Ireland 'losing its edge with fourth highest OECD minimum wage'

WAGES LADDER BY COUNTRY: Mexico: €0.90 Latvia: €1.29 Chile: €1.96 Ireland: €7.49 Luxembourg: €8.18 Australia: €8.44 Belgium: €7.58

Paul O'Donoghue

May 08 2015 06:36 PM

Ireland's competitiveness is being hit because it has the fourth-highest minimum wage in the Organisation for Economic Co-operation and Development (OECD), it was claimed yesterday.

A new survey by the international economic organisation looked at the after-tax minimum wages of the 34 member countries in 2013.

Eight of the countries in the bloc, such as Norway and Sweden, do not have a minimum wage, although employees who live there tend to be covered by sector-level collective agreements.

Of the remainder, Ireland was found to rank fourth in the table with an after-tax rate of €7.49 per hour (the net minimum wage rate is €8.65).

Australia topped the list with €8.44, while Luxembourg and Belgium were second and third with a rate of €8.18 and €7.58 respectively. Mexico ranked last with a rate of just €0.90 while Chile and Latvia fared slightly better with respective rates of €1.96 and €1.29.

The chief executive of the Irish Small and Medium Enterprise Association, Mark Fielding, said that the result illustrated why there should not be an increase in the national minimum wage, which is currently under consideration by the newly established Low Pay Commission.

"The fact that we are paying the minimum wage at that rate means that our competitiveness has to be under pressure," Mr Fielding said.

"From a labour point of view we are competing against the rest of these countries for investment and the fact that there are only three who are more expensive than us means that we have to be losing competitiveness."

He added: "The fact that we are fourth highest isn't a surprise to us. We're a country that is just coming out of recession, it's too soon to be thinking of a wage increase."

However, Siptu general president Jack O'Connor, who is advocating an increase in the minimum wage, said that it was "nonsensical" to look at salary figures without taking into account differing costs of living in OECD countries.

He referenced a Eurostat survey produced earlier this year that showed that the gap between Ireland's minimum and median wage was slightly above the EU average.

The gap increased in Ireland more than any other country in the OECD from 2007 to 2013. Minimum wage in Ireland was 53pc of the median wage in 2007, while in 2013 it was 48pc.

The Eurostat report also includes an adjustment of the minimum wage that eliminates price differences across countries into account. In this case Ireland ranks as having the sixth highest minimum wage in the EU, behind countries such as Luxembourg and Germany and ahead of the UK.

A statement from Siptu added that minimum wages "adjusted or not for prices, are not an ideal measure of labour cost competitiveness.

"For one thing they do not include other labour costs such as social insurance." It pointed out that employers' social contributions in Ireland are less than half the EU average.

The minimum wage has become an increasingly pressing in issue in Ireland recently, with pressure both in favour of and against an increase.

The European Commission warned in its spring economic statement earlier in the week that wage increases in Ireland, if they are not in line with productivity, would "erode competitiveness".

The observation raised by the Commission on wage rises mirrors concerns recently voiced by the National Competitiveness Council, which warned that the costs of doing business in Ireland are rising and drew particular attention to labour costs.

It added that any pay hikes must be accompanied by productivity increases.