Willie Penrose (Longford-Westmeath, Labour)

As the Labour Party spokesperson on enterprise, trade and innovation, I wish to make a contribution on behalf of the Labour Party relating specifically to section 13 of the Financial Emergency Measures in the Public Interest (No. 2) Bill 2010, which proposes to reduce the minimum wage by €1 from €8.65 to €7.65 and thereby amend section 11 of the National Minimum Wage Act 2000.

As most people know I have been privileged to serve as chairman of the Oireachtas Joint Committee on Enterprise, Trade and Innovation for the past three years and in that period I have facilitated various interest groups in making presentations to the committee, including representatives of the various industry sectors, such as services, hotels, restaurants and others. In this context, whereas the various groups have referenced the minimum wage, it was never elevated in my opinion to the level of it being of absolute and crucial importance that it be reduced.

The greater import in many submissions was that the joint labour committees, registered employment agreements and employment regulation orders should be addressed and modernised, especially to protect conditions where Sunday work may be part of the weekly commitment and might not attract premium payments in current circumstances. That is a completely different concept from what prevailed when these agreements were negotiated and people did not normally work on a Sunday.

There are areas which can be updated and modified to take account of current circumstances but the proposed cut is a Government decision. For a while it tried to offload the blame for this decision to the shoulders of Mr. Rehn and Mr. Chopra but that indication was untrue. The proposal to cut the minimum wage by up to 12% is proof positive that the least well off and most vulnerable are fair game as far as this Government is concerned.

I am worried about the part of the Bill indicating "Whereas the State is availing of financial assistance programmes provided by the European Financial Stabilisation Mechanism and the European Financial Stability Facility and the International Monetary Fund and it is necessary to take the measures in this Act as part of a range of measures provided for in those programmes to address the economic crisis in the State", which appears to indicate this measure forms part of the agreement with the IMF, EU and other parties. I would like clarification on this as the text implies that the measure had to be taken as part of the agreement. My understanding is it was not proposed by those gentlemen as part of the negotiations. The Government has indicated that a future Government would not be in a poor position and would not be circumscribed; the text implies the opposite.

Cutting the minimum wage makes no sense at any level and undermines the social floor, where people are already struggling to survive. The hardship that such a cut would impose would be very significant for the households relying on minimum wage employment and would clearly act as a disincentive to work. There is no evidence that such a cut would create a single job but there is ample evidence that it will increase poverty and hardship for many families.

Adding the universal social charge, which the Labour Party leader, Deputy Gilmore, referred to this morning, means that in some cases people at work are worse off than people who lost their jobs. This will accelerate a call for further cuts in social welfare and a deeper impoverishment of very large sections of our community. This presages a race to the bottom.

Just 52,000 people are earning at or close to the minimum wage. Some people earn less because there are exemptions for those under 18 and others. To argue that the cut will significantly add to our competitiveness does not stand up to any objective scrutiny. The measure will not reduce the fiscal deficit by a cent but it is clearly part of a neoliberal orthodoxy that should be anathema to all fair-minded people. On 24 November, after the Government's four year plan was published, the Labour Party stated unambiguously that it would oppose this miserly proposal tooth and nail. I reiterate unequivocally the Labour Party position: we would not countenance any reduction in the minimum wage and we will not implement such a measure if part of a future Government.

A full-time employee working 40 hours per week on the minimum wage earns €346 per week or €18,092 per year, which is a low income. As I stated, there are reductions for those under 18 or in their first job, so their wages are even lower. Among EU states the wage ranks 12th when measured as a percentage of average monthly wages and ninth in terms of purchasing power parity. Reducing the rate by €1 per hour, €40 per week or €2,080 per year reduces the annual wage income to €16,012, or €306 per week. We should remember there has been no increase in the minimum wage since July 2007, some three and a half years ago.

We are already aware and deeply concerned about 116,000 workers living below the poverty line, with the working poor making up 24% or almost one in four of all those in poverty, or 40% of all households in poverty. We are also aware that the minimum wage is especially relied upon for protection by women, with almost six from ten women in the work force relying on the minimum wage. It is therefore critical. Migrants and other vulnerable workers, some of whom we met today protesting outside the gates of Leinster House, are also affected. We also acknowledge the importance of the role of the statutory minimum wage in protecting against unfair competitive advantage by unscrupulous employers who exploit their workers. The minimum wage is extremely important from this perspective and as a means of establishing a social floor.

Under section 41 of the National Minimum Wage Act 2000, an employer in financial difficulty may apply to the Labour Court citing inability to pay if the minimum wage has caused extreme difficulties. Despite the Government's position, as set out in the legislation, this facility has never been invoked by an employer.

A decent minimum wage backed by statute is a statement of core values which provides a threshold of decency under which society agrees that workers' wages should not fall. The proposed reduction signals the start of a race to the bottom in which low wage workers, public and private sector employees, social welfare claimants and pensioners will suffer. What argument has been advanced to support the Government's logic that poverty wages will create more jobs and that welfare rates must be below the poverty wages? If one follows this logic to its conclusion, further reductions in social welfare payments will be required to maintain the race to the bottom.

Was a cost-benefit analysis carried out in respect of the proposed reduction given that a lower minimum wage will increase demands for secondary benefits, for example, family income supplement and medical cards? The result will be greater expenditure by the Exchequer. While the Government may have the numbers to pass this legislation, my party will fight it tooth and nail.

According to the Bill, the proposed reduction will not affect current contracts. An amendment should be introduced to provide that section 13 does not affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act to ensure that people will not exploit the legislation, if passed.

It is peculiar that section 10, which provides that before 30 June 2012 and every year thereafter a review will be undertaken of every provision of the legislation, excludes section 13 from the scope of such reviews. Why will the minimum wage not be the subject of review? In addition, the Labour Court's role in this matter has been removed and transferred to the Minister.

This is a fundamental issue which requires proper debate and careful assessment rather than rushed legislation. A reduction in the minimum wage will not contribute to competitiveness or job creation. It is a major mistake which the Labour Party in government will not be party to implementing.

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