Oireachtas Joint and Select Committees
Tuesday, 24 March 2015
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
General Scheme of the National Minimum Wage (Low Pay Commission) Bill 2015: Discussion
I remind members, visitors and those in the public gallery to please ensure mobile phones are switched off for the duration of this meeting, as they interfere with the broadcasting equipment, even when on silent mode. In session 1 we have consideration of the heads of the general scheme of the low pay commission (national minimum wage) Bill 2015. I would like to welcome the Minister of State with responsibility for business and employment, Deputy Gerald Nash, and officials from the Department, and thank them for coming here today to brief us on the general scheme of the Bill and outline the rationale for the provisions contained therein. Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against either a person outside the Houses or an official by name or in any way to make him or her identifiable.
I thank the Chairman for his kind invitation, which has afforded me the opportunity to present the general scheme of the low pay commission (national minimum wage) Bill 2015 for the purposes of pre-legislative scrutiny. The general scheme of the Bill was approved by Government in January, and, together with a regulatory impact assessment, has been published on my Department's website and forwarded to the committee.
It is fair to say that we have seen a paradigm shift in the economy over the past few months. Unemployment has dropped by a third since 2012, reaching its lowest level in six years, and it may dip below 9% over the next 12 months. The number of jobs has increased cumulatively by nearly 100,000 since the low point of the crisis, with 29,100 net new jobs having been created in the last year alone, of which most are full-time, as evidenced in CSO reports. The Exchequer deficit at the end of February stood at €205 million compared with €1.7 billion at the same time last year. Tax revenue has increased by €925 million, primarily as a result of the improving economy. The social protection bill has fallen by €240 million in line with falling unemployment levels. Our debt servicing costs have fallen by 17.8% over the year.
These figures illustrate the success of the Government's twin-track approach of creating the conditions for job growth and helping people back to work. The Action Plan for Jobs is accelerating Ireland's transition to a sustainable jobs-rich economy, while the Pathways to Work programme is ensuring that as many people as possible who take up work are from the live register. There are, however, far too many people still jobless, and we are working to build on the success to date and create full employment within the next three years.
One consequence of the beginning of the recovery that can be seen is that workers feel that recovery should be reflected in wage packets. A return to wage bargaining is already visible in certain sectors of the economy. IBEC's recent pay survey found that 57% of companies plan to increase basic pay in 2015. According to that survey, the median pay increase is set to be 2%. Other surveys suggest this figure might be higher. Making work pay is a cornerstone of this Government's agenda, and the setting up of a low pay commission was one of the key commitments in the statement of Government priorities agreed between the Taoiseach and the Tánaiste in July last.
Under the provisions of the National Minimum Wage Act 2000, the national minimum wage can be adjusted currently by ministerial order following a recommendation in a national agreement, under section 12; in the absence of such a recommendation, following an examination and recommendation by the Labour Court on foot of a request by a substantially representative organisation of employees or employers, as provided for in section 13; or unilaterally by the Minister, under section 11, whether or not a recommendation under section 12 or 13 has been made, taking into account a number of criteria set down explicitly in the 2000 Act.
The Economic and Social Research Institute, in its 2006 analysis of the last Labour Court recommendation proposing an increase to the national minimum wage, concluded that adjusting the minimum wage by a substantial amount on an irregular basis, with lengthy gaps between increases, as happened in the past, rather than having regular, smaller and fairly predictable pay rises, is more likely to have a detrimental impact on employment and contribute to uncertainty for employers and actual and potential employees.
The most recent figures from the Central Statistics Office's quarterly earnings, hours and employment costs survey show that 4.7% of all employees, or just over 73,000 workers, were being paid the adult experienced national minimum wage rate of €8.65 per hour or less in quarter 2 of 2014. Throughout the crisis the Government has been committed to maintaining employment rights, particularly those protecting the most vulnerable workers in our society. In many cases those rights are being enhanced. Where changes have been made or new legislation introduced, we have sought to improve them. On low pay alone, one of the first actions of this Government was to restore the minimum wage to the level that existed before the last Government cut it by €1 shortly before it left office.
The low pay commission, which will be chaired by Dr. Donal de Buitléir, was officially launched on Wednesday 26 February by the Taoiseach, the Tánaiste, the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, and myself to operate on an interim administrative basis, and the commission held its first meeting the same day. The principal function of the low pay commission will be, on an annual basis, to examine and make recommendations to the Minister of the day on the national minimum wage, with a view to ensuring that the national minimum wage, where adjusted, is adjusted incrementally over time, having had regard to changes in earnings, productivity, overall competitiveness and the likely impact any adjustment will have on employment and unemployment levels.
Alongside examining the national minimum wage, the low pay commission will also be asked to examine matters related generally to the functions of the commission under the Act. This work programme will be agreed by Government and presented to the commission in February of each year. In addition, in the discharging of its function, the commission will be required to make recommendations that are evidence based using a suite of agreed data sets or, where required, based on bespoke research undertaken at the behest of the commission. This approach draws on that adopted in the UK, where, since 1997, the recommendations of the UK Low Pay Commission have brought about a progressive increase in the minimum wage that has had little detrimental effect on the functioning of the economy or the labour market. In this context, I would like to express my thanks to the Chairman of the UK Low Pay Commission, David Norgrove, and his colleagues in the UK working in this area who, in recent months, have so freely given of their own experience and time during the preparatory work we have undertaken in establishing our own commission.
The commission will be statutorily independent in the performance of its functions. While not provided for in the general scheme of the Bill, it is intended that the low pay commission will adopt a consensus-based approach to its reports and recommendations. Work should always pay, but I am also conscious of the need to balance a basic statutory minimum pay rate that is fair with one that is sustainable and that allows employers to continue to create high-quality jobs. In this context, a particular function of the commission will be to ensure that any advice or recommendations it makes to the Government are evidence based, utilising agreed data obtained by carrying out research and consultations with employers, workers and their representatives and taking written and oral evidence from a wide range of organisations. This is to ensure that any suggested changes to the national minimum wage have minimum adverse effects on employment and competitiveness.
It is important to note that, alongside these hard data, the commission will consult people - workers and employers - who are directly affected by the national minimum wage. This real lived experience will be vital for the commissioners when deciding what rate the national minimum wage should be. The commission has already commenced its work. As members will be aware, the low pay commission recently asked for submissions from members of the public and interested parties. The closing date for receipt of submissions will be 5 p.m. on Monday 13 April. I expect that the commission will submit its first report to me by the middle of July.
The changes proposed in establishing the low pay commission on a statutory basis are essentially taking much of the politics out of setting the national minimum wage. It is very much in keeping with the dignity of work agenda that I am pursuing, and it complements other work such as the study on zero hours contracts and low hours contracts by the University of Limerick which we have commissioned and which has just commenced.
The heads of the Bill are largely self-explanatory, and given the limited time we have today, I do not intend to go through them individually. I am happy to clarify any particular issues which might arise and which members may wish to raise now. If any issues arise in the future, they may feel free to contact me or my officials.
It is appropriate to draw members' attention to head 4.
As it was decided to establish the low pay commission, LPC, on an interim basis in the first instance, transitional provisions were included in head 4 to ensure that the activities, reports, associated costs and membership of the non-statutory basis LPC would be regarded as activities, reports, associated costs and membership of the statutory LPC on the coming into effect of the Act. However, subsequent examination of the issue and legal advice obtained from the Attorney General has indicated that as the LPC will have been established on a statutory basis before any recommendation with regard to the minimum wage is made, such provisions are not in fact required. On that basis, I propose not to include them in the published Bill. I was anxious to bring the members' attention to that.
Again, I thank you, Chairman, for undertaking the pre-legislative scrutiny process on this important Bill and I look forward to hearing the views of committee members on the general scheme. It will assist us in our job of drafting the Bill.
I thank the Minister of State and his team. I have not had a chance to attach my questions directly to the heads. The Minister has already appointed a board and I suspect that none of the members of the interim board has ever been on the minimum wage or ever experienced living on the minimum wage. Equally, there is nobody on the board who has ever been a direct employer or run a small business and known the pressures that come with having to manage it. Were there people who applied through the open process who would have fulfilled those criteria? Was consideration given to including people who are directly affected in this regard?
Second, I notice that the Minister is following the UK model in that the decision will ultimately rest with the Minister of the day. Is there not an argument to be made for going the full hog and giving it full statutory body power to make the decision? Given that we are putting so much time into it in terms of it being evidence based and having public consultation, is it not the time to take this out of politics completely and give the commission the power to make the decision, as opposed to making a recommendation?
Is consideration being given to the commission having a wider role than just in respect of the minimum wage, for example, regarding the wage in sectoral agreements, wages for apprentices and wage setting generally for students and part-time workers, in view of the issues arising in that area?
Finally, I noted the Minister's opening party political broadcast. What about giving the commission a role in interpreting employment figures and where and how employment figures are counted?
Will the commission specifically recommend on the minimum wage or will the Minister give it a wider role in terms of joint labour committees, JLCs, wages, wages for apprenticeships and wages for part-time workers, under-age workers and so forth?
The Deputy will notice from the heads, the public commentary and the interventions I have made in recent times about the low pay commission that it will look at related matters. There is a range of different areas the low pay commission could potentially examine. I have asked the commission to focus exclusively over the next short period of time on the next rate of the national minimum wage. It is an important job and the commission has been given a tight timeframe in which to do it. However, the commission will be asked to look at other areas of the economy that may be synonymous with low pay, carrying out evidence based research into that and, indeed, making recommendations to the Government. For the next short period of time, however, it will focus exclusively on the task at hand, which is to recommend the rate for the national minimum wage.
The Deputy made a point about asking the low pay commission essentially to set the rate. It is important that the Government should always have a view on where the rate of the national minimum wage should go. We will ask the low pay commission to carry out its work in an evidence based way, and this is a timely opportunity for it to do that. To be frank, there would be a constitutional issue if it were the case that the low pay commission were acting at large, as it were, and simply making a recommendation without any parliamentary oversight.
We have seen the attitude of the courts in recent years to various industrial relations legislative measures that were considered to be unconstitutional due to the lack of parliamentary oversight.
The Oireachtas should have a view on what the rate of the national minimum wage should be. Ultimately, it will be a decision for the Minister of the day, me in this case, to bring to the Cabinet and to the Oireachtas, and everybody here should have a view on it. We are asking the low pay commission to do a very important job. It is closely modelled on the UK experience, which has worked very well and has had significant buy-in from trade unions, employers and civil society organisations, which have confidence in the UK Low Pay Commission to carry out its work in a dutiful, open, transparent and evidence-based manner.
In addition, we wish to ensure that the low pay commission is sufficiently well equipped and sufficiently protected in legislation to ensure that if and when the next recession hits the first target will not be those who are on low pay, and that a Government does not decide simply to train its guns on people who are on low pay and merely existing on the minimum wage. Unfortunately, that happened in recent times and I have no wish to see it happen again. We will now have a statutory organisation dealing with this in an evidence-based way on an annual basis.
In terms of the membership of the low pay commission, I am satisfied with its composition, as is the Government. We went through a detailed, open and transparent process with the public appointments system. There were over 150 applications. The committee will be familiar with the names of the members, which have been circulated and published. These are people in whom I have every confidence. They have a track record in representing employees and employers and a strong track record in civil society. I do not know if any of the members of the low pay commission has ever worked on the minimum wage - I do not believe Deputy Calleary can say that with any great confidence either; nobody can - or whatever their other experiences might be, but I am confident that we have selected the right people through a public process to assist the Government in this very important work.
