Brian Cowen (Laois-Offaly, Fianna Fail)

The OECD and others have been referring to this issue as a structural issue within the Irish economy generally. The Government took the view that this would assist removing some barriers to employment in labour intensive sectors. Deputy Gilmore is aware of the experience people have in a whole range of areas where people who are less skilled and who are anxious to take up employment are able to take up employment being provided by employers at affordable rates. One must examine all of those questions at a time when we have 13.5% unemployment. When, thankfully, we had much tighter labour market conditions, when we had almost full employment, a different policy was pursued. We introduced the minimum wage. It was raised on a number of occasions, by 55% at a time when inflation was 28% during that period. By keeping it out of the tax system that had the effect perhaps of narrowing the tax base but it was a good thing to do. It was broadly supported in the House, as one of the ways in which we could ensure that people on lower wages would have as much disposable income in net terms as possible. That was not the case ten or 15 years ago when the entry rate, as the Deputy knows, for taxation was about £7,500. It has since been raised to about €18,500. There has been a huge effort and progressivity in taking people on lower wages out of the tax net. When Deputy Gilmore was in government, we did not have a minimum wage and many of those people were taxed. We saw huge progress throughout that period.

Now we are in a totally new situation. We have to have flexibility in our labour markets and more competitive labour costs. We have to do it. It has been done in many areas of the private sector in terms of increased unemployment. We have to address this issue. It is not a question of saying that this is the way it has to be for the foreseeable future. It has to be this way in the immediate future. Over time as things improve, obviously we will look to see if people's remuneration levels can be raised again. That is the whole purpose and is how we must react to the very difficult situation that we face. It is not about trying to save money for the Exchequer. It is about trying to ensure there are as few barriers to employment as possible and that people can be taken on at rates which are €1 less than the current minimum wage. If this can create some jobs for people in the semi-skilled and unskilled categories, all the better for them and society in general. We must look at the issue that way, not because one welcomes the fact that this structural reform must take place, but because it is part of the adjustment that is taking place throughout the economy currently. As things pick up, we can look to better times again.

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