Mr. Ultan Courtney:

Good morning, Chairman, and members of the committee. I am glad to have the opportunity to meet with you all and discuss the commission’s recent report and recommendations on the national minimum wage.

Mandate has also been invited to the meeting. Since 2016, the accommodation and food, and the wholesale and retail sectors combined have consistently accounted for more than 50% of national minimum wage workers. In 2020, they accounted for 54.4% of all national minimum wage workers. Mandate’s experience of their representation of retail, bar and administrative workers is always of interest to the Low Pay Commission and its contributions to the commission’s consultations on minimum wage issues are always welcome. I look forward to hearing its contributions to today’s discussions.

I was appointed as chair of the commission last October. I started my working life with CIE and recently finished a seven-year term as chairman of Dublin Bus. I run a management consultancy business that I established in 2008. I have expertise in economics, industrial relations, employment law and human resources, both in the public and private sector, and act as an independent person in a number of other organisations. The Low Pay Commission was established in 2015 as an independent body. Its statutory function pursuant to the National Minimum Wage Acts is to make recommendations to the Minister for Enterprise, Trade and Employment on the appropriate rate of the national minimum wage. It is important to emphasise that the commission recommends a national minimum wage but the Government decides on the rate. The legislation provides for the Government to accept and implement the commission’s recommendation or to implement a different rate.

The national minimum wage seeks to find a balance between a fair and sustainable rate for low-paid workers and one that will not have significant negative consequences for employment and competitiveness. It might be useful for me to outline how the commission comes to its recommendations. The commission comprises eight members and myself as an independent chair. There are members who have an understanding of the interests of employees, especially the impact of living on the minimum wage and the sectors where low pay and minimum wage workers are concentrated. There are members who have an understanding of the interests of employers, particularly small to medium-sized employers and those operating in traditionally low-pay sectors and who possess a good knowledge and understanding of the specific issues faced by Irish businesses particularly in respect of labour costs and competitiveness. There are also academics who have particular knowledge and expertise in relation to economics, labour market economics and statistics.

The National Minimum Wage Acts set out the issues we are obliged to consider when we are making our recommendations. These include the cost of living, earnings and income distribution, competitiveness and the likely effect that any proposed recommendation will have on future levels of employment. Statute requires incremental adjustment to the national minimum wage. The recommendations that the commission makes are always based on the best available evidence at the time. The commission has a research partnership agreement with the ESRI to undertake and disseminate research on the issues surrounding low pay in Ireland. This has led to the publication of high-quality research on the impact of changes to the national minimum wage. The commission recently awarded research bursaries for two independent pieces of research on minimum wages issues. This research is being finalised and its publication will further improve our understanding of the issues surrounding low pay.

Since my appointment last October, the commission has met 15 times. Meetings are used to analyse the most recent research and data on low pay issues and on general economic performance. We also met with representatives of the Department of Finance, OECD, UK Low Pay Commission, Eurofound, ESRI, Central Bank of Ireland, as well as academics from the University of Oxford and University College Dublin, to hear their expert opinion on issues relevant to our work. We also received commissioned reports from the ESRI and Maynooth University, which provided analysis of the impact of changes in the minimum wage on several areas including employment and hours of work. The commission also met with several representative groups representing both employers and employees, including Mandate. As part of our deliberations the commission conducted a public consultation this year where we invited submissions on the appropriate rate of the national minimum wage for 2023. The commission received 297 submissions. This contrasts with 85 submissions received last year and highlights the interest in and awareness of low-pay issues at this time. These meetings and submissions provided further information and context for us to consider when it came to making our final recommendations.

Our recommendation to the Government was for an 80 cent increase in the national minimum wage. This represents a 7.6% increase and is the largest increase recommended by the commission to date. This recommendation was supported by seven of the nine members of the commission. Two of the three employee representative members dissented from the majority decision of an increase of 80 cent in the national minimum wage. Those members sought a higher increase phased in in tranches beginning with a temporary increase in October 2022. The Government recently announced that it had accepted the commission’s recommendation and that the national minimum wage will rise to €11.30 from 1 January 2023.

It is expected that more than 164,000 people will be in line for an increase based on our recommendation to increase the national minimum wage. However, the real figure is likely to be much higher given that there will be a knock-on increase for those currently earning slightly above the minimum wage. The commission’s recommendation for 2023 equates to gross increases of approximately €30 a week, €120 a month or €1,600 a year for those working full-time on the national minimum wage. When we made our recommendation of a 7.6% increase in the national minimum wage inflation was predicted to be 4% in 2023 with wage growth predicted to reach 4.5%. There are those who will say that this increase is not enough in a time of high inflation and others will say this increase is too much when employers are also facing high inflation and challenges to their competitiveness. When coming to our recommendation we sought to make it fair, balanced and sustainable. We examined our commissioned research from the ESRI and Maynooth University, which indicates that previous minimum wage increases recommended by the commission have had little effect on employment while reducing wage inequality. These have been gradual increases and when we consider changes to the national minimum wage we have to make sure that we make changes in a way that does not give rise to a fall in the employment or a fall in hours worked. To do so would be counterproductive. This year’s recommendations were made at a time the economy is grappling with its third severe economic shock in as many years due to Brexit, Covid-19 and, most recently, the fallout from the crisis in Ukraine. We, of course, gave great consideration to the rising cost of living. As we recognised in our report the cost of living has increased significantly since the commission made its recommendation for the 2022 national minimum wage. Housing, childcare and transportation continue to be significant issues for minimum wage and low-paid workers. These issues however cannot be resolved by the minimum wage increases alone. The national minimum wage is not a panacea. We have made it clear in our recommendations that the national minimum wage alone will not compensate workers for inflation and recent increases in the cost of living. Our 80 cent recommendation is significant but we also recommended that supports to low-paid workers should be considered in the context of budget 2023. The Government indicated that should be a cost-of-living budget and the commission recommended that additional measures are taken to support minimum wage and low-paid workers.

The commission also recommended that supports to employers are considered by the Government. We are all aware of the rising costs affecting individuals and families but the commission also had to consider the rising costs affecting employers. Employers and their representatives told us that rising costs are affecting all sectors and that they face further labour costs such as pensions auto-enrolment and mandatory sick pay. We were also conscious of the need to avoid generating inflationary pressures and the need to avoid a wage price spiral when considering wage increases. We try to balance this by ensuring that low-paid workers receive an increase that helps to ease the pressures they face in meeting day-to-day living costs.

When we talk about next year’s increase in the national minimum wage, it is important to highlight the commission’s recent recommendations on the progression to a living wage. Members will be aware that earlier this year we submitted its report on how best the Government could progress to a living wage. We recommended adopting a fixed-threshold approach for the calculation of a living wage and setting the fixed threshold at 60% of the median wage in the economy. The commission also recommended that after the 60% target has been reached, subject to an assessment of the impact of this, we should assess the economic practicality of gradually increasing the targeted threshold rate towards 66% of the median wage and make appropriate recommendations.

I thank members and am happy to take any questions they may have on the commission’s report and recommendations.