Gabhaim buíochas leis an Aire as ucht a chur i láthair. We have heard the Minister state a number of times that he is seeking to take politics out of the setting of the low pay commission. Given that poverty, inequality and low wages are currently entrenched in the economy, many would say that the Labour Party has been successful in taking politics out of its time in government. Politics must be at the heart of these decisions. One goes to the people, tells them what one will do and then one delivers. That is the political way. The problem is that this is not a low pay commission, but a minimum wage commission. It is not looking at low pay in its entirety. The Minister said that he has asked it exclusively to examine the minimum wage-----
-----in the short term. He also said it is to look at general issues associated with low pay. Again, a Minister with a political direction should be giving direction to these individuals with regard to exactly what they should be examining.
The problem I have is that it appears we are inventing a typewriter here, while Britain is already looking at inventing an iPad. What I mean is that in Britain they have already come to the decision. People such as Alan Buckle and Sir George Bain, who have major experience with the functioning of the commission in Britain, have written extensively and looked at the inadequacies of it. They have seen that low pay is still entrenched in the British economy. Has the Minister read Alan Buckle's independent report, Low Pay: The Nation's Challenge, or Sir George Bain on the national minimum wage issue? I will outline what I mean by the broader context of low pay. There are sectors of society that are hammered with low pay. These include younger workers, women and migrants. Is it not necessary to provide in the legislation and in the specific remit of the commission that it examine the experiences of these people and identify policies that will resolve those experiences?
Also, it was stated at the International Labour Organization, ILO, minimum wage fixing convention that there is a suite of other issues to do with low pay. A proper public service, for example, helps people who are in poverty, those suffering from inequality and those on low pay and the delivery of proper public services can lift those individuals out of that. If it is to do what it says on the tin, so to speak, would it not be logical to also task the commission to examine how these tools can be used to resolve the problem of low pay for people? The Council of Europe has indicated that there are problems with sub-minimum wage rates, etc. Should that not be examined also?
The Minister and I have had many debates on the fact that there is a major lack of enforcement powers with regard to the minimum wage in this State. We have had the Kishoge affair and a number of other cases where workers were earning less than the minimum wage. There are enforcement processes in the State but those are so slow they are no longer effective for workers. If political direction were at the heart of this issue, the Labour Party would be tasking the low pay commission to ensure that enforcement happens.
Is it not necessary to build a low pay commission on the basis of the experience of people in other countries such as Britain, which is now looking at reforming what is a 15 year old, outdated institution?
I find it extraordinary that while this is one of the most important initiatives any government has taken to address low pay, Deputy Tóibín and his party cannot find it in themselves to welcome it. That is shameful.
Deputy Tóibín has chosen to make some political charges. The reality is that the Labour Party in government, and this Government in general, is committed to making sure that work pays, that it is valued in society and that it is rewarded. The Deputy will be aware that we are commissioning a study on zero hour contracts as well.
The experience in Northern Ireland is interesting, with 32,000 people existing on zero hour contracts and tens of thousands more existing on low hour contracts, yet we have heard nothing but rhetoric from the member opposite on that issue. In terms of the experience of the Administration in which his party plays a central role in Northern Ireland, it is far from a utopian picture.
We are very serious about dealing with issues pertaining to low pay. The Deputy seems to have misheard me, or at least misrepresented me. For the coming period it is the exclusive job of the low pay commission to set the rate of the national minimum wage for next year. That is a major piece of work. The national minimum wage has not been reviewed to any great degree since 2007. It is timely that it be done.
There may well be an expectation that because there have been pay increases across the private sector of 2% to 3%, broadly speaking, in the past 12 to 18 months, people on the minimum wage should experience an increase as well. The right way to do public policy making, and if we are to learn anything from the lessons of the past, is to task a statutory organisation like the low pay commission to do that work in an evidence based way that will stand up to scrutiny and is informed by the best practices of social dialogue while making convincing arguments, using evidence and bringing employers, trade unions and civil society organisations with us.
I ask people to ditch their pessimism and cynicism and give this low pay commission the opportunity to do the job it has been tasked to do. The Deputy seems to have very little faith or confidence in the National Employment Rights Agency. I beg to differ. NERA has done an excellent job of work, for example, in terms of its legislation enforcing payment of the national minimum wage.
The matter the Deputy referred to earlier, Kishoge, is an entirely different matter. I agree with him that there are issues in regard to charges of bogus self-employment and so on. It is an issue that has to be settled at European level. It is a very important matter for European nation states and something that needs to be addressed. We are serious about dealing with issues to do with low pay, the minimum wage and making sure that work pays so I ask people to park their cynicism, back the low pay commission, not make narrow political points, work with the commission and make their own submission to it before 13 April in terms of how they see it operating.
The Minister of State has made a number of points. It is not that we are cynical with regard to the low pay commission. We are ambitious for it but we do not believe there is the necessary level of ambition in terms of an economy dealing with entrenched poverty. In Britain, and this was the case I put to the Minister of State, they have started to appraise the effectiveness of their low pay commission. People who were formerly chief executive officers of that commission concluded that to have a narrow focus on the minimum wage only does not address low pay. I understand there may be an opportunity in the future for a broadening of that focus beyond the minimum wage but I suggest the Minister of State give our commission a concrete direction in terms of those issues because it is unlikely he will be in that position next year when this organisation has published its first report. This is his opportunity to put his stamp on it and be sure of it.
On the zero hour contracts issue, we have the same policy in the North as we have in the South. Will the Minister of State ask the Central Statistics Office to record the number of zero hour contracts in function in the National Quarterly Household Survey because we could then have a greater insight into zero hour contracts and their impact in the economy?
The questions remain. They concern enforcement in the sectors I mentioned, women and migrants, low pay and also broadening the focus to examine public services. Will the Minister of State answer those questions?
I cannot reiterate this strongly enough. Given the short timeframe, the work we have asked the low pay commission to do is exclusively on the minimum wage for the moment. However, it is clear to me, and we can all agree, that low pay, for example, is a large issue. There is no doubt that there is a gender element to it, and the low pay commission will be looking at issues to do with that over the coming period. We all know it is an issue for migrant workers as well. There will be opportunities for us to engage with the commission and I will be making it clear to it shortly what I will be asking it to do in terms of issues to do with low pay in general and the related matters.
In many ways the zero hour contracts review will run parallel with the initial work the low pay commission has been asked to do this year. There may well be ongoing work the commission could do in regard to data and the monitoring-----
-----of zero hour contracts. I do not want to pre-empt the outcome of the review of zero hour contracts. This is the first such review of this nature carried out by any Government in this State. We need to reflect on that because it illustrates the Government's commitment to making work pay and dealing with some of the more egregious issues we have all come across in recent years.
We do not have a full set of data. We do not have all the information we would like to have on the practice of zero and low hour contracts. We are now doing that. The State will need to keep a close eye on it. I have an open mind in terms of who might do that, but it is important to have a continuum where data sets are regularly updated so we can keep a close track on work patterns and the type of contracts in our economy. I do not want to see low pay or zero or low hour contracts becoming the norm, as has been the case in the UK and in Northern Ireland.
I welcome the Minister of State and his staff. In terms of the Minister of State's life experience, the issues of working conditions and fairness at work give him great credibility in bringing in the reforms and initiatives in which he is currently engaged, including this one.
A commentator in the UK remarked that the minimum wage is a wage floor, not a living wage.
Would the Minister of State like to comment on that?
That is exactly the situation. The statutory minimum wage was introduced only a few years ago. It is the floor beneath which nobody should be allowed to fall in a decent society. Most of us here would never recommend that an employer pay the minimum wage.
The living wage is a very interesting concept which I have been exploring in detail recently. I had announced publicly several weeks ago that I would host a living wage forum where we will engage not just with trade unions and civil society organisations but crucially with employers to scope out the notion of a living wage in Ireland. Some present here today have established various fora on the living wage but I do not believe they are serious about it because they have never bothered to engage with a single employer on it. If we do not engage with employers and convince them of the virtues of a living wage we are in a different spot.
Nobody should conflate the notions of the national minimum wage and the living wage. They are two entirely different matters. The national minimum wage is the floor beneath which nobody should be allowed to fall but the living wage is a very attractive and interesting concept. It is a civil society movement. That is where it drew its strength from in the UK. It was a grassroots campaign initiated by a collection of churches in London which made the case to individual companies for a living wage. It is useful to describe how the national minimum wage and the living wage concepts differ, rather than conflate them, which is not useful.
I thank the Minister of State and his officials for attending today’s meeting and for briefing us on the heads of the National Minimum Wage (Low Pay Commission) Bill 2015.
The meeting will be suspended for a few minutes to allow our next guests take their seats.
I remind members, witnesses and those in the visitors Gallery to please ensure their mobile telephones are switched off for the duration of this meeting as they interfere with the broadcasting equipment even when on silent mode.
I welcome Mr. David Foden of Eurofound; Ms Grainne O’Toole of the Migrant Rights Centre; Ms Alice Mary Higgins, National Women's Council of Ireland; Sr. Bernadette MacMahon, Vincentian Partnership for Social Justice and Ms Esther Lynch of the Irish Congress of Trade Unions, ICTU, and I thank them for coming before the committee today.
They will make presentations on the general scheme of the National Minimum Wage (Low Pay Commission) Bill 2015. We have received the witnesses’ submissions and they have been circulated to committee members. I ask that they please address their comments to the draft heads of the Bill.
This meeting gives witnesses an opportunity to inform the committee of problems they may have with the heads of the Bill as drafted and to propose measures to address these issues. It is important that the time available to us be used constructively and for the intended purpose I have outlined. Due to the number of groups presenting today I will adhere strictly to the time limit of no longer than five minutes for presentations. The committee will consider all proposals when preparing its report for the Minister.
Before we hear the presentations and in accordance with procedure, I am required to read the following. 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. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They 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 either by name or in such a way as to make him or her identifiable. I will call on witnesses to make their opening statements and then members will be invited to ask questions. Members should state the number of the head to which they are referring when questioning the witnesses.
I invite Mr. David Foden, head of the working conditions and industrial relations unit at Eurofound, to make his presentation.
Mr. David Foden:
I thank the Chairman and committee for the opportunity to be here. In some ways I do not feel very well equipped to be here and to comment in detail on the heads of the Bill. I circulated some material and will illustrate the key points in respect of that.
I will start with the arguments for and against having a minimum wage and the things that need to be taken into account in designing it and amending or changing it. It can prevent exploitation, play a key role in tackling in-work poverty and encourages companies to compete on quality not price. Better paid staff tend to work more productively. It prevents the bad employer relying on the State to top up poverty wages but there are things that need to be taken into account as well and reasons for caution. If the labour market is competitive, and that is a big “if”, any wage floor will have some negative impact on employment. There may be problems of maintaining differentials which are costly. There may be adverse effects on prices, business closures, etc. Most important, if there are adverse effects the most vulnerable groups in the labour market are likely to be most affected. Caution is merited.
In the background material I distributed I drew attention, albeit briefly, to the variety of experiences in other European countries and made some specific reference to the UK experience because it is of particular relevance and interest in this case. Over the past 15 or 20 years the UK has moved towards the centre of gravity of the European experience, having at one stage been an outlier without a statutory minimum wage, although it had a long history of some minimum wage protection. It now takes care to involve social partners in the discussion, which is important although it is done in different ways in other countries.
Many would say that if collective bargaining functioned effectively it would be fine to leave it to the unions and employers. We know there are areas of the economy where collective bargaining cannot function effectively. That is why it is important to have some State intervention and protection. That centrality of the social partners is important in Britain as elsewhere.
The success, and I do think it has been a success in the UK, has been in establishing an embedding of the system. What is a relatively recent political innovation, if one takes the long view, has now become largely accepted as a successful way of dealing with the issue. This is perhaps because people tempered their ambitions at the outset and thought it was worth investing in having something which would endure and remain in force in the longer run. It has now survived a change of Government and a very deep recession. It has worked by consensus and it has worked on the basis of evidence. All those things have been important.
