With more than a million workers now on some form of Government wage support or salary scheme at a cost of €4bn-€4.5bn over a 12 week period, talk is now of how to cut the cost of those schemes as the economy re-opens.
Any moves to cut payments will have a huge impact on people who were on the minimum wage prior to the pandemic, half of whom work in the areas that have been hardest hit the coronavirus lockdowns in retail and accommodation and food, according to a new report from the Economic and Social Research Institute.
Minister for Finance Paschal Donohoe said recently that while the payments were working, “they are costing many hundreds of millions of euros per week” and that they needed to change “in a way that is affordable”.
A new report by the notes that even if the economy as whole starts to reopen as is planned in stages from May 18 onwards tourism is unlikely to recover soon, the ESRI report said.
“In addition, hotels and restaurants may find it difficult to operate under social distancing requirements. This could lead to longer-term disruption in the accommodation and food sector, which employs a quarter of all minimum wage employees,” said the report’s author, Paul Redmond.
The Pandemic Unemployment Payment (Pup) of €350 per week is 50pc higher than the gross weekly wage of the average minimum wage employee in the retail and accommodation and food sectors who works approximately 23 hours a week for a gross weekly wage of €232.30, according to the report.
The minimum wage currently stands at €10.10 per hour for an experienced adult worker.
The pandemic has however changed the nature of work for many lower paid people, making it far more risky in terms of health, which the ESRI report said had implications for the lowest wage rate at which a worker would be willing to accept a particular job, the so-called “reservation rate”.
“There is now an added health risk for those who are working and this will result in a higher reservation wage. Therefore, individuals in receipt of Pup, and even those on standard jobseeker’s benefits, may for a given wage rate, be less willing to accept a job now than before the crisis,” the ESRI paper said.
The Pup payments are in part set higher than the typical single person’s jobseeker’s allowance of €203 because they aim to provide financial security so that people comply with the lockdowns and so that it is equivalent to the rate paid to a jobseeker with an adult dependent.