Dr. Paul Redmond:

With regard to the timelines, the legality and the type of sectors most impacted, in fact the UK Low Pay Commission has made similar recommendations to those the Irish Low Pay Commission recently made. As it entails fairly substantial changes to policy there, it also suggests a gradual and cautious approach and adopting a relatively long timeline to try to change policy in this area.

With regard to the sectors most impacted, I can draw from several pieces. In our sub-minimum wage study we show that the vast majority of sub-minimum wage employees in Ireland work in accommodation, food or retail. These are the sectors that are likely to be most impacted by any policy change. We conducted a study in 2021 in which we used different data to look at the potential impact on the labour costs of firms associated with minimum wage increases in general. We did not look specifically at sub-minimum wage rates but at increases in the full rate of minimum wage. We were trying to assess whether firms in certain sectors experience substantial shocks to their average labour costs when the minimum wage increases. Overall we found that when we look at the data in general we do not see any major impact. We have to dig into the data to look at employers who employ a considerable share of minimum wage employees. By this I mean the only time we really detect an impact on labour costs is when we look at employers where more than half of the labour force is on the minimum wage. Even at this, the changes in average labour costs compared to all other firms is quite modest. This was for increases to the full rate of minimum wage.

If we were to abolish, reform or increase sub-minimum youth rates, the overall impact on direct labour costs would be quite low for the reasons I have outlined. Sub-minimum youth rate employment is relatively rare, although it may be increasing. Of the employers who employ some minimum wage workers, for the majority the share of employees on minimum wage is relatively low. If it were the case that sub-minimum wages were to be abolished or reformed, the Low Pay Commission has recommended that a study be undertaken after a couple of years so we can then establish whether it did have an impact on firms in certain sectors, as we do when the minimum wage is increased in general. We keep an eye on things to see whether there has been any adverse impact.