I suspect I am coming towards the close of my few minutes. Perhaps my final remark would be to go back to the scope and ambition for a minimum wage, having heard the very interesting exchanges earlier. In the UK, it is very clearly a wage floor and it does not claim to be a total answer by any means to issues of poverty in society or wider questions of inequality. It could be claimed and it could also be disputed that there are other policies in place to address those things adequately. It is a big ask for a single policy of a national minimum wage to address all of those things. There is therefore merit in having different policies, taxes and benefits and having public services look at the other elements as well.
Ms Gráinne O'Toole:
I thank the committee for the invitation to speak here today. The Migrant Rights Centre Ireland is a national non-government organisation which works with families and migrant workers who have low pay and who are very vulnerable to exploitation and discrimination. We provide a free and confidential drop-in centre. Last year, we dealt with more than 2,000 cases. We also provide a range of outreach activities targeting more than 2,000 additional people each year. We have a long track record in working on issues of low pay, exploitation and lack of enforcement of rights.
To reiterate what was said earlier about Ireland having a serious low pay problem, I will not reel out the statistics but there are substantiated statistics from which we are learning more about the entrenched nature of the problem here. In looking at the regulatory impact assessment and the heads of Bill, we are confining our comments to the scope and the function of the low pay commission. We welcome the initiative of establishing the low pay commission. We have long believed that an increase in the minimum wage is overdue and we are looking forward to seeing what evidence-based recommendations will be made. We also know from the UK experience that the increase in minimum wage did not have an adverse effect on unemployment. This is an important and good starting point.
Given the precariousness of people's work in the low pay sector, which is characterised by insecure hours and zero-hour contracts, lack of progression and exploitation, the issues surrounding low pay are grave in some sectors. This is particularly so in the more non-regulated sectors. We therefore need to be ambitious in trying to address these issues.
We feel that it was the intention in the Government's priorities to establish the low pay commission as an independent body. At the moment, there is nothing in the way the heads of Bill are constructed that gives this aspect any kind of protection. We have seen the undermining of institutions such as the Equality Authority over the past number of years. If there was a change in Government and it was not interested in low pay issues and they became less of a priority, there is no safeguard in the way the low pay commission is currently being constructed to protect its integrity and independence. We would like to see this addressed. We would like to see the low pay commission having a relationship with the Oireachtas but we would like to see more work on this relationship.
The Government's priorities included having the low pay commission examine minimum wage issues. It is clear this will happen and that this will be its priority over the first year, but it was also to look at other related matters. Our concern is that this is not reflected in the heads of Bill in terms of the functions of the low pay commission contained in head 2. The Migrant Rights Centre Ireland believes that we should be more ambitious given the prevalence of the low pay issue and recommends that related matters should be provided for in the Bill and the definition of what this means expanded. The Bill should set out exactly what these related matters would be. We also recommend that the low pay commission would act more as a watchdog-type organisation which could seek to support the Government in setting a target to eliminate low pay.
Lessons can be learned from the UK experience. A detailed review of the UK Low Pay Commission was conducted by the Resolution Foundation. The UK commission achieved what it set out to do and I have no doubt that our commission will do the same. The UK Low Pay Commission managed to increase minimum wages. However, it was also highlighted that there was a shortfall because the UK commission did not manage to address the pervasive issue of low pay.
Our concerns surround the narrowness of the remit and trying to tackle the minimum wage on its own. Focusing on extreme low pay is a restrictive approach. We have an opportunity now and the commission should be more ambitious. I will finish on three recommendations we have. The Government should set a goal for the elimination of low pay. The remit of the low pay commission should be expanded to become a watchdog on low pay and the low pay commission should have powers to set targets to reduce low pay across a number of policy areas.
Ms Alice-Mary Higgins:
I thank the committee for the opportunity to present. The establishment of a low pay commission is a positive step and a very welcome recognition of the problem of low pay in Ireland. It is critically important that the commission will have a strong gender perspective in its analysis and recommendations. We know from our members and from statistics that this is an issue which affects women in particular. Some 60% of people on low pay are women and 50% of women in Ireland are currently earning €20,000 or less. Many of the sectors in which women predominate have been at the frontline of often aggressive casualisation in terms of the erosion of wages and hours. We have a clear indicator of this in that Ireland's gender pay gap is now widening from 12.6% in 2009 to 14.4% currently. Historically, one of the only measures which has narrowed this gap was the original introduction of the minimum wage. This is therefore of crucial importance for the council.
I would love to discuss these issues in detail but we have been asked to focus on the heads of Bill. The National Women's Council of Ireland have a number of concerns and suggested amendments to the wording of the legislation which should be considered in order to ensure that the Bill genuinely delivers the scope and ambition for the commission which is in the spirit of the Bill.
Head 2, section 12, sets out the functions of the commission. Subsection 2 lists a number of items to which, in making a recommendation, the commission shall have regard. Given the gender concerns I have outlined, the council believes it is crucial that the low pay commission should be mandated in this section to have regard to gender equality and other equality factors, as a named aspect, in its deliberations. As well as the key issues of gender equality, explicit regard to equality would also be appropriate in line with the new positive duty which requires all public bodies, including presumably newly formed bodies, to have regard to equality in their operations. The detail of the recommendations is listed in the written submissions and I will therefore not enumerate them now.
In regard to looking at low pay, anyone would recognise that it is crucial to look at the cost of living as experienced by workers. However, there is an anomaly in the current phrasing of the Bill. Cost of living is not named as an overall area to which the commission should have regard. It is a subparagraph of paragraph (g), which provides for looking at the potential effects that an order might have on the cost of living. The problem is that, as currently phrased, the commission is not being asked to consider the impact the cost of living should have on a minimum wage, but rather the impact a minimum wage might have on the cost of living.
This is an anomaly or oversight that should be addressed. The cost of living should be listed as a concern in its own right and it should be high up on that list. We would recommend it as the second concern.
We feel two other areas should be included in matters of which regard should be taken. One that was previously mentioned was in-work poverty levels. It is a very concrete measure. It is clearly part of the motivation behind the Bill and it should be listed as something on which the commission is deliberating when making its recommendations. We know now that 16% of those below the poverty line are currently in work and that is a real concern.
We draw attention to the social and economic impact of wage levels and the associated cost or benefit to the State. Again, that is a concrete measure to be considered when we look, for example, at the level of reliance on family income supplement from the Department of Social Protection. It would behove the low pay commission to look wider than the employment context and at the wider socio-economic costs of low pay when making its recommendations.
We suggest that two areas need examination. One is the inclusion of the need for quality job creation. That is point (e). Under point (f), we already have employment and unemployment, rightly so. There is a danger when we talk about the need for job creation that we are including a rhetoric that doubles up on that and might imply a trade off, which we believe is unproven assumption. It would be more in the spirit of the Bill to refer to the need for quality job creation, which is the goal of the Bill.
I will skip through my other points and turn to two last areas. One thing we had suggested is that in terms of international comparison it might be enough to say "international comparison" rather than to tie us to the UK over Europe, for example. In terms of the focus on the minimum hourly rate of pay, we now know there is a huge body of work that is saying it is not about the hourly rate of pay. My colleagues in the Vincentian Partnership have highlighted that. Given the precarious work, we would suggest the inclusion of "other minimum wage instruments or measures as required" because an hourly focus does not capture the reality of most women in Ireland, or a third of all workers.
We welcome the gender balance in the commission and congratulate all of the new members. Our final suggestion is that sociology should perhaps be included as one of the areas of expertise given that the social impact of low wages is part of the picture.
I thank Ms Higgins. I reassure all witnesses that their full presentation will be taken into account as well as their contributions and the engagement with members. I now invite Sr. Bernadette MacMahon, director of the Vincentian Partnership for Social Justice to make her presentation.
Sr. Bernadette MacMahon:
I too wish to say how grateful we are for the opportunity to speak this afternoon to the Oireachtas joint committee. We warmly welcome the establishment of the low pay commission. We are concerned about head 2. The heading of section 11(2) refers to assisting many low-paid workers, but section 12(2) sets out seven areas to which the commission should have regard in making recommendations on the national minimum wage rate. The terms require the commission to have regard to economic, employment and competitive issues, all of which are very important. However, nowhere in section 12(2) are issues of adequacy of the minimum wage rate mentioned or the standard of living the national minimum wage rate enables. Those factors are not specified for consideration. Simply asking if the national minimum wage should be adjusted in line with changes in inflation or median earnings fails to ask the question of whether it is adequate in the first place. It cannot be assumed that it is adequate. We also know that the increases were made in an unsystematic manner.
The Vincentian Partnership for Social Justice has provided expenditure on the cost of a minimum essential standard of living. This is work which meets a person's physical, psychological and social needs at a minimum level of need not wants. We also worked with Trinity College on the establishment of a minimum income standard which helps to calculate the income required for this particular standard of living. The data covers 89% of the working age population. It is evidence based and is very transparent. It enables the assessment of rates of pay regarding adequacy and the degree to which they enable a socially acceptable minimum standard of living. The seven household compositions presented in tables 1 and 2 are representative of the most common compositions in Ireland and it is evident from the tables that all seven face a shortfall in income when reliant on the national minimum wage. The expenditure we are talking about is very stringent and does not involve luxuries. It just respects the dignity of the worker.
The minimum essential standard of living data and the minimum income standard model provide a robust and transparent method for calculating the minimum income of the household types. Members can see that in tables 3 and 4. The living wage method has been developed for calculating the average gross salary needed for a single adult to afford a minimum acceptable standard of living. I was very pleased when I heard this afternoon that the Minister of State said he was going to establish a living wage forum. It is recognised that pay rates alone cannot address the needs of low-paid households with children. More must be done in terms of the provision of an acceptable level of services, for example, the cost of housing and the cost of accessible child care.
Low pay is less than two thirds of the median hourly rate. For example, the most recent EUROSTAT report on low wages found that the low pay threshold for Ireland was €12.20 but when the matter was looked at again in 2013 it worked out at €11.50. The figure of €11.50 is slightly higher than the living wage figure of €11.45. People whose income does not allow them to have an expenditure which meets the cost of a minimum essential standard of living that meets their physical and psychological needs at a minimum level are living in poverty.
It is a matter of concern for many of us that people can work for 37.5 hours a week and yet come home with a wage that does not meet their family’s minimum essential standard of living. It is difficult to see how questions of adequacy of the national minimum wage cannot be part of the remit of the commission. We accept that is not the only consideration. We accept the importance of employment issues, competitiveness issues and economic issues but surely adequacy must also be taken into account.
Workers are not just units of labour. The Minister of State spoke about the dignity of work, but let us speak about the dignity of the worker. The Vincentian Partnership is realistic. We know that all we can do is work for a progressive realisation of a more adequate minimum wage and hopefully, eventually a living wage for everybody in Ireland.
Ms Esther Lynch:
I thank members for remaining. I wish to make five points in the five minutes I have to speak. The first point I wish to make relates very much to the comments that have been made previously, which is that head 2 is stacked too much against the worker. We would like to see some amendments to head 2.
We could certainly support the idea of gender equality. We would also like to see, for example, the median wage. It is somewhat surprising that the median wage was not included because when the national minimum wage was first introduced it was recommended and was set at more or less two thirds of the median wage. That is quite a normal criterion against which national minimum wages are considered and set.
I note what the Minister of State said in reply to Deputy Conaghan, but would it not be logical to have some consideration of how much the national minimum wage is compared to the living wage? That does not sound to me to be a ridiculous thing with which to task the low pay commission. Likewise, all human rights standards refer to a just and fair wage, exactly the type of thing Sr. Bernadette spoke about. Why would the low pay commission not take into account human rights standards such as a just and fair wage? The ILO convention to which Deputy Tóibín referred, requires states when looking at comparisons and how much the national minimum wage is worth, to also take into account the level of social protection afforded.
