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Business group rejects concept of a ‘living wage’ as government prepares to roll out plan from next year

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Tánaiste Leo Varadkar announced last June that a new living wage would replace the national minimum wage. Photo: Colin Keegan

Tánaiste Leo Varadkar announced last June that a new living wage would replace the national minimum wage. Photo: Colin Keegan

Tánaiste Leo Varadkar announced last June that a new living wage would replace the national minimum wage. Photo: Colin Keegan

A BUSINESS group has rejected the concept of a living wage and a government proposal to roll it out in four years.

In a submission to the Department of Enterprise, Trade and Employment, ISME said “the control of living costs” are more material and important to the lower paid than driving wage costs upward “by legislative fiat”.

ISME also describes as “nonsensical” a question posed by the department about whether employers should be supported in phasing in the living wage.

A living wage is defined as the minimum income needed for a worker to meet their basic needs.

Tánaiste Leo Varadkar announced last June that a new living wage would replace the national minimum wage.

He said it is proposed to phase it in over four years from next year. It would be worth 60pc of the median wage for all workers.

Based on this calculation, the living wage would be €12.17 per hour this year compared with the national minimum wage of €10.50 per hour.

“ISME rejects both the timeline for achievement of a living wage, and the concept of a living wage itself. We consider the control of living costs to be more material and important to the lower paid than driving wage costs upward by legislative fiat. Our principal difficulty with the living wage issue is that it identifies wages as the issue, not costs.”

It said Ireland consistently has the second or third highest minimum wage in Europe, not just the EU.

Moving from a €10.50-an-hour national minimum wage to a living wage of €12.90 an hour would push labour costs up by 23pc, it said.

The business group describes a living wage based on a basket of goods as “inherently flawed” because of the “subjective” choice of goods.

Although it says a fixed threshold approach is the only valid one, it does not believe using the median wage is appropriate.

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“Ireland is unusual in having so large a foreign multinational sector, paying very high wages; and having a public-private sector pay gap that is so large.”

It says a 60pc threshold of the median wage would result in a significant increase in the minimum wage, which would be damaging to employment and competitiveness. It notes that average monthly rents are €817 in Leitrim, but €2,314 in south Co Dublin.

“How does it make sense therefore to have the same living wage in Leitrim and south county Dublin? Leitrim employers would be paying a massive deadweight wage cost if there was no permitted regional variation.”

It said this is not a justification for regional variation but demonstrates how the concept of a living wage is “fundamentally and structurally flawed”.

In response to a question about whether it agreed certain employers should be supported while phasing in the living wage, it said: “We consider the question to be nonsensical.

“If a business is unable to pay the prevailing wage rate in order to attract staff, it should not be in business and should not be supported by taxpayers’ money.”

The submission was made as part of a public consultation, which has been extended until next week.

Mr Varadkar will consider the submissions when finalising proposals to bring to Government.

His proposals are largely based on recommendations made by the Low Pay Commission.

The commission found there should be no sectoral or regional variation in the living wage.

It said the commission should assess the practicality of gradually increasing the threshold rate towards 66pc of the median wage.


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