Dara Calleary (Mayo, Fianna Fail)

I thank the Deputies for their contributions over the past two nights. I reiterate the Government's intention to restore the national minimum wage to a rate more suited to our present economic circumstances and the specific needs of the labour market today. This shows we are determined to support job creation and restore competitiveness to our economy. Unless steps are taken to address labour market inflexibility now, it is likely to inhibit employment growth in Ireland and lead to a further loss of competitiveness in the coming years. We must move now to maintain existing jobs and actions taken by Government and business during the past two years have allowed us to regain much of the competitiveness we had lost. Such action will now provide an essential basis for future growth. The national recovery plan includes structural reforms to sustain this process.

We realise work is the best route out of poverty and that it prevents people from falling back into poverty in the future. Employment allows people to provide for themselves, their families and their future incomes. The fact is where a national minimum wage is imposed at an excessively high level relative to the specific circumstances of an economy, unemployment will tend to be higher than it should be. This is especially the case for younger people, who can be denied the opportunity to work by an excessive national minimum wage.

Our priority as a Government is to encourage job creation and labour costs must be a key consideration in this regard, especially in sectors with high labour intensity. Legislative changes will allow the Minister for Enterprise, Trade and Innovation to set a new national minimum wage and to give effect to the Government's decision to reduce the minimum hourly rate where necessary to alleviate this situation.

Some Deputies have argued that the Government picked the wrong target in reducing the national minimum wage and that the range of sectoral minima determined by employment regulation orders and registered employment agreements should have been tackled instead. However, the national recovery plan includes provision for a formal review to be undertaken of our statutory wage setting mechanisms within a short timeframe to assess the effectiveness or otherwise of the current structures. The proposed review will take into account the views of the parties to registered employment agreements and employment regulation orders, as well as the variety of means through which these arrangements can evolve as a more streamlined, transparent and flexible means of wage-setting. The precise terms of reference for the review will be agreed shortly but it will involve an opportunity for all Oireachtas Members to input directly.

In arguing that the Government should have limited its focus to the wage fixing machinery that sits on top of the national minimum wage, people fail to take into account the analysis provided by Forfás which highlighted how the national minimum wage serves as a floor for wage setting for a wider range of employment through the mechanisms of employment regulation orders, EROs, and that the ERO process delivers a premium of approximately 5% over and above the national minimum wage. This is simply one illustration of the way in which the national minimum wage interacts with other sectoral wage fixing mechanisms and with collective bargaining generally.

The OECD economic survey of last year recommended that action be taken on the national minimum wage to better reflect changing economic circumstances and reduced labour demand. The report stated:

While firms may have been able to sustain high rates of pay when demand was strong enough for high labour costs to be passed on to customers, this will be more problematic when demand is weak.

As nominal wages fall significantly, it is important that the minimum wage is adjusted to maintain its relative value and not add to downwards pressures on employment. Around one tenth of workers earn less than €10 per hour: these low-wage workers are the most vulnerable to the minimum wage becoming binding as overall wages fall. This proportion is around one third in parts of the services industry.

The OECD also urged that such action be complemented by a review of the sectoral minima which I have just outlined.

During the debate in the House last Friday, I stated that a range of protections were in place for workers, among the highest in the European Union, including a range of legislation and the existence of the National Employment Rights Authority. All concerns expressed by Deputies with regard to this issue and the genuine concerns held by every Deputy about exploitation can be dealt with through these fora. The Labour Court will continue to play a central role in the governance of the national minimum wage. However, the measures supported in this House last week also contain a proposal and provision for the Minister for Enterprise, Trade and Innovation to make a direct call on the minimum wage and to do so in a quicker manner. I fully accept that this decision is difficult. However, we must respond to the changed circumstances in the Irish economy and ensure we take immediate steps to encourage the fostering of employment within the economy.

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