It is worrying that we have set up a comparison directly with Northern Ireland when what we need to do is to recognise that is not really comparing like with like. For example, one could take into account the cost of going to a doctor in Dublin compared to the cost of going to a doctor in Belfast. They are very different things. We need to make sure that the low pay commission is not constructed in such a way that it makes it difficult for people to make the arguments they want to make and that it becomes difficult for the commission to make the complete consideration we want it to make.
The second point relates to head 2 and the scope of the commission. In particular, two issues need to be included in this legislation because the legislation sets out not only what the commission can consider but the order the Minister can make. We suggest that two issues undermine the object and purpose of the national minimum wage. One of those is the number of hours a person gets to work and the second is the amount of deductions an employer can make from that person's wage, both of which can significantly undermine the purpose of an hourly rate of the national minimum wage. We have prepared and submitted amendments. They might not be perfect but, hopefully, they will give some inspiration to this committee to say that even if the commission does not consider it, the Minister would be empowered out of the research he has undertaken to list in the order fair employment rules and a restriction on the amount of deductions that can be made not just relating to board and lodging but to other things such as stoppages, till shortages and uniforms. I asked some people today how much employers are generally deducting for uniforms. I was surprised to hear that it was €200 per uniform. That is a lot when one considers the national minimum wage. It would be helpful if the Minister was empowered to put a ceiling not just on the amount that can be deducted for board and lodging but also for all these other things.
Ms Esther Lynch:
It is really good that the commission will hear from low-paid workers but what protection will we give them when they come forward and tell their stories? The committee can take it from me that many employers will not be very happy when their workers come forward and describe what happens to them. For example, those on zero hours contracts will not be protected. They could show up for work the next day and end up with very few, if any, hours of work. Let us not be naïve and think this does not happen. If we are asking people to come forward and tell us their stories, it is incumbent upon us to protect them from penalisation.
We need to send a strong message about the importance of people complying with national minimum wage law. One way we could do this is to say that any commissioner who did not comply with the national minimum wage law would be removed. This would send out a strong message about how seriously we take compliance with national minimum wage law.
Gabhaim buíochas leis na toscairí as ucht a gcuid cur i láthair. Bhí siad an-suimiúil ar fad. How entrenched is low pay? Sometimes, people think we have always had low pay and the poor and things are really no different in this generation than they were in previous generations. Is 2015 radically different from ten or 20 years ago with regard to income inequality?
Could the witnesses relate that to their own sectors? I saw an interesting magazine cover recently which read "Women: Like men, only cheaper". I thought it was a shocking cover which obviously indicated that 14% gender pay gap. What practical elements could the Low Pay Commission have to ensure that this does not exist in the future?
If the commission looks only at the minimum wage, what difference, roughly, will it make in the witnesses' sectors? Will it make a radical difference or a 50% difference? Will it just tiptoe around the edges of the problem? Should the commission as it develops design a minimum wage for the next five years so that we are planning into the future and those median wages and the ratio to median wages we are looking at are increased over that period?
My last question concerns compliance. In the witnesses' experience, what is the incidence of lack of compliance? Is enforcement good enough? What can be done regarding enforcement?
My own experience is that enforcement can be very slow and cumbersome and miss the target completely as a result. There are obviously other views that enforcement is adequate. What is the witnesses' experience in that regard?
Ms Esther Lynch:
I am long enough with the ICTU to have worked on the campaign in 1998 to introduce the national minimum wage. In my experience, there is a lot that is the same as when we introduced it. There was so much unemployment at that time that people were very vulnerable. Where an employment right exists that people must turn up to demand, what happens is that people are too scared to do that. A good example of that relates to deductions from wages. The Payment of Wages Act states that the deductions from wages must be fair and reasonable but if someone is a low-paid worker who is afraid of having his or her hours cut back to almost nothing, which an employer can legally do under zero-hours practices, it is very difficult for that person to have the confidence to pitch up a year later with a complaint that there has been an unreasonable deduction from his or her wages for a till shortage. It is difficult for workers to have the confidence to come forward to stand up for their rights. I know there has been quite a lot of comment about where all the cases are. The reason there are so few cases is that workers are very nervous about coming forward, particularly without the involvement of a trade union.
We know from NERA reports that non-compliance comprises more than half of some sectors and could be as high as three-quarters. All sorts of innovations are used, such as people being asked to work for no pay, a week's trial period or the number of hours that count as work shrinking as people are sent from A to B and then to C but the time they are travelling between those places is not counted as working time. There are all sorts of innovations coming forward as ways to undermine the value of or the obligation to pay the national minimum wage.
In response to Deputy Tóibín's question, the Low Pay Commission will make a huge difference. If one puts an extra €2 or €3 per hour into the hands of a low-paid worker, they can do an awful lot with that money so it is worth promoting and encouraging an increase in the national minimum wage.
Sr. Bernadette MacMahon:
In respect of Deputy Tóibín's question about whether low pay is entrenched, there is greater awareness today of poverty and more transparency and accountability. One thing that always worries me when I have conversations, even with friends, is that there is a lot of defensive low pay among employers. They talk about their businesses collapsing and yet a search in this area shows that where wages have increased, companies have not gone to the wall. My concern is that a lot of it is not just what the politicians do, it is the general public. Do we have the will and how do we see other people? That is a huge challenge to keep before the population. We are talking about human beings with equal dignity. It is a challenge to see whether we can not only change the perspective of employers but that of the general public.
Deputy Tóibín referred to what might happen if the Low Pay Commission looks only at the minimum wage. I think we should start at the minimum because income must be the starting point but the provision of services is key. When I hear about comparisons with other countries, I say "stop, we are comparing apples and eggs, not even apples and oranges" because the services are not available in our country.
In respect of compliance, we work a lot with people on very low incomes and €1 per hour can make an enormous difference at the end of the week. We would like to think that we will work progressively towards a better standard of living but every step of an increase is a step in the right direction.
Mr. David Foden:
Looking at the experience in the UK, one can see that the tail of low pay has moved to the right direction in terms of wage distribution as result of what has happened in the past 15 years. In that sense, the minimum wage has made a difference.
It has had some impact and it has provided some protection but, as other witnesses have hinted, we do not know what is under the surface. We know what the statistics show and what has been declared but what about the undeclared, the illegal and the hidden? Naturally, in itself it is difficult to find out about that. It would be very brave to say that because there is now that flaw which is having some effect that the problem has gone away.
I have a final comment which relates to a number of remarks made. We are talking about the minimum wage and about earnings. We have done some analysis of job quality or decent work - if one wants to use that phrase - by looking at other dimensions such as working time quality, prospects, intrinsic job quality, work intensity, physical environment, etc. It is important to note that they do not always congregate in the same jobs; some are good in one dimension and bad in another. Looking at Europe as a whole, some 20% of the jobs in Europe are basically pretty bad on all of these dimensions. On the question of what we need to do, as well as looking at the minimum wage and earnings I think there is a lot to be done in terms of improving working conditions which go beyond wages and which would also address some of the concerns raised.
Ms Alice-Mary Higgins:
I will begin with the point that it would make a difference and I agree it does make a difference. We know it made a difference previously to the gender pay gap. It also makes a difference in terms of towns and communities because we know that any increase in pay for those on lower pay translates immediately into spending in local services and local goods. It has an economic knock-on effect as well as making a difference for the individual.
On the question of whether it is entrenched, it is more than entrenched, it is evolving with new mechanisms, new systems and new tricks. I refer to the zero hour contracts and the migration of that kind of insecure contract. I refer to the pushing out of those kinds of contracts in sectors such as the fast food industry which in many cases has made massively increased profits during the recession. It has not necessarily been a closing-down response, rather it is evolving. Similarly, we know that there are cases where wages are calculated on people being able to get family income supplement as well. There has been anecdotal evidence to the women's council of people who believe they have been punished for complaints by having their hours cut to the 15 hour minimum, which means they do not achieve the 19 hour minimum of work they need to work to access family income supplement. There is that gap between the current 15 hour minimum and the 19 hour minimum for family income supplement and this gap is being exploited. It is a very evolving situation and that is why we need to be ambitious in this legislation and it needs to have a really strong scope in its provisions. If the Government wants to set out strong measures pushing for a different kind of work relationship, it needs to include that capacity and to provide those tools in the legislation.
As well as considering compliance measures, something can be done to add stronger incentivising measures in areas such as public procurement, for example. The National Women's Council of Ireland is of the strong view that all public spending, public procurement, grants, enterprise grants, employer incentives, should come with social clauses and social criteria attached which include not just a minimum wage but those other issues which will be highlighted in this panoply of work. We believe that the question of the hourly rate is not sufficient in this legislation. Even if we cannot take in every issue around low pay, precarious work or vulnerable sectors, we certainly can move beyond an hourly indicator to something that looks at the question of the number of hours and what is a secure or an insecure contract and at the question of non-fixed hour contracts, for example.
Ms Gráinne O'Toole:
Migration has been occurring over the past 15 years and low pay is pervasive, based on the evidence we have gathered in studies of the restaurant sector in recent years. Au-pair work is a new issue for domestic work with its high levels of exploitation. We have also conducted a survey of more than 100 workers in the care, security, restaurant and domestic work sectors.
It shows precarious situations such that more than 50% of those workers earn just €300 a week. They are not able to get enough hours on which to live and to earn a sustainable wage. The minimum wage is very important to us and it has been very important to try to enforce rights for workers, to try to ensure compliance with the minimum wage. We believe that an increase in the minimum wage will raise the standards. As all speakers have eloquently outlined, it would make a big difference. However, if the Bill focuses only on minimum wage issues, it will lose an opportunity. Many migrants have become Irish citizens and they are in the labour market but discrimination at recruitment is an issue as is discrimination in the workplace. Exploitation is still prevalent as we will show in our study when it is published in coming month. I refer to the difficulty of workers being able to claim their rights in non-unionised sectors. Ms Esther Lynch referred to the fear of coming forward. People know that there is a minimum wage in Ireland and people know their rights but they have no enforcement mechanism when they are not unionised. Fear is a big factor.
The Migrant Rights Centre is continually dealing with issues of compliance and we bring cases to the Labour Court. Compliance with the minimum wage is still a problem, in particular, for undocumented workers as our study showed. The care work sector is very precarious. We are doing a study with SIPTU and the Carer's Association to examine levels of compliance. We note zero hour contracts and people fearful of complaining. This brings in the procurement issue because companies are tendering to the health service for contracts to run our care services. There is a package of issues in this regard. Therefore, if the Bill deals only with the minimum wage - which I acknowledge is a significant step forward - and does not consider the inter-relationship issues and the issues that keep low pay as a pressing issue, we will lose out.
Ms O'Toole referred to her concerns about the independence of the commission and that it may not survive another Government. I ask if she could expand on that view. What are the key factors that have driven the gender pay gap? What can this legislation do to address it?
The majority of employers - in excess of 90% - are compliant and more than compliant with legislation. Ms Lynch referred to compliance rates. However, the NERA figures are not necessarily pay-related compliance issues but rather issues around paperwork. These are serious issues but they are not necessarily pay-related. Many employers, particularly SMEs, cannot pay themselves the minimum wage because of the pressures on their businesses in recent years. They have kept people in employment without paying themselves. They have paid employees by dipping into their own savings or pensions or by selling off assets. What would the delegation's message be to those employers who may take some umbrage at these presentations when they themselves are not even getting the minimum wage?
Ms Gráinne O'Toole:
We believe the independence of the commission is important. I refer to how the Human Rights and Equality Commission has an independent function with a direct relationship with the Oireachtas and a budget line. It is able to conduct inquiries and undertake research. I hope the low pay commission will be an independent body which will not be over-influenced by sectoral interests. It will be allocated a budget and I hope it will be protected by the legislation. We will look at that aspect and come back with suggestions.
