Regina Doherty (Meath East, Fine Gael) | Oireachtas source

I am happy to have this opportunity to address the Seanad on the issue of sub-minima rates of pay under the National Minimum Wage Act. The existing rates provide for reduced rates to be paid in certain circumstances to particular groups, for example, younger workers and trainee workers. It might be useful to outline the role of the Low Pay Commission in this area. I emphasise that it is an independent body that was established by statute by the former Labour Party and Fine Gael Government and comprises eight members and an independent chairperson. Under the provisions of the National Minimum Wage (Low Pay Commission) Act 2015, when it was established, we asked the commission to make recommendations to the Minister that are designed to set a minimum wage that is fair, sustainable and, when appropriate, adjusted incrementally in order that, over time, it is progressively increased to assist as many low-paid workers as is reasonably practicable without creating significant adverse consequences or challenges for employment or competitiveness. The commission has done an outstanding job in recent years.

In November 2015, the then Minister, Senator Gerald Nash, requested that the commission be asked to examine the appropriateness of sub-minima rates as provided for in the National Minimum Wage Act with particular regard to their impact on youth unemployment rates and participation in education. I ask the House to note that the commission has members who have an understanding of employers' interests, employees' interests and a particular expertise in labour market economics, as well as the independent chairperson. It would be useful for the House to note that the commission is charged with taking evidence-based approaches, paying full regard to a range of economic factors while also taking into account the views of stakeholders and the general public as a whole. The commission's strength is its independence and the evidence-based approach it is required to take when coming to conclusions and recommendations to give me or any other sitting Minister. This approach ensures that the issues are thoroughly examined in a fair hearing and that the commission is given to all points of view. The commission tells me, as I am sure it has told previous Ministers, that there are different views around its table on every discussion and topic before it. It is clear that the commission has extensive expertise and could be considered expert when it comes to the principal Act that this Bill seeks to amend.

Since its establishment, the commission has examined and compiled reports on the preponderance of women on the national minimum wage and the allowances provided for board and lodgings under the national minimum wage as well as two reports on the subject of sub-minima rates, the second of which was submitted to me in December 2017. In its first report, to which Senator Gerald Nash referred, the Low Pay Commission was of the view that there was insufficient up-to-date data available on which it could make an evidence-based recommendation to the Minister. The commission at the time chose to delay making its recommendations until the result of a pilot question on the national minimum wage included in the CSO quarterly national household survey was available to the commission. I genuinely urge Members to note that this deliberative approach - to obtain the relevant information and data - is probably the most appropriate approach to policymaking in this important area.

The second report the Low Pay Commission gave us on sub-minima rates sets out a clear evidence base and rationale for its recommendations. The commission also commissioned research by the ESRI, which examined international practice in respect of the national minimum wage and sub-minima rates. The ESRI research found that of the 26 OECD countries, out of a total of 34 countries, that have a statutory national minimum wage, just over half included sub-minima rates for younger people. The numbers in employment on age-based rates are extremely low. An average of just 1.5% of all employees reported earning less than the "adult rate" of the national minimum wage, and approximately one quarter to one third of those reported being on age-based rates as per the CSO data. The commission considered that there is little evidence of any significant abuse of the sub-minima rates per se. The commission has found that following the economic crisis, European policymakers have put particular focus on NEETs, young people who are not in employment, education or training, and the need to integrate or reintegrate them into the labour market. According to a recent study undertaken by Eurofound, NEETs face a greater risk of poor future employment outcomes and social exclusion. The same study found that Ireland's high proportion of NEETs is out of line with the majority of central and northern European countries. Given this fact, the commission was cognisant of the need to ensure changes to the sub-minima rates of the national minimum wage do not negatively impact on the prospects of these young people gaining access to the labour market. This is probably the most important conclusion in the commission's second report to us, and I ask Members to note it seriously.

