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Friday 22 August 2014

Colette Browne: If Burton's ideas on a fair wage would help growth, we should discuss them

Published 13/11/2013 | 02:00

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Joan Burton

Three years after David Cameron declared that the living wage was "an idea whose time had come", Social Protection Minister Joan Burton has floated the idea of its introduction in this country.

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In a speech to Labour members last week, she said a return to full employment "would mean little unless accompanied by a fair wage".

"Low wages and zero-hour contracts are now growing features of the modern work environment ... it is why I've suggested the possibility of introducing a living wage in the future," she said.

Burton said she was concerned at the spiralling costs of income support measures, such as Family Income Supplement, that have caused huge strains on her department's budget.

In the past four years, the numbers claiming the supplement have risen by 60pc with 41,000 low-income families, including 4,000 public servants, now reliant on the payment. This year, the scheme will cost the State €229.6m, and €282m has been budgeted for next year.

In effect, the social welfare system is subsidising the paltry pay and conditions that an increasing number of employers are offering.

These kinds of social welfare measures provide an important support structure for families at risk of poverty in times of recession, but they are not sustainable in the long term. The State cannot be expected to permanently bridge the gap between employers' derisory wages and workers' basic living standards.

In contrast to a minimum wage, a living wage would provide the income necessary to meet basic needs, including housing and healthcare, and food and heating.

This would result in immediate savings for the social welfare budget and would also lead to increased taxes. The problem of so-called welfare traps, that affect about 3pc of those in receipt of social welfare payments, would also be eradicated.

The suggestion is likely to send IBEC and ISME into fits of apoplexy but the concept of a living wage is not just a pipe dream of liberal economic illiterates. Even such unlikely socialists as Tory grandee and London mayor Boris Johnson have come out in favour.

He said recently that employers were increasingly recognising "the benefits of fair remuneration for all of their workforce" and said London's living wage was "good for London's productivity and growth".

Accountancy firm KPMG, which pays workers a living wage, echoed this sentiment, saying its introduction had reduced staff turnover and absenteeism and increased productivity.

While Burton – who recently slashed social welfare payments for those aged under 25 and feels that unskilled manual jobs are appropriate candidates for JobBridge internships – may not be the most convincing advocate for a living wage, it is time we had a debate in this country about the race to the bottom that is being engaged in by some employers, who are using the economic crash as a pretext for attacking workers' pay and conditions.

Every time the issue of low wages is raised, the usual suspects say that any attempt to raise the minimum wage would seriously impact competitiveness and stymie growth.

Advocating a reduction of the minimum wage in this newspaper recently, Minister for Training and Skills Ciaran Cannon cited a 1998 study from economist Paul Krugman in which he said higher wages reduce the quantity of labour demanded and necessarily lead to unemployment.

However, Krugman has changed his view and, earlier this year, in 'The New York Times', said "the great preponderance of evidence ... points to little if any negative effect of minimum wage increases on employment".

Nominally, the Irish rate of €8.65 is the second-highest in the EU but when it is adjusted to reflect the cost of living it falls into fifth place – behind Luxembourg, the Netherlands, Belgium and France, and just ahead of the UK.

In fact, the €8.65 rate does not even apply to every worker, with employees under 18 entitled to just €6.06 per hour, 18-year-olds in the first year of employment receiving €6.92 and those in the second year of employment receiving €7.97.

Additionally, the rate does not reflect the higher living costs associated with living in the Dublin region, where rent alone can be twice the price of that in rural areas.

Burton has not suggested the imposition of a compulsory living wage but rather its introduction on a phased, voluntary basis with employers opting in, akin to the London scheme.

Employers who sign up are awarded a Living Wage badge so that customers can opt to support them. Almost 500 businesses employing more than 250,000 people have signed up to the initiative.

There's nothing to stop the introduction of a similar initiative here, first in Dublin and then, if it's a success, in other parts of the country.

Irish Independent

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