The Human Rights and Equality Commission was one model at which we were looking when we made that comment and that is vitally important for us.
As for not being able to pay wages to a decent level, I note we still see compliance issues. We see undocumented workers being employed for less than the minimum wage and see people being employed who still do not have contracts of employment and still are not getting sufficient hours to have a decent standard of living for them and for their families. We still see problematic sectors that we would like to see addressed and have concerns in this regard. We also have concerns about the way in which inspections are being conducted, particularly with regard to migrants, and we worry about ethnic profiling. For example, we have had a number of reports in recent years of inspectors searching workplaces for the first time with immigration police and the first question they are asking workers is what is their immigration status. This then creates an atmosphere of fear without finding out what is the exploitation. We have raised this issue many times and it still has not been addressed. We seek guidelines for where labour inspectors carry out inspections with An Garda Síochána on where it is necessary and whether it is necessary. There should be guidance on that because it is not working, which is a shame because the National Employment Rights Authority is a body that always has promoted itself as being there to advise workers.
Ms Alice-Mary Higgins:
As I could have a full session on the gender pay gap, I will not attempt to enumerate all the various factors at work. It is known from ESRI findings that one factor was that many women work in the public service. In addition, it was noted that the income of women in couples fell by 14% during the recession versus a fall of 9% for men. In part, that was identified as a link with the aforementioned public service work, as well as because many women are working in areas that have become highly casualised, such as retail and hospitality. Members have heard about the undervaluing of care as an area of work and the subject of child care also is a huge issue. While it is not within the remit of this Bill, it feeds into this issue.
Ms Alice-Mary Higgins:
If we address the issues of hours, secure contracts and progression, those issues are related to it. The work of child care is a separate but absolutely vital issue. The issue of progression also is deeply affected by the question of child care. As to how this legislation will make a difference, the very fact of examining low pay and minimum pay and in particular, if the commission looks beyond the hourly rate to weekly or monthly pay, as well as examining security of contract, security of hours and predictable hours, this will make a huge difference for women. The very fact that so many women are on such incredibly low incomes means it will make a difference to the gender pay gap when the minimum wage is adjusted. Moreover, adjusting conditions and providing more secure conditions also could have a huge effect.
If I may, I also wish to address briefly Deputy Calleary's other question on small business. It is important to state there is strong common ground potential here. It is known that those who are on low or medium pay tend to spend in their areas with a geographical distribution one does not get when one is topping up very high salaries, for example, in the same way. Therefore, there is a huge knock-on effect, in that this money translates directly back out into the economy and has a huge geographical distribution. In that regard, it is an absolute win for small business. On the issue of procurement, which a number of us have mentioned, it might be interesting to note the example of Kenya, which has reserved 30% of all of its Government contracts for largely local and smaller businesses that are headed by and with good conditions for women, youth and those with a disability. This is having a huge knock-on effect of, I think, €1.2 billion. Again, this is about joined-up thinking. It also is rewarding good practice and those employers who keep in mind that essential bargain, namely, one pays people who are giving one their work, which is their life and their time and by so doing, one is giving them the means by which they can live. It is a basic bargain and it should be rewarded as well as enforced.
Ms Esther Lynch:
There was a comment as well I think. In response to Deputy Calleary, not all small employers are bad employers. In fact, quite a lot of the exploitative practices about which I have been talking are not those of small employers at all but are practices of big business making big profits, which makes it all the more objectionable. For those businesses that cannot afford the national minimum wage, provisions are in place that allow the employer to go along in private to the Labour Court.
It is not a publicised discussion, the accounts are not made public and such employers can tell the Labour Court they cannot afford to pay the national minimum wage for a period. The Labour Court can then set out a lower rate of pay. However, the legislation quite rightly limits the amount of time for that and the implicit question is, why would the legislation limit the amount of time? Quite simply, it is that there must be fair competition. One cannot have a situation in which one business is trying to pay the national minimum wage and to provide good, just and fair conditions of employment and is competing with somebody who has an ability to pay less. Consequently, the legislation says one can do this for a year. To be honest, if one cannot afford to pay the national level wage to oneself and all one's employees for a period longer than a year, one's business is struggling and needs more help than just the national minimum wage. While a lot more should be done to help small businesses that are in trouble, I do not think it should be a subsidy from the employees' wages. I think the Government should be helping small businesses more. It is not a case of suggesting it is the employees' wages that should be helping because then one really is asking workers to subsidise their own employment and there is a point at which that becomes unfair, both in terms of competition and to the workers themselves.
I thank the witnesses for their attendance. They definitely are preaching to the converted in respect of some members and particularly in my case. However, the reality is that another group of witnesses are coming before the joint committee who, I can pretty much guess will have a different point of view on the subject than would the witnesses or I. In some cases, I could bet a week's wages on that. Some of them will suggest there is no need for a minimum wage or it is too high and one should be able to put a price on labour, depending on who is the person. Comments like that have been made recently by some of those who may not be attending later today but who have appeared before the joint committee on a similar issue pertaining to low pay. Some business representative groups believe it is the job of business to create wealth, for taxes to be paid on that and then for the Government to distribute wealth. This is the reality of what Members face as legislators from others who perceive the world of work, workers and the dignity of workers very differently from the witnesses or I. What would the witnesses say to some of those people who will appear before the committee later today and who possess such values and do not believe a minimum wage is needed? They believe people should be paid what they are worth, I am putting politely the comments made, and essentially, that it is up to the Government, not business, to redistribute wealth. This is the reality as far as some people who will be appearing before the committee later today are concerned.
Rather than everybody answering, it should be whoever for whom it feels most appropriate to answer. I do not need to hear five answers. It should be answered by people who feel most passionate about it or for whom it is most appropriate to respond.
Sr. Bernadette MacMahon:
I might not be the most appropriate person but I certainly have a view on it because we come across it so often. As noted earlier, it is used as a justification for leaving the minimum wage as it is. We also hear that people living on the minimum wage cannot cope because they are bad managers or because they are wasters. Consequently, in the same way that we talked about some employers not being able to afford it, there is more than one category of employer. The biggest point is the question of whether one can educate people because a lot of people who are relatively well-off have no idea as to what it is like to feed one's family on less than €100 per week. I refer to the food bills for four children and two adults. Consequently, I think there is a strong educational aspect simply by asking them to face the facts. Sometimes, people can be highly embarrassed when they are asked to apply that to themselves. While I believe that it can be a difficult wall to get over, somehow we must come back with the facts. This is what we try to do by saying this is what one is asking people to work for and to give 37 hours a week to doing. It is a question of education and of appealing to them. I do not know what the other answer is but I feel extremely strongly about it. I have two other points to make, the first of which is about the hours and we spoke of the importance of it not just being about the hourly wage. The second point relates to Deputy Calleary's reference to child care. The other biggest contribution to the cost of living is housing and if one wishes to talk about child care, one should also include the cost of housing.
It is a difficult question that we get all the time. We do not want to say that people have no moral or ethical values. The President is asking us to look at a more ethical Ireland and I ask them to participate in that conversation.
Ms Alice-Mary Higgins:
We have enumerated many of the reasons in answering these questions. There is not a disconnect with business, and business is absolutely ingrained in the fabric of society. Its customers, workers, the towns and communities, the roads used are generated by the collective project of the State. To suggest that business floats separately from the mutual responsibility is inappropriate.
I appreciate that members will make these arguments and it is important to make them but we must move past the point of making arguments on a case-by-case basis. That is why we need firm legislation that gives the scope for solid, evidence-based clear directives and recommendations from the commission. That is why I urge the committee to put forward solid amendments to ensure the commission is not reliant on having an argument such as the one described again and again but that it has real measures.
Ms Gráinne O'Toole:
Unequal societies do not do well and more equal societies do better. There is a lot of research to show that. The attitude described drives down standards in a society where all of us must live. It is in everyone's interests to work through the issues in partnership and in a constructive fashion.
I thank everyone for attending and for their presentations and engagement on the heads of the national minimum wage (low pay commission) Bill 2015. We will suspend the meeting to allow our next guests to take their seats.
I remind members, visitors and those in the public gallery to ensure their mobile phones are switched off for the duration of the meeting as they interfere with the broadcasting equipment even when on silent mode. I welcome Mr. Mark Fielding from ISME, Ms Tara Buckley from RGDATA, Mr. Sean Murphy from Retail Excellence Ireland, Ms Maeve McElwee from IBEC, Mr. Stephen McNally from the Irish Hotels Federation, and Mr. Adrian Cummins from the Restaurants Association of Ireland. I thank them for appearing to give presentations to the committee on the general scheme of the national minimum wage (low pay commission) Bill 2015. We received and circulated the submissions made by the witnesses so I ask them to address comments to the specific draft heads of the Bill.
The meeting is an opportunity to inform the committee about issues the witnesses might have with the heads of the Bill as drafted and to propose measures to address the issues. It is important that the time available to us be used constructively and for the intended purposes, as outlined. Due to the number of groups presenting, a time limit of no longer than five minutes for each presentation will be strictly adhered to. I will indicate when the groups are approaching the end of their time, at four minutes, so they will know they have one minute left.
All proposals will be considered by the committee when preparing the report for the Minister. I want to reassure you that the full content of the presentations which you have sent us will be taken into account, as well as the presentations and engagement here today.
Before we hear the presentations, in accordance with procedure I am required to read the following. 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 to the committee. However, if you are directed by the committee to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter to only a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you 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 will call on each person individually to make opening statements and members will be then invited to ask questions. Members are reminded that they should state the number of the head to which they are referring and to whom they are indicating their question. I now invite Mr. Mark Fielding, CEO of ISME, to make his presentation.
Mr. Mark Fielding:
I thank the Chairman. I will be well within the five minutes. My presentation will be short, but not sweet. On the review of the general scheme of the national minimum wage, there are a few things ISME would like to bring to the attention of the committee.
Under section 12(1) the commission states:
[T]he Commission shall make such recommendations to the Minister that are designed to set a minimum wage that, is fair and sustainable, and when appropriate, is adjusted incrementally, and that, over time, is progressively increased.
When I did my mathematics, the term "incremental" would be positive but could be also negative. The phrase "progressively increased" means that instead of having an evidence-based inquiry into the minimum wage we are already stating that this will be increased. We would suggest that instead of having the wording I have read out, the section should state:
The commission shall make such recommendations to the Minister that are designed to set a minimum wage that is fair and sustainable and, when appropriate, is adjusted and that, over time, is progressively adjusted without creating significant adverse consequences for employment and competitiveness.
That brings us to the issue of competitiveness and productivity in the country. Changing the wording would allow the low pay commission to make recommendations based on empirical evidence and not to be constrained by a political implication that wages will always rise. We also feel that the deliberations of the low pay commission must be aided and supported by accurate and relevant facts and figures so as to protect businesses and the jobs therein.
Under the functions of the commission, we see words such as "productivity" and "national competitiveness" mentioned. As we know, figures like GDP and GNP mean different things to different people, and we need to be very careful that when we examine these issues that GDP figures are not used because we do not feel that would give an accurate measurement of the sectors that are mainly involved in the national minimum wage.
When we talk about competitiveness, there is much disagreement about how it can be measured. We would suggest that all deliberations within the low pay commission would be transparent and dissimilar to previous exercises like the famous benchmarking, where decisions were carried out behind closed doors, in that all of the decisions of the low pay commission would be seen in open court.
We hope the low pay commission will take into account the knock-on effect that changes to the national minimum wage will involve. It is imperative that the totality of the increases in the national minimum wage will be taken into account.
