we get our heads around that, we need to almost recreate our system from the ground up, and that would merit a serious amount of attention in terms of resolving all of these issues. We may be coming at the problem from a different angle but there is certainly a problem that needs to be addressed.
What are the incremental rates? I know Ms Callan does not want to say there should be an increase in the minimum wage at this stage, but would it be acceptable if in three years' time there were incremental rate increases?
Ms Patricia Callan:
Yes; I think it merits the exercise. If the low pay commission were to do this exercise every year, and we are satisfied that the process is transparent and independent and that it is using evidence-based policy making, that is something we could certainly live with. The reason we have taken the decision to talk about a freeze at this moment in time is that we are living in exceptional times. It is amazing how quickly people have forgotten what we have come through in the past seven years. Owner-managers have not forgotten quite so quickly because they have a lot more sleepless nights than the average person. They are very risk-averse. When we talk about banks and funding now, the banks keep telling us that people are shattered and that the problem in terms of demand is that people are so risk-averse. We could have all sorts of other discussions about that, but there is an element of truth in it. What people really want is to feel that they have security, stability and, particularly at this time, foreseeability in terms of business costs, which are critical to one's long-term investment and decision-making.
That is critical to whether I would hire somebody. If there is a threat that the minimum wage will be €9.65 in a number of months' time, should I already have stopped hiring? Has this discussion stopped job creation? That is the untold aspect. The worst thing in life an owner-manager has to do is to let somebody go. Making people redundant is traumatic for owner-managers, so they will not put themselves in a position in which they have to do that if it is not necessary.
It is very serious for Ireland to have an elected representative with such a cynical view of job creators. Running a business is not a nine-to-five job. If one is running a business one is working 24 hours a day, seven days a week. It would be a good idea for people to learn what it is like to be an employer. As Ms Callan stated with passion, we have a 9% unemployment rate. That is the most disturbing issue in the country. There are at least 100,000 people who are long-term unemployed.
Having started a business with Connie Doody, I know that the effect of unemployment on people - in terms of their lack of confidence and self-esteem and the fact that they are not meeting people every day - is devastating. The country is going nowhere if we are bitter and cynical about our job creators. We are not talking about the multinationals that have a pot full of money. They are very capital-intensive, and it is much easier for a company to make a profit when it is capital-intensive. That should be studied as well.
I supported the minimum wage when it was introduced. I am still supportive of it in spirit, but compared to when it was introduced I still believe our economy is in a dire state. One only has to walk the streets around here to see the shops closing down. That is happening in the suburbs as well. It is a fairly sad state.
I detest cynicism. There is a failure to understand that employers and employees are a team. They work together, and there is mutual trust and good faith.
Senator Cullinane, has the protection of the Chair, as always. I have asked Senator White not to refer to him specifically. She is not referring to him specifically; she is speaking in general terms.
I set up a business to increase employment, and I am not ashamed to say I never heard of profit. My drive was to create employment. I do not believe our country will go anywhere if we have an extreme position of cynicism. We are talking here today about small and medium-sized Irish companies. That is the reality, and we must face facts. I do not know anybody who wants to be ruthless and exploit another person, because that person would not work if he or she felt exploited.
If they felt they were being exploited, they would not put their heart and soul into the business. It is good to protect people but the problem originally was that the minimum wage kept going up every year. It is no harm for our colleagues to know that in 2000, wages in Germany were exactly the same as our wages but our wages went up over the past five or six years so we lost competitiveness. A learning process is needed to understand what business is like. We need private enterprise and being self-employed is not 9 a.m. to 5 p.m. It is 24-7. One cannot just look at one's watch and say "I'm getting out the door and going home." One must be on the job all the time. From my experience and that of other employers, it is a team composed of owners and their workers.
It is clear that the relationship between the employer and the worker is symbiotic because without one, one will not have the other. What is the largest firm represented by the Small Firms Association?
Ms Patricia Callan:
The vast majority would have between ten and 25 employees. Once one gets beyond that, one tends to grow very quickly, which is great because one has professionalised one's management in the main and are on a growth strategy that, hopefully, works out. A lot of people choose to stay around ten employees - the micro-business mark. They hit that level and they are happy to do so.
Ms Patricia Callan:
We have a huge number of self-employed and individual members who will never take anyone on because they are so scared of employment law. There are 40 pieces of employment law one needs to know overnight if one chooses to hire one person. This militates against people, in the very early days, hiring someone. Our survey showed that most companies have about 52 employees before they hire a human relations professional to deal with this myriad of issues. Until then, it is a case of the owner-manager trying to grapple with it.