Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

I shall begin by considering issues raised in regard to the minimum wage. The minimum wage was introduced in 2000 at the beginning of a period of sustained economic growth and subsequent rapid wage increases across the economy. However, in the past three years our circumstances have changed dramatically. Price levels have reduced and earnings have adjusted downwards to help to preserve jobs. Although I appreciate the genuine concerns of all Deputies regarding the impact of the proposed cut it is important to point out some background. When the minimum wage was introduced in April 2000, it stood at IR£4.40, the equivalent of €5.59. The wage has increased six times since its introduction and is now 55% higher than its original level. In contrast, at the end of 2010 the consumer price index is forecast to have increased by approximately 28% since 2001. A wage rate of €7.65 per hour, as proposed, or the 2005 rate, will still be substantially higher in real terms than when first introduced.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

When a minimum wage is at a high level and unable to respond to downward pressure in the labour market unemployment is more likely to persist. As has been pointed out to every Deputy in the House over the years, there are many workers who would be willing to work for a wage lower than the national minimum but their employers are restricted from providing these job opportunities. A high minimum wage can also act as a barrier for younger and less skilled workers to enter the labour force and take up jobs and can also prevent small and medium enterprises from adjusting wage costs downward in order to maintain viability and improve competitiveness. The minimum wage section of this Bill is designed with these aims in mind.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

Recent research published by Forfás and advice following from that indicate that a reduction in the national minimum wage can result in an increase in employment in the medium term. It is expected that there will be a benefit to the Exchequer in terms of savings from reduced transfer payments and increased taxation that may accrue from the increased employment arising from a more flexible labour market.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

I have consistently stated in this House and in other fora that we need to ensure that labour costs and wage fixing mechanisms do not have a negative impact on economic performance and employment levels. It is within this context that the Government has decided that a formal review of our statutory wage setting mechanisms, employment regulations orders, EROs, and registered employment agreements, REAs, should be undertaken within a short timeframe. The terms of reference are being finalised for that review which will allow Members of the Oireachtas to make their proposals known. I hope to publish them shortly.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

It is important to point out, in reference to the speech by the Minister for Finance, Deputy Lenihan, earlier today that the ministerial order will set out that where an employee is already working under a contract of employment that sets wages at or above the national minimum wage, the employee is entitled under his or her contract of employment to continue to be paid those wages unless otherwise agreed between both the employer and the employee concerned, or unless the contract stipulates that the employer pays only the national minimum wage hourly rate. An existing employee will be under no obligation to accept a rate of pay reduced by the employer on a unilateral basis as an employer cannot arbitrarily impose a new rate of pay that would contractually bind an existing employee. If the employer proceeds unilaterally to make a change in agreed rates of pay the employee would have grounds for a complaint under the Payment of Wages Act or for breach of contract in common law.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

In that context it is important to note that within the existing minimum wage legislation and even in the context of the downturn of the past three years, with the pressures being experienced by many employers in the sector that this mechanism has not been initiated. This would suggest that the vast majority of such employers would not seek to impose wage reductions unilaterally on existing employees.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

This decision is part of a series of attempts to facilitate job creation and foster an environment that seeks and promotes a return to sustainable employment. In this regard it is important to point out that the reduction in the minimum wage is only one element of the labour market reforms outlined in the national recovery plan. which will also include a review of sectoral agreements, new labour market activation policies and a review of our welfare policy.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

The package of measures reflects our determination to stimulate growth and create jobs. Getting people back to work is the number one priority of every Deputy. It is the driving force behind everything that we do. In this regard, the budget shows that we will continue to spend significant sums on investment to sustain employment and growth. Over €1 billion will be invested in my Department's capital programmes in 2011, to support almost 10,000 jobs. It will give the labour-intensive construction industry a much needed boost through the introduction of tax incentives for retrofit schemes and by reforming the relevant contracts in tax regimes, in particular, in withholding tax. There are a number of other measures including the revamping of the usiness expansion scheme, the extension of the employer job PRSI incentive scheme, the extension of the tax exemption scheme for start-ups and the extension of accelerated capital allowance scheme for energy. In addition, there is an additional programme of activation measures to keep the unemployed close to the work force. This means that they will be in a position to take up jobs which arise as the economy recovers. Five thousand additional places will be provided in the private sector under the skills development and internship programme, which the Minister, Deputy O'Keeffe has discussed in detail with the business community in recent months and which will offer substantial opportunities for graduates. Another 5,000 places will be provided in the public service under the work placement programme and a further 5,000 places will be provided in the community and voluntary sector under the community work placement scheme.

Deputy Minister of State at the Department of Enterprise, Trade and Innovation ( Dara Calleary:

In spite of what many will say, the national recovery plan and the accompanying budget are designed to foster jobs, growth and stability. Although it is difficult this Bill is another important step in this regard and I commend it to the House. The Bill before us today, while difficult, is another important step and I commend it to the House.

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