In the past relativity and differentials were used. If there is an increase of 4%, 5% or 10% in the minimum wage, people on €12, €13 or €14 an hour will look for similar increases. That then ripples through the economy and definitely has to be taken into account.
When I was here before we spoke about the fact that the real concern of workers is not the national minimum wage, which is subject to tax deductions, etc., but rather what people take home in their take home pay. The low pay commission should concentrate on growth, the net effect and the cost to employers. There is a tax on employment in this country, that is, employers' PRSI. We have been always against a national minimum wage and have always looked for a low pay commission or at least a minimum incomes policy to be put in its place. However, as this is a fait accompli, we trust that the low pay commission will be transparent and will take all relevant information into account, not just the headline figures of GDP and GNP.
Ms Tara Buckley:
RGDATA represents the owners of 4,000 shops, convenience stores, forecourt stores and supermarkets around the country. We are currently updating a 2011 economic study about the independent grocery sector which found that our members were important local employers providing 90,000 jobs in cities, towns and villages throughout the country. I will provide copies of the updated report to the committee members once it is available. The average hourly earnings in our members’ shops is well above the national minimum wage. Our members provide a combination of good skilled full-time jobs including retail management, food service, butchers, bakers, chefs and retail assistants. They also provide part-time jobs and vital first jobs in local communities throughout the country.
Excellent customer service is a cornerstone of the independent grocery sector. Community retailers need motivated, customer focused staff that are happy in their jobs. Part-time staff are extremely important to the grocery and convenience sector. RGDATA members employ many people, such as parents, students and others, who want flexible part-time jobs. Some of these may be categorised as low paid workers as they do a limited number of hours, but many want to work only mornings while their children are at school or for one day at the weekends when they are home from college. Shop owners try to be flexible on rostering part-time staff and our members do not engage in practices such as offering zero-hour contracts. RGDATA members believe that the one practical measure which would assist them in creating new part-time and first time jobs would be the reintroduction of the 4.25% employers’ PRSI rate.
This committee is well aware of the considerable challenges that the retail sector has faced in recent years. The grocery and convenience sector has faced additional challenges, including increased competition from new retail formats and a complete transformation in food shopping habits. Independent retailers have had to cut their costs and up their game to stay in business. They have to provide better service than the multiples, but they must remain competitive with regard to pricing. This is a tough challenge.
During the worst days of the past few years many independent shop owners worked 24/7 to keep their businesses afloat and their staff in jobs, and took no salary from the business. Many invested their pensions and their savings in the business to keep it going. Retail sales may be showing a slight improvement in the main cities, but for many RGDATA members in rural towns and villages business conditions remain extremely challenging. This committee needs to ensure that the Government delivers on its promise to make the tax treatment of self employed people more equitable and fair.
The growth of the discount supermarket format has had a significant direct and negative impact on employment levels in the grocery and convenience retail sector. This is best illustrated by a comment from an RGDATA member who said the biggest competition for her town centre supermarket which employs 90 people is coming from a Lidl outside the town which employs 15 people. The discount grocery model is here to stay and this has significant consequences for jobs in the grocery and convenience sector. It is a low employment format that creates very few new jobs and causes a net reduction in jobs in local shops.
As the low pay commission is already up and running I do not have much to say about this draft legislation, except that the deliberations of the commission must be evidence based and transparent. The retail grocery sector continues to be treated differently from the rest of the retail sector, with a retail grocery and allied trades joint labour committee. RGDATA believes that having a sectoral agreement just for retail grocers is inappropriate and we have consistently argued that it should be scrapped. RGDATA believes that retail grocery employers should be subject to the same employment regulations and national minimum wage conditions as other retail employers.
RGDATA believes that the current contribution of the independent retail sector to employment growth should be recognised and nurtured.
Mr. Seán Murphy:
I thank the Chairman. I note the previous observations of my colleagues to my right and I do not propose to repeat exactly what they said. We also do not support zero-hours contracts in the retail sector. It is about retail excellence which is about supporting, training and upskilling staff.
Our big issues with this and the outgoing legislation in terms of the minimum wage relate to the knock-on relativity impacts. It is not so much the recipients of the minimum wage. It can be a challenge living in Dublin inside the M50 on these wages. However, it is the knock-on impacts on staff whose salaries are built on the minimum wage.
We note there are still JLCs and other employment agreements that have a further levelling or increasing impact on cost. Our concern would be that while we hear rhetoric of it being evidence based, how will it be established? How will our competitiveness be measured? How will the legislation adjust and derive itself from that?
To echo what my colleague from ISME has said, in terms of take-home pay, we have one of the highest VAT rates in the world at 23%. TASC has referred to this as being an incredibly regressive tax. We have highly progressive income taxes but a highly regressive value added tax, eating into the take-home pay of those on low wages.
We are in an era of almost negative inflation. The most recent retail numbers at the end of January noted that by value retail sales are up by less than 1% - by volume they are up by a lot. That is on account of very significant discounting undertaken by private sector operators. Rather than the legislation dealing with the cost of low pay etc., it would be much more important if it took into account cost-of-living issues and the drivers of those cost-of-living issues. The legislation seems to be missing out on the Government's impact on that space.
We are obviously coming through a long global crisis that has had a major effect on this economy. When one looks on the increase in VAT, the lack of movement on upwards-only rent reviews, the changes to sick leave legislation and how they impacted on employee expectation in that area and moves to effectively abolish the employers' rebate for redundancy, the business case for employers to create employment is increasingly challenged. It is in this context that the observations that we already submitted in writing to the committee come to mind.
We worry about how the evidence-based legislation will be delivered and we note that we already have a very high minimum wage in this country. In the context of this legislation, our biggest concerns are with the knock-on impacts and the data used to derive the determination of valuation.
Ms Maeve McElwee:
As IBEC has already presented its views on the national minimum wage to the committee in the past, I will speak to the general scheme of the Bill.
Head 2 amends Part 3 of National Minimum Wage Act. Section 12(b) refers to changes in currency exchange rates during that period. That is the period between the review by the low pay commission and the previous setting of a national minimum wage. From the point of view of considering currency exchange rates, that is too narrow a timeframe given the potential volatility of exchange rates. Any shock in exchange rates could leave low value-add industries exposed relative to competitors. We would respectfully suggest a rewording. It would be more consistently addressed if section 12(d) were to state: "international comparisons, particularly with Great Britain and Northern Ireland, taking into account currency exchange rates;".
Again with head 2 the issue of competitiveness is considered. A number of considerations have been laid out for the low pay commission to consider, including levels of employment to unemployment, the cost of living and national competitiveness. Given its importance in considering any adjustment to the national minimum wage, regional competitiveness should be specified there as an additional subsection.
Head 3 deals with the addition of a Second Schedule to the National Minimum Wage Act 2000. This is section 1(4) dealing with the balance of representatives on the commission. In defining the structure of the low pay commission, the balance of representation has been very carefully considered. We would like to see inserted in the legislation that in the event of an absence, for whatever reason, on the low pay commission of any of the representatives provision is made to fill that immediately. I recognise that the heads provide for doing so within six months of a vacancy arising. Nevertheless given the timeframe between reporting which is in July and implementation, it is actually a shorter period. Therefore in order to protect that balance we would like to see that provision strengthened.
Also in that section we have a point about the chairperson of the low pay commission. It is unclear whether the chairman would have a casting vote. For clarity and understanding of how the commission would work, it would be important to set that out.
Mr. Stephen McNally:
I thank the members for inviting the Irish Hotels Federation to address the Joint Committee on Jobs, Enterprise and Innovation on the national minimum wage. The Irish Hotels Federation, founded in 1937, is the national representative organisation of the hotel and guesthouse sector in Ireland. We are a key stakeholder in Irish tourism and the SME sector.
Tourism is one of Ireland’s largest industries and provides almost 205,000 jobs, equivalent to 11% of total employment in the country and a figure that has grown by more than 30,000 since 2011. It accounts for almost 4% of gross national product. Fáilte Ireland estimates total tourism revenue in 2014 at €6.45 billion. With more than 54,000 people directly employed by hotels and guesthouses across every county and town, the hotels sector is playing a critical role in contributing to recovery in the tourism industry and the wider economy. The international tourism market is exceptionally competitive and every tourism euro spent in Ireland is hard won. Value for money is an important factor in achieving growth in overall visitors as reflected in research published by Fáilte Ireland.
Hotels are very labour-intensive business activities operating in a very competitive international market. In 2014 payroll costs were approximately 40% of turnover compared with 8% in manufacturing. Because of the service nature of hotels labour productivity is low compared with other sectors in the economy.
The hotel sector provides many high-quality jobs both directly and indirectly. These include managers, accountants, chefs, IT specialists, marketing executives and HR executives. However, the nature of the business as a service industry is that many lower-skilled occupations are also required to provide the quality of service demanded by customers. These include cleaners, waiting staff, accommodation staff and kitchen assistants. In line with the hotels sector internationally, Ireland’s hotel product requires a high proportion of the lower-skill occupations, and consequently wage costs, particularly at the lower level, are a major part of hotel competitiveness.
The reality of labour costs in the hotel sector, with payroll and related expenses amounting to approximately 40% of total revenue, is that it is affected greatly by the minimum wage. We in the Irish Hotels Federation support a national minimum wage rate for all workers. However, we are concerned that unjustified increases in the minimum wage will have a strong negative effect on many small and medium-sized hotels particularly outside the main urban areas.
We recommend that the national minimum wage should not be increased in the immediate future. The domestic economy is still at a fragile stage in its recovery, particularly outside the main urban areas. An increase at this time would jeopardise the hard-won competitiveness gains achieved in the economy and would risk excluding younger and low-skilled workers from employment.
Our comments on the heads of the national minimum wage (low pay commission) Bill are as follows. Under the heading, National Competitiveness, the regulatory impact analysis identifies:
The particular role of the Commission is to ensure that any advice or recommendations it makes to Government is evidence-based; utilising agreed data, carrying out research and consultations with employers, workers and their representatives and taking written and oral evidence from a wide range of organisations.
This is to ensure that any suggested changes to the National Minimum Wage have minimum adverse impact on employment and competitiveness.
However, the Bill provides that in discharging the functions assigned to it by section 12(1), it is proposed that the commission shall make such recommendations to the Minister that are designed to set a minimum wage that is fair and sustainable, and when appropriate, is adjusted incrementally, and that over time is progressively increased to assist as many low-paid workers as is reasonably practicable. It is important that it is fair and reasonable for all parties.
However, it must not create significant adverse consequences for employment or competitiveness. It is not clear to us how the objectives set out in the regulatory impact assessment are to be achieved. The Bill redefines "minimum adverse impact" referred to in the RIA as "without creating significant adverse consequences for employment or competitiveness". These are entirely different objectives and we suggest an amendment should be included to rectify it. We recommend the deletion of the word "significant" in section 11(2).
The Bill does not identify how the commission has to ensure that its recommendations to Government are evidence-based, such as by utilising agreed data, carrying out research and consultations with employers, workers and their representatives and taking written and oral evidence from a wide range of organisations. We recommend the insertion of a clause to stipulate this with particular reference to engagement with the sectors that are most affected. For a national minimum wage to be fair and sustainable, it must not create a barrier to employment at entry level. The most unfair situation that can arise is the exclusion from the workforce of those who wish to enter employment and are prevented from doing so because of uneconomic and inflexible minimum rates of pay. We recommend the insertion of a clause that requires the commission to have regard for such an impact.
In the interests of balance and fairness, any recommendations made by the low pay commission should not be prejudiced by the absence of commissioners. At all times when increases in the national minimum wage are being decided on, all commissioners must be present to vote or be provided with facilities to do so through remote access.