The report considers the abolition of youth rates but concluded that the rates would then no longer offer any recognition of the difference between a young, inexperienced worker and a more experienced colleague, which could lead to employers no longer seeing the value in hiring young people. This could potentially have an impact on our youth employment rates, which are still stubbornly too high for anyone's liking. The commission also concluded that abolishing youth rates could potentially act as an incentive for young people to leave education and take up employment, which would have a negative impact on their future prospects of getting a better job and then, it would be hoped, a career. I acknowledge some Members disagree with this, but it is the view of the commission, which has the experts and the recommended people, both employers and employees. More recently, the OECD, in its recent jobs strategy, published in January this year, specifically recognises the use of sub-minima wages for youth. The strategy states. "Governments should also ensure that the cost of hiring youth reflects their productivity through the use of wage-subsidies, the design of non-wage labour costs or a sub-minimum wage."

Again, I emphasise that the commission's conclusions and recommendations are evidence-based. Having examined all available evidence and submissions from a range of individuals and groups, and considered a range of options, the commission made two recommendations.The commission set out a clear evidence base and rationale for its recommendation to abolish the training rates. It noted that the rates were not widely used in the first instance but, second, having regard to the lack of clear definitions around training, the lack of a formal system of notification of the use of training rates leaves the rates open to possible abuse. In reality, they were more open to possible abuse. The commission outlined that it had heard evidence in submissions of the training rates being paid in order to reduce wage costs rather than being part of a structured training programme. The commission outlined its belief that the employee should not receive less than the statutory minimum wage unless the employee was part of a proper apprenticeship programme approved by the State. All available evidence shows that training rates are not widely used - less than 0.5% of employees indicated that they were on a training rate.

The commission also wanted us to simplify the youth rates. With regard to the age based and first employment rates, it recommended that the rates should be retained but that we should simplify them to improve both compliance and ease of operation. It recommended retaining the age based rates for younger workers and it acknowledged both the statutory restrictions that apply in respect of the working hours and conditions of employees under 18 years of age and the need to ensure younger workers can gain work experience. I agree with the commission’s conclusion that the simplification of the rates to a purely age-based system will assist employers in that it will be administratively simpler to operate. It will also benefit slightly older employees, for example, those moving on to a first job while in or leaving university at perhaps 20 to 23 years of age insofar as they will no longer be subject to the sub-minimum rates.

I ask the House to note that the commission’s recommendations were not intended to disenfranchise young workers in any way or to leave them in an unequal position to their colleagues. They were designed to ensure that young workers continue to have a way to gain access to, and experience in, the labour market, while also ensuring that they are not incentivised to leave school any earlier than they should to pursue full-time employment. I hope all of us would agree with those objectives.

Due to the complexities of the issues it examines, the members of the commission have not always been able to agree. In fact, they have never all agreed on any position since the commission was established in 2015. Some Members of this House have been involved in the labour movement for many years, seeking employees’ rights and the recognition that there should be decent pay for a decent day’s work. I wish to emphasise that there was no disagreement in the commission’s recommendations to me in December with regard to sub-minimum rates. All nine members of the Low Pay Commission, all from different sides of the spectrum, agreed on the recommendations that the trainee rates should be abolished and that the permitted sub-minimum rates of the national minimum wage should be simplified.

I decided to accept the recommendations of the Low Pay Commission and the Government gave its approval to my proposals regarding their implementation, which were that they would be put forward as amendments to the Employment (Miscellaneous Provisions) Bill 2017. That Bill was debated on Committee Stage two weeks ago and every party and Independent Member in that committee agreed with the recommendations of the Low Pay Commission. The amendments were passed on Committee Stage as part of the employment Bill by all the parties.

I ask Members to reflect on the report provided by the Low Pay Commission. The commission was established in good faith and with huge principles by the Labour Party in 2015 and it has served us incredibly well in the years since then. Given the unanimous decision by the commission I would be loath to question its evidence based recommendations to me. The commission was quite correct that such issues should be informed by an independent expert committee. I am sure Members will join me in supporting the recommendations of the commission. Those recommendations are evidence based and well researched through the ESRI and the OECD.

This Bill is at cross-purposes with the amendments to the Employment (Miscellaneous Provisions) Bill 2017 that were passed last week. I thank the Low Pay Commission for its excellent work on this report and for all its work over the years. In this case it made a unanimous decision, the recommendations were accepted by the Government and they were implemented in the amendments to the employment Bill. For those reasons I oppose the Bill and I ask Members to reflect and consider supporting me in that regard.