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Ireland’s Low Pay Problem: time for a Living Wage

Posted on August 25, 2014 by Micheál Collins

Ireland joined a growing international living wage movement in July when the Living Wage Technical Group launched the 2014 Living Wage. In principle, a living wage is intended to establish an hourly wage rate that should provide employees with sufficient income to achieve an agreed acceptable minimum standard of living. In that sense it is an income floor; representing a figure that allows employees working full-time to afford the essentials of life. The figure for 2014 is €11.45 per hour, equivalent to €446 per week.

The emergence of an Irish Living Wage movement has a number of contexts. First, we have a low-pay problem; one sitting at the heart of our skewed direct (earnings) income distribution and one which demands significant state intervention to redistribute resources to counter act that inequality. The latest CSO poverty figures indicate that of all those in poverty, 12.6% are at work (the working poor) - about 95,000 workers. The latest income distribution data, for 2012, show that the pre-distribution of income is such that the top 20% receive more than 50% of all earned income and the top 30% receive more than 66%. Overall, the top 20% receive 23 times the share of the bottom 20%. Earlier, Eurostat (2010) classified 20.7% of workers in Ireland as ‘low-paid’ – earning less than two-thirds of national median hourly earnings.

Unsurprisingly, the latest Department of Social Protection annual report shows that in 2013, the number of working families in receipt of Family Income Supplement (FIS) increased by almost 30% to 42,000 families, supporting over 90,000 children. Other less quantifiable implications, linked to precarious work and income uncertainty, add further to the impact on society.

A second context reflects a growing appreciation for society to consider low wage rates not just in the context of competitiveness and competition but also in the context of income adequacy and living standards. While having low wage rates is often championed as a competitiveness goal; there is a simple question of how low should wages be? It is hard to argue with a view that an individual working full-time should be able to earn enough income to enjoy a decent standard of living. The Living Wage is about providing a robust evidence based number to answer that question.

Establishing a transparent, robust and sustainable way of determining how much that is was the focus of the work of the group since early 2014. In presenting its findings, the group produced a technical paper with a methodology that will allow an annual update from here on. The calculation is based on minimum living standards budgets from the Vincentian Partnership for Social Justice reflecting the costs of living faced by a single adult working full-time.

Earnings below the living wage suggest employees are forced to do without certain essentials so they can make ends-meet. Above the threshold employees gain discretionary income to afford living standards and items beyond those deemed essential.

The implementation of a Living Wage is likely to be a gradual process. In some sectors, where there are only small numbers of employees below the threshold (eg finance), achieving increases should be possible and the international research shows little or no impact for companies. There are greater challenges in labour intensive low-pay sectors (retail, accommodation etc) where a phased approach to achieving a living wage is more doable. Similarly, local authorities should take a leadership role and ensure their employees and contracted workers are all paid at least the Living Wage. The experience elsewhere is that the idea of a Living Wage evolves from ‘impossible’ to ‘societally beneficial’; although that transition and its acceptance by employers, workers and society in general can take time.

The arrival the Irish Living Wage will hopefully ignite interest in issues around low-pay, income adequacy, precarious work patterns and social inclusion in general. From here on it will provide an annually updated adequacy benchmark for low wages – the next update is due in July 2015.

 

A version of this blog appears as an article in the August/September edition of Village Magazine http://www.villagemagazine.ie/

Details and documents on the Irish Living Wage are available at www.livingwage.ie

Posted in: IncomeInequalityJobsLabour costsLiving wageWages

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