Mr. Adrian Cummins:
I thank the Chairman and members of the joint committee for giving me the opportunity to talk about low pay, the living wage and the minimum wage. The Restaurants Association of Ireland, RAI, is happy to engage with the committee on these and other matters of mutual interest. From the outset, we are concerned about the need to create more jobs in our industry and economy. We will be talking about the cost of employment for businesses and it must be viewed in tandem with any discussion about the minimum wage. If the desire of the Government and the Oireachtas is to ensure that people have more disposable income in their pockets at the end of the week, that they be able to support themselves and their families, then I suggest we look at what emanates from elsewhere in the Oireachtas. The most direct way to increase take home pay is to reduce the excessive burden of taxation and the controversial universal social charge, USC, on employees.
In advance of this presentation, I consulted with hundreds of restaurant owners who are members of the RAI. The majority are small, family owned and family run businesses in every corner of Ireland. Many of them are in a state of disbelief that there is even talk about increasing wages, when they have been struggling to keep their doors open. Many of them will have had little or no wages paid to themselves during the past five years as they have struggled to keep their businesses alive and pay salaries to staff, pay rates to local authorities and meet the ever-increasing cost of business, including energy, insurance and, in many cases, rent. This is not about helping create employment; it appears to be about creating an environment where it is hard to do business.
The survey of income and living conditions produced by the CSO in 2012 shows that the level of poverty has drastically increased since 2004. If we are to address this issue, we need to get people working. There is no greater dignity than can be found by having a job. It gives a reason to get up in the morning and the ability to provide for oneself and one's family. In the past 18 months, through a pilot initiative, the RAI has taken 140 long-term unemployed people and put them through a structured chef training programme, and I am delighted to say that over 50% are now in full-time employment. This shows that there are jobs in our industry, especially for chefs.
An increase in the minimum wage is not the answer. It will only stifle job creation. As of February 2015, there are 355,124 people on the live register. Each person who finds employment results in a saving of up to €20,000 and the Government will benefit from tax revenue, employer's PRSI and USC. The last increase in the minimum wage was in 2007 during the Celtic tiger era before the 2008 recession. Youth unemployment stands at 21.6%. That is where the problem lies. Since the inception of the minimum wage, it has increased by 55%. Although competitiveness has slowly returned, we are, again, losing it and now there is a proposal for an increase in the minimum wage. Have we already forgotten what we have gone through during the past seven years?
Considering inflation figures during the past 12 years, the minimum wage should be €7.40 as opposed to €8.65. The poverty rate is highest amongst the unemployed, a shocking 19.2% compared to 1% of those employed. When there is a rise in the minimum wage, it hits small businesses, such as hospitality and restaurants, six times harder than other businesses.
A rise in the minimum wage will definitely deter small businesses from taking on staff. To get a job is a starting point for employees, a foot in the door. It provides opportunities and career progression, which in turn comes with pay rises. Profitable businesses are giving pay increases. However, they are doing so based on an individual’s contribution to the business, rather than across the board pay increases.
Ireland has a high minimum wage by international standards, taking into account that we have not had an increase during the recession. Our minimum wage is the fourth highest in the EU, when Luxemburg is excluded. In many other countries, people on lower rates of pay are taxed much more than in Ireland. The regions in Ireland with a weaker economic performance will seriously suffer if there is an increase in the minimum wage. We cannot allow this to happen. It is regions like this that need help to recover. There are still restaurants closing in small towns in Ireland. Many restaurants and businesses are still in debt and cannot afford to have cost increases imposed on them. Furthermore it will result in fewer jobs being created. It will have a destabilising effect on the restaurant and hospitality industry. The level of unemployment in the wider economy is the issue here.
When the low pay commission makes its final decision whether or not it will increase the minimum wage, it must conduct a detailed analysis of the cost of doing business in Ireland. This includes the 28 regulatory and inspection bodies that the restaurant industry deals with annually, the rising cost of energy and insurance, rent reviews and the ever increasing cost of product raw material.
I thank the delegates for their presentations. Before their presentations, we heard presentations by employee representatives. Many of them were decent individuals who explained very difficult situations for employees. Our job is to square the circle. I do not know who the squares and circles are here, and I will not say. It is a major and difficult challenge for the Oireachtas. A former KPMG chairman, Mr. Alan Buckle, wrote a very interesting article on the minimum wage in which he stated that fears with regard to the minimum wage and job losses are mostly overstated and often protect employers from other employers who would pay very low wages. I am conscious that the Chairman wants me to ask specific questions of individuals. I would like to take a straw poll to find out who is in favour of zero-hour contracts. Some organisations have said they are not, which I welcome. Could I have a show of hands as to which organisations are in favour of the use of zero-hour contracts?
We will have that discussion. I just wanted to get a brief understanding of where the representative groups stand on the issue. Mr. Murphy's member organisations are experiencing a whole ecosystem of costs, and wages are one aspect. I always feel wages are the last place we should seek cost reductions. Where do wages stand in his priority of costs? Would parity of USC for self-employed people be a quid pro quofor an increase in the minimum wage?
Mr. Seán Murphy:
In the retail space, wages are a very significant element, partly because huge numbers of our members are tied into upwards-only rent reviews and, therefore, have no flexibility there. They are tied into rates that have doubled during the 2000s and, while we recognise that efforts have been made to reduce them, they have not fallen in line with the levels of economic activity with which we deal. The only other place people can seek flexibility is wages.
That is a fact. This Government committed to doing something about upward only rent reviews and did not do it. In 2015, and allegedly on the cusp of a return to growth, we still see retail chains and retailers shutting down or going into administration or exiting. Wages are a very big driver. The key issue from a retail perspective is it operates in a very, very tight margin - typically 2% to 5% - therefore even a 1% increase in wages directly affects the margin of a business. If we go back to the enabling legislation and talking about competitiveness, what is it and how are we measuring it and what are the agreements on how competitiveness will be measured - these are crucially important. Part of the reason why these wages have softened is that this is a global competitiveness issue. Thomas Friedman asks how does one compare a European who wants to work a 35 hour week with an Indian who wants to work a 35 hour day? He is being flippant when he says that, but this is what we are dealing with in terms of the issues we face and the challenges we have.
The last question I have is to Ms Maeve McElwee. The 4.7% of the working population who are on the minimum wage is a cost element regarding business. But the 4.7% of the population who are on the very top wages is equally a cost. Given that both costs should be a challenge equally to the people you represent, what should be done with the wages at the top, the 4.7%?
Ireland has a very steep incomes gradient. A steep incomes gradient is not necessarily good for a cohesive society. We are here to focus on wages as a cost of doing business. The committee is focussing on the 4.7% at the bottom. I am just wondering why there is no attention given to the 4.7% at the top.
Ms Maeve McElwee:
It is correct to say that we do have a considerable incomes gradient. We have a situation here where we have a very high median earnings on the basis that we have a high value economy and we look to create jobs in the high value sector. Naturally we are going to have a situation where we have a disparity of income given that we are not creating jobs at this lower entry level and at lower level piece manufacturing. It has been our ambition to create a knowledge economy and that will lead to a disparity in income. In reality the current national minimum wage is already quite high in its percentage value against the median wage so we have a situation where in Connacht the minimum wage is almost 57% of the national median wage and in Ulster the minimum wage is almost 60% of the national median wage. We must be cognisant of where we are pitching our minimum wage versus the median earnings in the economy.
I welcome the speakers and want to reassure Deputy Tóibín there are many decent employers too, just in case he thinks there are not. Relativity has been spoken about and the impact of relativity. Where can we get a measurement of that for accurate figures? If the committee was to propose that relativity be included, where would it find measurements? I accept the argument, but where can we measure it accurately? What had the bigger impact on your members' bottom lines; the increase to the minimum wage or the doubling of employer's PRSI? Ms McElwee mentioned putting in regional competitors as a measure. Is she suggesting that we need to consider different minimum wages for different regions, is that where she is going with that argument?
I also have questions for Ms Buckley, Mr. McNally and Mr. Cummins. Is there a role for the low pay commission in measuring the rates for joint labour committees? The rates seem to come out magically - so is there a role for getting it involved in measuring that or bringing some sort of transparency in there? The Government tells us, and the witnesses provide evidence, that tourism is now back to 2007 and 2008 occupancy levels and eating levels. When one shares a constituency with the Minister for Tourism, one hears a lot.
Given that tourism is back on the up is it not time to reward the employees, who assisted it coming back up, with some sort of a minimum wage increase? In the context of our general minimum wage discussions, the view was taken that the VAT decrease, which the witnesses both campaigned strongly for, was not passed back to employees. Can the witnesses respond to that?
Mr. Mark Fielding:
Well seeing as I started it I suppose I should. How can we measure it? All we have to do is go back to 2000 when the minimum wage was brought in and measure it along that line up to 2007 and further along, measure the increases in minimum wage at 55% and measure the increases across the economy, which rose by something in the region of 52% to 54%. It would be quite easy to see the relativity knock-on where people thought the minimum wage was a great idea back in 2000 and did not see the effect it was going to have on other wages up along the line - but we saw it at the coal face and I believe the figures prove it. The figures rose across the whole economy at roughly the same level.
Regarding the increase in minimum wage versus twice the PRSI - depending on the level, I believe the increase in the minimum wage will have a bigger effect because of that relativity. The doubling of the PRSI, adaptable for specific sectors, had a major effect. It had a major effect on new employment. There was a stop put on employment. I am sure many of my colleagues can talk in terms of that, we certainly would have seen that.
Ms Tara Buckley:
Because retail grocers are subject to a joint labour committee, JLC wage rate, the employers PRSI issue had a much more significant impact on them than the rise in the minimum wage. Wage bills went up overnight between €20,000 and €80,000. If one is running a business, as people here have explained, and one has a certain budget to pay for wages, then one cannot handle an overnight increase of €20,000 or €80,000 a year. Unfortunately, what one then has to do is look at the hours and the number of staff. At the same time there was huge pressure coming on the grocery sector from a different retail format which proved very popular with consumers - a very low employment format. It is difficult for an employer with 90 staff to compete with a shop which has 15 staff.
Mr. Seán Murphy:
The No. 1 priority at the retail consultation forum facing into Budget 2015 was the employer's PRSI and revisiting of the 4.25% hike. That tells us something. The reports of the low pay commission in the UK are pretty good. It talks of the impacts, and the actual domestic economy impacts, of a minimum wage and the relativity we spoke of earlier. It states:
Minimum wage jobs account for 12% of jobs in the UK [it is a greater number there than it is here] that means in general minimum wage jobs are likely to be too large a part of the cost base for wage rises to be affordable without material increase in a firm's revenues. Such increases are likely to increase pressures that increase the pay of other workers in order to protect differentials.
I quote this because it absolutely chimes with Ireland outside the M50 where, despite all our effort and rhetoric, it is still pretty flat. As the Deputies go back to their constituencies this is surely chiming with them. My colleagues talked about employers who have taken no, or very limited salaries, out of the business for the last six years - waiting for that upturn. We are finally starting to see something of an upturn now and yet a massive instability and insecurity and dare I say it, a kick to confidence, is being created and driven by the rhetoric of Government around this matter - "Time for pay rises, time for cost increases". At the same time the Government has mandated massive and significant costs onto employers across the board. We have not had the reforms in our labour legislation which the UK has had as it introduces national minimum wage. We have far more strictures here like JLCs and far less flexibility. That is part of the reason we are challenged. Many would argue, and I would empathise, that if there is a minimum wage, why are all these sectoral agreements needed on top of them?
Mr. Stephen McNally:
It is important to note that the JLC for the hotel sector was struck down in 2011. It is no coincidence that when the JLC was struck down that 30,000 jobs were created. That is a direct answer to the question.
