James Browne (Wexford, Fianna Fail) | Oireachtas source

I thank Solidarity-People Before Profit for tabling this motion.

The Government notes the motion on the minimum wage. It expresses concerns with rising inflation and with the welfare of the low paid. These are two concerns that this Government shares. However, the motion ignores what this Government has done and is doing to address issues around the cost of living and to ensure rising incomes and rising living standards for the low paid.

First, regarding the problems of inflation and cost of living increases, I understand the pressures people are feeling. The annual rate of consumer price inflation, as measured by the EU's harmonised index of consumer prices has picked up sharply in recent months, reaching a multi-decade high of 5.7% in December. The Government recognises that those on lower incomes are being disproportionately affected but it should be noted that the recent rise in inflation is primarily the result of global factors and consequently, largely beyond the reach of Government policy. These inflationary pressures are partly the result of temporary factors related to the pandemic that are expected to fade over time. We need to be aware of the risk of higher inflation expectations feeding through to a wage-price spiral. This risk to the inflation outlook increases the longer this temporary period of high inflation lasts.

The Government has pursued a large range of measures to protect households from the rising cost of living. Budget 2022 contained a personal income tax package worth €520 million and a social welfare package of more than €550 million. The fuel allowance was increased by €5 per week to compensate lower-income households for the additional energy costs they are likely to incur. There were also increases in the allocation to early learning and care and school-age childcare to ensure childcare prices do not rise. The Government has also approved an electricity costs emergency benefit scheme, with payment of up to €100 to be made this year to an estimated 2.1 million electricity account holders. In addition to the actions taken, colleagues across government along with their officials have been tasked with developing proposals for a package to help families with the cost of living. The Government will finalise this package very shortly.

Regarding the income and living standards of the low paid, what the Government has done, and is doing, to address these issue should be acknowledged. Central to this have been increases to the minimum wage. Since its establishment in 2015, the Low Pay Commission has been responsible for making annual recommendations to the Government on the appropriate rate of the national minimum wage. The national minimum wage seeks to find a balance between a fair and sustainable rate for low paid workers and one that will not have significant negative consequences for employers and competitiveness. As it is legally enforceable, it provides protection for workers.

The Low Pay Commission comprises an equal number of employer and employee representatives and independent members who help to provide a balanced view when determining an appropriate rate for the national minimum wage. In addition, the establishing legislation requires that the commission gives consideration to a range of issues when arriving at a recommendation for the appropriate national minimum wage. These issues include the cost of living, competitiveness and the likely effect of any proposed recommendation on future levels of employment. When considering increases in the national minimum wage during a period of inflation the Government must be conscious of the need to avoid second round effects or a wage-price spiral.

The Low Pay Commission is legislatively required to provide a recommendation to the Minister by the third week in July. Any recommended change in the minimum wage is then normally announced as part of the budget in October, coming into force the following January. The commission has made six recommendations on the national minimum wage since it was established and the Government has accepted each of these recommendations. The national minimum wage increased from €8.65 per hour to €10.50 per hour between 2016 and 2022, in line with the recommendations of the commission. The Government is supportive of the commission and the work it has carried out since its foundation and respects its independence.

The Government is committed to protecting low paid workers, many of whom have continued to work in sectors providing important services throughout the pandemic. It is estimated that at least 135,000 people saw an increase in their wages due to the latest increase in the minimum wage in January, with many others on slightly higher pay levels also getting a knock-on increase. Today Ireland has one of the highest minimum wages in the EU. Recently released data from EUROSTAT shows that as of 1 January 2022, 21 of the 27 EU member states have national minimum wages. In terms of gross monthly rates, Ireland has the second highest national minimum wage of these 21 member states. When adjusted for purchasing power standards, PPS, Ireland ranks sixth out of 21. The share of workers on the minimum wages in Ireland has fallen consistently since the establishment of the Low Pay Commission. The share of workers on the minimum wage or less as a percentage of the total labour force has reduced from 9.3% in quarter four of 2016 to 6.8% in the fourth quarter of 2020. It should also be noted that wages in Ireland are among the highest in the EU. Median gross earnings in Ireland were €17.97 an hour in 2018, which is 36% above the EU-27 average of €13.18.

Ireland's personal taxation regime is viewed as being one of the most progressive in terms of income redistribution in both the EU and the OECD. It is characterised by a large number of earners who are exempt from income tax, followed by a relatively steep climb from entry to the taxation net at an annual wage of circa €17,000 to entry to the top rate of taxation at earnings of €36,800, which is below the national average wage of €38,846. The tax strategy group's paper for 2021 shows that 989,000 earners or 36% of the total are exempt from income tax. This includes people on the national minimum wage and on low pay.

Ireland has a well established system for setting the minimum wage based on the Low Pay Commission and this system works well. Since its establishment, the commission has delivered six consecutive annual increases in the minimum wage and the next recommendation on the national minimum wage is due in July of this year. As well as considering the national minimum wage, the commission is also currently tasked with examining the issues of a living wage and a universal basic income pilot scheme. Reports from the commission on both of these matters are expected within the first half of this year. The Government respects the commission and its independence. It supports the work the commission is currently doing on the living wage, a universal basic income and preparing its July recommendations. I expect, as with all commission recommendations, that the Government will indicate its planned approach following receipt of those recommendations.

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