Thursday, 16 October 2014
National Minimum Wage
7. To ask the Minister for Jobs, Enterprise and Innovation his views on the merits of a living wage separate to the current minimum wage; the way he feels this would impact on the prospects for jobs and consumer spending; and if he will make a statement on the matter. [39086/14]
I ask the Minister for his thoughts on the merits of a living wage as opposed to a minimum wage and the actions Government can do, in the context of a still relatively weak economy, to support a higher living wage as opposed to the statutory minimum wage.
The living wage concept is grounded in the idea that a person’s wage should be sufficient to maintain a safe, decent standard of living within the community without the need for substantial recourse to the welfare system.
The national minimum wage in Ireland is considered to be relatively high by international standards. The most recent figures published by EUROSTAT show that Ireland’s rate is the fourth highest among the 21 EU member states that have a national minimum wage. When the cost of living is taken into account, Ireland’s rate is the fifth highest.
The decision to restore the national minimum wage to €8.65 per hour, after the cut by the previous Government, with effect from 1 July 2011, together with the decision to put the joint labour committees, JLC, system on a more secure legal and constitutional footing and reinstate a robust system of protection, represents a significant commitment by this Government to protect the lowest paid and most vulnerable workers.
The Statement of Government Priorities 2014-2016 contains a commitment to establish a low pay commission on a statutory basis as an independent body to make annual recommendations to the Government about the appropriate level of the national minimum wage and related matters. I am currently developing proposals to implement that commitment.
The Government is moving on a number of other fronts relating to wage setting.
The Industrial Relations Acts provide a framework within which employers and employee representatives, through the JLC system, can come together voluntarily and negotiate terms and conditions of workers in their respective sector. Pay rates negotiated in the JLC fora have tended to be above the national minimum wage and the JLCs operate in areas where collective bargaining is not well established and wages tend to be low.
For vulnerable workers, the advantage of JLCs is that they see fair terms and conditions such as wage rates, sick pay and so on agreed and given effect by employment regulation orders. For some employers, the advantage of the JLC system, based as it is on the principle of self-governance, means that they can agree and set minimum pay and conditions and agree on work practices which are custom-made to their industry; a flexibility which cannot be achieved by primary legislation. Where both parties to a JLC see commonality of purpose and outcome an agreement may emerge that is of benefit to both.
In addition, the Government recently approved the drafting of the legislation to provide for a revised legislative framework to replace REAs, as I stated earlier in response to Deputy Tóibín.
In the UK, where neither systems of REAs or JLCs exist, London is often highlighted as an area that has recognised the concept of a living wage and has put that in practice in many respects. It is voluntary and, as such, does not prevent UK employers paying the national minimum wage rate of £6.50 per hour in the UK context. However, it does recognise the costs of living in London.
In addition to Ireland's national minimum wage, JLC and REA structures, we have a system of supports through the Department of Social Protection supporting low income families. The Department avails of every opportunity in its engagement with employers and jobseekers to build awareness of the availability of FIS.
Based on the question and appreciating the sincerity of Deputy Calleary tabling it, I very much welcome Fianna Fáil's Pauline conversion to the notion of higher rates of pay for lower paid workers.
I would remind the Minister of State, Deputy Nash, that much of the infrastructure to which he referred, and that he is now using, was put in place by our party. First, I ask him to consider the Government's responsibilities in this regard. For instance, when PRSI kicks in for somebody on the minimum wage their entire income becomes liable to PRSI if it increases by a small amount. We also have the perverse situation where somebody earning €18,304, which is the minimum wage, would be paying an effective tax rate of 5.25%. If somebody earns an additional €1 per hour it goes up to 9.25% because of PRSI kicking in. Will that be considered by the commission?
Second, one of the biggest deterrents to somebody coming off welfare and taking up a position in the labour force is the cost of child care and the lack of child care provision. There was nothing in the budget to assist people with child care costs, particularly people we want to get back into the workplace. Will the issue of child care costs and provision be examined in the context of the commission, given its importance for people making the decision to go back to work?
I want to reiterate the concept of the living wage, which is of deep interest to me and to Deputy Calleary and other Deputies. It is a concept that requires proper debate in this House and across society. There are considerable merits to having that debate. As the Deputy will be aware, I have already expressed my own views on the notion of a wage-led recovery and have called on employers now making profits to consider sharing that prosperity with working people through higher wages. This is not just a debate that is taking place here. It is going on across Europe, and in some cases from some of the least likely sources we would imagine. The Tánaiste is on record as stating that she believes employers should consider signing up to a voluntary code in respect of a living wage, as they do in parts of the United Kingdom.
Lest those on the Opposition benches think this is purely motivated by some kind of exclusively leftist agenda, we would be surprised by some of the individuals in the UK in particular who are supportive of the living wage concept because it makes sense for employees and for business. People like the Mayor of London, Boris Johnson, and figures on the right such as Iain Duncan Smith support the concept as well.
-----because it is clear it is not. I accept his argument that profit-making enterprises should contribute to wage recovery but many enterprises are not in a situation, perhaps because of debt service commitments, where they can make profits. When they are able to they will but as of now, their workers need some share in this recovery.
I am anxious to pursue the Minister on the PRSI element in particular. Will that be a matter of consideration for the minimum wage commission or will it focus entirely on the relationship between employer and employee?
The low pay commission will be asked to consider a range of matters in the context of making recommendations to me as Minister for business and employment on the rate of the national minimum wage on an annual basis. I am sure that will be one of the items the commission will consider when it is appointed.
To return to the concept of the living wage, it is an attractive concept and an issue on which we need to have a debate. I would welcome that debate and look forward to meeting with organisations such as the Vincentian Partnership for Social Justice and the Nevin Institute, which have done considerable leg work and research on this issue. The Nevin Institute is on record as saying that if we are to have a living wage in this country, essentially it would be on a voluntary basis in the way it is in the UK and that any move in that direction would be done on an incremental basis.
I look forward to bringing a proposal to this House shortly on the establishment of the low pay commission and to working with all Members in ensuring that we get that body up and running as soon as possible and to make sure that it works.