It is also important to note the following. In the hotel business the minimum level is the entry rate to the business. We have found that it provides a level playing field for all businesses. The point of JLCs distorts the level playing field. That means when employees go to work on their career they have options. When there is a level playing field it is much easier to administer as well, which is also important.
We are delighted that tourism numbers have moved forward since the VAT rate was introduced. The 30,000 jobs were also assisted by the move and led to a huge increase in jobs. There are a number of issues. In 2011, we had 5.95 million foreign visits here and in 2015, we are looking at 7.6 million visitors. Two things happened, the VAT rate was introduced and landing charges.
Yesterday the Government set out a good policy to cover the next few years in terms of where we are going and we now have a roadmap to get 10 million visitors. The easiest way to hijack that goal would be to get rid of the VAT rate now when, in fact, we have proved that the numbers will come into the country. What our country needed, throughout this economic recovery, was spend from outside of Ireland. What that created, through us becoming competitiveness, was that spend from outside of Ireland came into Ireland.
From a satisfaction point of view, a Fáilte Ireland survey states that foreign visitors now say we are very good value and we are at the highest level than we have been for years. I contest that the decreases in VAT have been passed on to the customer, which is important.
Finally, there has been a lot of media speculation on how the recovery happened. We must remember, not unlike the other industry sitting beside me, that a lot of this has happened in the urban areas, particularly Dublin, Cork and Galway. Outside of those locations a lot of businesses are struggling. There is no doubt that they are struggling to stay open. At least 150 colleague hotels still remain unresolved and are financially unstable. The majority of them are based in rural areas around the country.
It is also important for us to note that every town and village in the country has a hotel or a guesthouse which often creates the first job for people. Personally, my first job was at the age of 14 or 15. It meant I was able to go into the industry and gain confidence. I was happy to get the minimum pay rate or the rate that existed because the job was all about me getting confidence. That is what we do, whether we are in retail, hotels or hospitality - we give people that first leg up.
I also note that lots of students work in our industry. Our hotels are busy at the weekends with weddings, functions, etc. During the week students go to college but at the weekend their work in the industry finances their college years. That is the way it works. The industry is very much based on supply and demand and works for all parties. It is important that we take all these points into consideration.
Mr. Adrian Cummins:
Mr. McNally has covered a lot of the points. In response to mention of the pass through on the VAT, there were three reports compiled. Deloitte compiled one and the other two were compiled by the Department of Finance and Fáilte Ireland. All three reports reaffirmed that the pass through was given to the customers with a VAT reduction since 2011.
With regard to the question on JLCs, it was the catering industry that took the challenge in 2011 and it was found to be unconstitutional. We do not want to go back to having a system that was anti-business and anti job creation. We are totally opposed to the re-introduction of JLCs. Let me give the example of two pubs side by side where only one provided food. In that case, the pub that served food had to pay a higher rate of pay because of the JLC system. We do not want to return to that situation and believe it is a thing of the past. We have a national minimum wage which is the base rate. Let us negotiate from there on an individual basis with employers.
In terms of NERA inspections, I got the report for 2014 and compared it with 2011. The sky has not fallen down. There are still 30 pieces of legislation that NERA has to inspect and breaches have dramatically decreased since the JLCs have gone.
Mr. Murphy and Ms Buckley both mentioned the decision-making process should be evidence based. What evidence would they like included?
Mr. Fielding had an issue with the progressive increase and recommended it should be adjusted. Was the previous minimum wage reduced in 2009? It was only for a short period. What consequence did that initiative have for business? I have heard from people in the last government that lobbying took place at the time. It was speculated, at the start of the recession, that the initiative would save jobs and help keep businesses afloat. Things were going downhill. Is there evidence or information to back up the view that the reduction had an impact?
Mr. Mark Fielding:
I do not have such evidence because the minimum wage was reduced for only a short period. I shall return to the initial point I made. I am worried about the words "progressively increased" that have been stitched into the Bill. There will be times, and hopefully we will never get to it but there could become times where, in a recession, wages would have to come down. There will be bad draftsmanship in the Bill if we include that clause and it has to be changed. I do not have evidence to say what happened in the case outlined by the Deputy.
Ms Tara Buckley:
The experience of RGDATA in terms of wage negotiations comes from the retail grocery and allied trades joint labour committee. We were part of one as well and our concern is as follows. During those so-called negotiations it was extremely difficult to get the group to understand that there was a big difference between a large multiple operator and a small local shop in terms of economical experience and everything else. These small businesses had a small number of staff so when everything started going pear shaped everyone in the business knew things were really tough. Together they might have decided that instead of somebody losing his or her job that they were all prepared to take a pay cut to try and get through the crisis. There was inflexibility because legally they were not allowed to go below a rate that was quite in excess of the national minimum wage at the time. The staff working in the business would have been happy for all of them to keep their jobs and continue to work with a wage that was above the minimum wage but below the joint labour committee rate. There was also a lot of inflexibility when one tried to negotiate. The view that came from the other side of the room was that if these businesses cannot afford to pay then they should not be in business. The reality is that these small businesses are located in places in Ireland where no other businesses exist. It means that if the people who work in those shops lose their jobs and the shop, hotel or restaurant closes then they will discover there is no other job available. The people who worked in the businesses wanted to keep the businesses open and try to survive the recession. That is where the inflexibility lay and that is where we are coming from. We believe one should listen to all sides of the story when trying to negotiate and decide these rates. One should listen to big and small businesses, especially for things like a minimum or starter wage rates. Small businesses create first jobs for most people. Therefore, small businesses should be listened to and their voices should be heard.
Mr. Seán Murphy:
In terms of data and research, I direct the Deputy to the Neumark and Wascher paper of 2007 which mentioned that a minimum wage rate will reduce employment if not set at a moderate rate. The OECD wrote the same in 1998, the World Bank did so in 2006 and there is also an IMF study from 2014 which indicated this fact. The IMF study made the point that youth employment in particular, which now is at the extraordinary level of 21%, will increase in the context of a minimum wage increase.
We should be aware of another issue. I attended the launch of the Government's tourism plan for the period 2015 to 2025 in Kilkenny yesterday where the Minister and the Taoiseach talked about our need to focus on cost. Do we honestly think that an increase in the minimum wage will not have a knock-on impact on everything ranging from hairdressing to child care? The latter issue of child care is one of the big issues that affects Irish society at present. Of course an increase will have an impact. We live in an era where the European Central Bank has embarked on a massive amount of quantitative easing to drive inflation because there is no inflation.
If anything, there is deflation when the cost of the decrease in the price of oil is taken into account. It has been suggested that those of us operating in a small and incredibly open economy should increase our costs. That is the context in which we would make this argument at the present time. I would point the committee to those papers.
I have a question. We all accept that the recovery is very unbalanced throughout the country. Some parts of the country, such as the city of Dublin, are doing particularly well. The western region and other parts of the country are experiencing significant difficulties. It is very difficult to argue against an increase for employees who are working in sectors that are doing particularly well. Hotels and restaurants in Dublin and perhaps in other parts of the country are significantly increasing their prices. I am aware that some hotels have increased the cost of accommodation by up to 15% in recent times. The increase may be somewhat more in some cases. The same thing applies to restaurants. How can the witnesses argue that the employees working in those establishments should not see an increase in their wages as a result of the improvement in business that those establishments are seeing?
Mr. Stephen McNally:
The Senator is right to say that business has improved in Dublin in particular. It is important to note that there is almost a shortage of bedrooms in the centre of Dublin at the moment. People will agree with that as well. We have come from such a deep position since we went to the base that the increase taking place as part of the recovery seems high. The recent PricewaterhouseCoopers report made it clear that Dublin is the fourth most occupied city in Europe, but it is merely the 14th most expensive city in terms of the rate we are charging. It is clear that we still have a long way to go to get ourselves up. Practically speaking, the rates in London are twice the rates in Dublin. That is what one would find if one compared the two cities, but we are not even going there. I can give the Senator very good examples of hotels right across Dublin that have already increased pay rates. That has happened in the cases of hotels that have been able to afford to do so. The Senator made the important point that Dublin is almost running differently from everywhere else. When a busy market is overheating, our employees will move somewhere else if we do not mind them. The market will determine the way it is going to move. Maybe that is what is happening in Dublin. The market is flat outside Dublin. Many hotels are just opening again. The seasonal hotels will be opening at the start of April for Easter. Their numbers are looking okay, but some of them have not been refurbished for some time. Their restaurants might not have seen a new piece of furniture for eight years, or their bedrooms might not have seen a new carpet for nine years. These businesses are trying to get up to an economic level again. That is the balance we have here. I have seen the increases that have been put in place in Dublin - it has happened in our company - because the economics have said it is absolutely right that the employees should be rewarded. That did not require a joint labour committee or a minimum rate. The market demand said we had to do something. That is the way it should happen here.
Is Senator Mullins happy? Okay. I would like to ask Ms McElwee a question about zero-hour contracts before we wrap up. Can she give me an example of a type of position that would require that type of flexibility?
Ms Maeve McElwee:
Certainly. It is required in professions where particular skills need to be reserved. I will give two examples that come to mind. In the first example, one is running a pharmacy and is therefore obliged to have a qualified pharmacist on site. An issue might arise that means one has to ensure somebody is reserved for some hours to cover a potential upcoming absence - perhaps a pharmacist is on call for a family emergency. One might not necessarily have a vacancy at the time, but one needs to ensure someone is available. One could use a zero-hour contract appropriately in such circumstances by calling on an individual if he or she is needed to fill in.
The second example I would like to give relates to manufacturing. A manufacturing company might sometimes reserve hours with a skilled technician, such as a welder, in case it wins a particular contract. It might not know whether that contract is coming in, but in order to achieve that contract it needs to be able to demonstrate that it has the skill set at its disposal to fulfil the contract. In such circumstances, it might decide to reserve the hours on a zero-hour contract. We would say that zero-hour contracts tend to be much more efficient and useful when they are availed of in those types of scenarios than when they are availed of instead of low-hours or variable-hours contracts.
Mr. Mark Fielding:
We have advocated for this over the last 20 years. As I said earlier, employees are not interested in gross pay; they are interested in take-home pay. The distribution of wealth is the job of the Government rather than the job of employers. If the market dictates that the going rate for a certain job is €10 an hour, for example, a person will be contracted or employed at that rate. The national average wage is approximately €32,000 at the moment. If a person could earn up to approximately two-thirds of that wage, or approximately €21,000, without being taxed or being hit with PRSI and USC, that would distribute the burden that is coming through the tax system. The employer pays the going rate for the job. The Government decides that people need to have a certain amount. We suggest that they should not be taxed up to a certain level. They should be allowed to earn up to €21,000, for example, without being taxed. The pressure or burden should not be placed solely on the employer. That is really the thing. It comes through. We are saying the tax and social welfare systems should take up the difference between what the going rate for the job is - the employer's objective is to get people at the going rate - and what the Government determines to be a living wage or whatever we hear being thrown around at the moment. It should not be the sole responsibility of the employer. If it were, our competitiveness would be in question.
I thank all the stakeholders for attending today's meeting of the committee to discuss the heads of the proposed national minimum wage (low pay commission) Bill 2015. I thank the officials from the library and research service and the Department of Jobs, Enterprise and Innovation for the assistance and briefing they provided. In the coming weeks, the committee will finalise its report and submit it to the Minister. I sincerely thank the witnesses for attending here today.
Members are reminded that the launch of the committee's report on policy options to support business growth and job creation and retention in town and village centres will take place in the audio-visual room at 11 a.m. on this Thursday, 26 March. In addition, an e-mail was circulated to members this morning advising them that the European Commissioner for Trade, Ms Cecilia Malmström, will attend a meeting of the Joint Committee on European Union Affairs in Committee Room 2 at 2.15 p.m. on Friday, 27 March. Members are invited to attend this meeting if they wish.