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Work on progressing to living wage to formally begin – Tánaiste

Terms of Reference for Low Pay Commission Report into Living Wage agreed

Following a request from the Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar TD, the Low Pay Commission has formally begun work on examining how Ireland can move towards a living wage.

The Programme for Government commits to “progress to a living wage over the lifetime of the Government”. Earlier this year, the Tánaiste formally requested the Low Pay Commission to prepare a report on this issue and terms of reference for the report have now been noted by Cabinet.

The Tánaiste said:

“The pandemic has caused us to redefine frontline or essential workers and to reconsider the value we place on their work and the reward they should get for that work.

“Traditionally, when we thought of frontline or essential workers, we thought of nurses, doctors, Gardaí or firemen. Generally, people working in the public service with relatively well paid, secure and pensionable jobs. Now with think also of retail workers, drivers, security guards, transport workers and cleaners. 

“One of the legacies of the pandemic must be a more inclusive society that rewards work and enterprise better. That means better terms and conditions for lower paid workers. Moving to a living wage is an important part of this. Of course, in doing so we need to recognise that many businesses are closed and are now loss-making, so we must do it in way that that does not cost jobs or cause people’s working hours to be reduced. That would be counter-productive

“Although the Low Pay Commission has done some initial work, we now have the agreed terms of reference to allow the Commission formally begin its research and advise us on an appropriate model in an independent and evidence-based way so that we can move towards a living wage over the period of this Government.

“This work will build on the improved social protections for workers over the last five years, including paternity benefit, parental leave, our plans for a statutory sick pay scheme and the extension of social insurance benefits to the self-employed.”

The Low Pay Commission study will examine the design of a living wage in an Irish context. It will consider the policy, social and economic implications of a move to a living wage and the process by which Ireland could progress towards a living wage.

It will do this by looking at international evidence on living wages, examining different calculation methods and examining the policy implications of moving to a living wage in Ireland.

The paper will conclude by outlining a process by which Ireland will progress towards achieving a living wage. It is expected that the report will be completed in the second half of 2021. Following completion of the report, the Commission will submit the report to the Tánaiste for consideration.

The current minimum wage in Ireland has steadily increased over the last ten years, from €8.65 in 2011 to €10.20 today.  

ENDS

Notes for Editor

Terms of Reference for Living Wage Study

On 25January 2021 the Tánaiste and Minister for Enterprise, Trade and Employment requested that the Low Pay Commission examine the Programme for Government commitment to “progress to a living wage over the lifetime of the Government” and make recommendations to Government on how best to achieve this commitment.

The Low Pay Commission understands that a living wage may be defined as the minimum income necessary for a single adult worker in full time employment, with no dependents, to meet his or her basic needs and afford a minimum acceptable standard of living.

The Low Pay Commission has decided to commission a study in order to inform our recommendations to Government on the best approach to achieving the Programme for Government commitment. This study should examine the design of a living wage in an Irish context. It should consider the policy, social and economic implications of a move to a ‘living wage’ and the process by which Ireland could progress towards a ‘living wage’.

1. National and International experience of a Living Wage

Review the national and international experience and research around a living wage, including the objectives of a living wage, for example, to ensure a socially acceptable standard of living while protecting employment. Outline the approach, design and implementation process experienced in other countries, similar to Ireland, and assess their economic and social impacts.

 2. A Living Wage in Ireland

Examine how a living wage could be calculated in the Irish context and provide the rates implied from the different methods of calculation.   The study should examine the following:

  1.  A living wage as a percentage of the country’s median wage, taking into consideration any possible distorting effect of Multi-National Companies (MNC’s) on the median wage in Ireland versus other countries.
  2. A living wage based on the cost of achieving a minimum standard of living
  3. A combination of methods, such as a median wage target with periodic reviews to assess in-work poverty and income adequacy for living wage workers.
  4. Consider whether a living wage should be related to the age of a worker.
  5. Consider the option of having a different regional or sub national rates, for example the possibility of a Dublin rate.
  6. Consider the impact of Covid 19 on the data sets that are being relied upon for the research and the appropriateness of same. For example, will the use of the data lead to an artificial skewing of the outcome.

3. Policy implications of moving to a Living Wage

Examine the policy implications of a move to a living wage in Ireland, including:

  1. Review the national and international evidence on the impact of the introduction of a living wage at the levels implied at point 2, on employment, hours of worked, consumer prices, and other relevant margins of adjustment. 
  2. Consider how a living wage at each of the rates implied would be expected to change the overall wage distribution and the wages of different groups of employees. 
  3. Consider the impact of a living wage at each of the rates implied on in-work poverty.
  4. Consider how a living wage at each of the rates implied would be expected to change labour costs and total costs at an economy wide level and across sectors.
  5. Consider over what length of time should a living wage be introduced in Ireland and how changes in the living wage (as measured in 2) in the intervening period be dealt with.
  6. Examine possible interactions between a living wage and other policy instruments, such as tax rates, social insurance rates, social policy and (if calculated on a cost-of-living basis) health, education, and housing policy.
  7. Examine the potential impact that a living wage would have on other fiscal and social policy instruments. For example, the possibility of lower supplementary welfare payments if a living wage lowered in-work poverty, higher revenues if a living wage increased productivity, consumer demand, purchasing power, etc.

4. Moving towards a Living Wage in Ireland

Informed by national and international evidence, outline a process, method, or forum by which Ireland could progress towards achieving a living wage, including the following:

  1. Consider over what length of time a living wage should be introduced in Ireland.
  2. Consider whether there should be a provision for slowing down / pausing wage increases during recession and speeding them up during expansions, such that the target could be met over the business cycle. 
  3. Consider if there should be a provision for a periodic evaluation of the impact of a living wage. 
  4. Consider whether a living wage should be statutory or non-statutory.