Seanad debates

Wednesday, 27 May 2015

National Minimum Wage (Low Pay Commission) Bill 2015: Second Stage

 

10:30 am

Photo of Tony MulcahyTony Mulcahy (Fine Gael) | Oireachtas source

I welcome the Minister of State. I am representing Senator Naughton in this debate. This legislation is welcome. Under the National Minimum Wage Act 2000, there are three ways in which the minimum wage can be set: following a recommendation in a national agreement under section 12; in the absence of such a recommendation, following an examination and recommendation by the Labour Court on foot of a request by a substantially representative organisation of employees or employers under section 13; or unilaterally by the Minister under section 11 regardless of whether a recommendation under section 12 or 13 has been made. This methodology was, and is, not a proper mechanism for the adjustment of the national minimum wage. As the ESRI some time ago concluded, adjusting the minimum wage by a substantial amount on an irregular basis, with lengthy gaps between increases as happened in the past, is more likely to have a detrimental impact on employment and to contribute to uncertainty for employers and actual and potential employees than regular, smaller and fairly predictable upratings.

Given this finding, the proposed legislation and the consequential establishment of the commission is the way forward. In this way, we can have reasoned analysis of the costs of employment, its trends and the pros and cons of any proposed increase.

While I am supportive of the legislation, I wish to raise a few related issues with the Minister of State. The UN's recent global wage report revealed Ireland's high wage rate in comparison with the rest of the world. Ireland came fourth behind Australia, Switzerland and Denmark for hourly rates in the manufacturing industry, for instance. While this might not directly relate to the minimum wage, it is a cause for concern. We are not as competitive as we might be, which has led to some of our problems. Senator White referred to how losing our competitiveness posed a major challenge prior to the recession.

According to a recent report from the NCC, while the country's cost base had "improved significantly" since 2009, much of the recent change had come from factors outside our control. It cited the weak euro, record low ECB interest rates and cheap oil prices as driving down business costs across the eurozone. However, the Costs of Doing Business in Ireland 2015 report stated that new pressures were emerging, for example, rising property prices and calls for wage increases, that could jeopardise the ability of companies to compete internationally and create jobs.

Despite improvements, Ireland remains a high-cost location - the third highest in the EU - for consumer goods and services. With a net minimum wage of €7.49 after tax, the statutory rate being €8.65, Ireland is the fourth highest in the table of OECD countries behind Australia, Luxembourg and Belgium, whose rates range from €8.44 to €7.58. In these circumstances, we must be prudent when raising expectations. Through the public's perseverance and the hard work of business owners, our economy is on the up. We cannot jeopardise that with the "something for everyone" economic policies favoured by previous Governments. All evidence suggests that any immediate sharp jump in the minimum wage would be counterproductive. Careful consideration and small, regular increases are required so as to maintain competitiveness and ensure that employers know what to expect and are able to plan accordingly.

I am not against an increase in the minimum wage, as it is warranted. However, it cannot be an increase in large percentage terms, as that would effectively make employing our young people in particular prohibitively expensive. The Government has proposed a way forward, namely, an expert body that will conduct a review of the employment situation, consider the positives and negatives and make rational proposals. This legislation needs to be implemented by a Government that is fiscally responsible and will not bow to every pressure group, concede to demands and contribute to wrecking the economy.

I should put on the record the fact that I am an employer. I am concerned that SMEs have taken extra hits over and above what everyone else has endured in recent years. Speaking as an employer, family income supports and supplements may need to be examined as part of the minimum wage concept and how we support families. I know people working in factories who are in receipt of substantial incomes and people working in the public service who are in receipt of family income supplement, FIS. This is how the Government can help with the minimum wage situation. We need to take a balanced approach.Above all, we have to ensure that working individuals and families are given a fair and decent wage for the work they do. It must be a wage they can survive on, because they have been faced with a lot of extra costs over the past couple of years.

In general, I welcome the initiative and I will support the legislation. However, let us have a good and comprehensive look at it. While Senator White may go on a little, as an employer, I feel that what she says makes a lot of sense. We had a company that fell over in 2011; we had one or two employees then, and we now have seven. At the end of the day, we cannot get an increase for the product we sell at the far end, so we have to be very careful. At €8.65, a €1 increase is effectively a 10% increase in the wage base. If companies were to face that kind of cost without having supports coming from the other side, a lot of companies could be very easily tipped over the cliff.

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