Time for wage rises to spur economy – Labour Minister
Businesses say Nash fuelling ‘unrealistic pay hike expectations
Workers need pay rises to help the economic recovery, a powerful new Labour minister has insisted.
Minister for Business and Employment Ged Nash told the Irish Independent the rise in the numbers in jobs has to be matched by wage hikes for low- to middle-income earners.
“We need to have a wage-led recovery. When the economy improves, workers’ wage levels should improve so that they are spending more in the economy to sustain jobs. It’s that virtuous circle idea,” he said.
However, Fine Gael Enterprise Minister Richard Bruton poured cold water on the prospect of wage increases amid fears such a move would pose a barrier to job creation.
“I don’t believe the priority now is for wage increases. The priority is to continue to focus on employment opportunities. We have to create the opportunities for enterprises to grow,” he said.
The idea of wage increases was strongly opposed by business group ISME, which accused Labour TDs in particular of “fuelling unrealistic expectations of pay rises”.
Mr Nash’s comments come as new figures show the number of people employed has reached the highest level since 2009 at 1.9 million.
There were 31,600 more people employed in the second quarter of 2014 compared to the same period last year – an increase of 1.7pc, according to the Quarterly National Household Survey results.
In an interview with the Irish Independent, Mr Nash said the recovery of the economy has to be accompanied by wage hikes for workers.
“All of the indicators are that the economy is on an upward trajectory. People are feeling more confident and we are in a better place than we were in. We are having a recovery in jobs but what I don’t want to see is a race to the bottom where that recovery is defined by low wages and precarious work.
“We need a wage-led recovery and decent, sustainable jobs,” he said.
Mr Nash, who has direct responsibility for the minimum wage, said the issue of low pay for workers must be tackled.
“About 20pc of Irish workers are considered by the OECD to be on low wages.
That's socially unacceptable to me. It's completely socially unacceptable. It's not good for social cohesion and it's not good for those of us who believe in a for a fairer society and a progressive society," he said.
Mr Nash, the Cabinet's new super junior minister, is setting up a new 'Low Pay Commission' to consider a range of issues, including the rate of the minimum wage.
The minister said he did not want to pre-empt the findings of the new body and it is important to ensure "politics is taken out of setting the national minimum wage".
However, he did clearly indicate he felt the current rate of €8.65 per hour was too low a wage to live on.
"The national minimum wage is that floor whereby nobody is permitted to fall below. Nobody is suggesting that [€8.65] is a living wage in that general scheme," he said.
Mr Nash said wage rises for the low paid would benefit small businesses.
"The idea of addressing low pay is a virtuous circle. By very definition, those who exist on the national minimum wage or on social welfare payments spend everything that they have, they are spenders not savers. So their money is supporting local business," he added.
Mr Nash, who shares a government department with Mr Bruton, said he believes a way can be found to improve wage conditions while still securing the support of businesses.
The Low Pay Commission was a Labour Party leadership race promise by Tanaiste Joan Burton. The new body was then agreed in the Coalition's 'Priorities for Government' and will be made up of representatives from unions, employer groups, the field of academia and other social bodies. The Commission is expected to present its first report to Mr Nash next year.
Ms Burton is also a major proponent of the so-called 'living wage', which exists in London and takes into account a number of basic needs.
"A living wage would be higher than the minimum wage and would provide the income necessary to meet basic needs, including housing and healthcare, on top of items such as food and heating," she said in a speech in March.
Mr Nash yesterday cited analysis carried out by the Nevin Economic Research Institute which has proposed the gradual phasing in of wage hikes for low paid workers.
But he insisted he would not pass any measures that damage the ability of companies to create jobs.