Inequality of pay between women and men is a well documented statistical fact. But, what is the relationship between this gender gap and low pay? How is early childhood care relevant? And what are the implications for public policy and trade unions? This Blog looks at these questions in the Republic of Ireland against a background of three important documents that entered the public domain last week.
Quarterly Economic Observer (NERI) Spring 2016
Our latest quarterly report focussed on the incidence of low pay among women workers using data from 2013. The results show a marked concentration of low pay in the hospitality (hotels and restaurants) as well as in retail and certain other sectors. In this case, low pay is defined with reference to a gross hourly wage rate of €11.45. However, as it is pointed out in the Observer, poverty and low income are related to all sources of income in households. Just as crucial as the hourly rate of pay is the number of hours of work available to employees as well as all the benefits taken more for granted among traditional larger employers a generation ago. These include access to pensions, sick pay and other entitlements outside the somewhat limited social welfare code.
Our data show that there were 207,000 female employees earning below the €11.45 hourly rate in 2013. Almost 3 out of 10 female employees were below this benchmark. By contrast, the corresponding figure for male employees was just over 2 out of 10.While there is a high correlation between low pay and being on a temporary job contract it should be noted that 1 out of 4 female employees on a permanent job contract were on ‘low pay’ (Table 4.1a).
A vital dimension of male-female difference is level of educational attainment. If you are a higher education graduate then the incidence of low pay is not much different between men and women. However, for those with secondary level completion or lower the incidence of low pay is significantly higher among women. Since we know that labour market earnings are highly correlated with educational attainment (more so in the Republic of Ireland than in other OECD countries) it clear that whatever factors are driving low pay among women it is among those with less education that the differences between men and women emerge most clearly. Add to this another crucial issue – care of children.
Notwithstanding much improvement since the 1990s, the Republic of Ireland is unique in having a highly costly (as in direct payments by parents) and fragmented early childhood care system. If you are a woman with children and earning something close to the national minimum wage (which is €9.15 per hour since last January for those not in their first job) and, to compound the challenge, face uncertainty about your hours of work from week to week, then going to work hardly pays. Some right-wing economists talk about the ‘poverty trap’. Yet, the evidence for such a trap on a widespread basis is far from clear even when the costs of childcare are added in. To the extent that there is a trap the answer in part is higher wages at or above the ‘living wage’ rate of €11.45. However, the story does not end there. Access to affordable and quality childcare is a must along with other social supports and public services. To that end, most of us need to pay more taxes whether through a social insurance fund or general taxation. Corporations and employers also have an essential role to play in funding a European level childcare system.
Submission to the Low Pay Commission (ICTU) 
The Irish Congress of Trade Unions submitted, last week, a series of proposals and analysis on the topic of low pay and how it impacts on women in particular. The submission highlights the various ways in which occupations and hierarchical grade levels are segregated to the detriment of women workers. Furthermore, the submission makes the case for ‘a properly resourced childcare system’. The submission makes a number of sensible and economically realistic proposals to increase the national minimum wage at a pace to reach the ‘living wage’ threshold ‘over the lifetime of the current Low Pay Commission’. Such proposals are sensible because they would narrow the pay gap between men and women and begin to make serious inroads into ‘in-work poverty’. They would also lay the basis for a more sustainable recovery in domestic demand across all regions and sectors of society. A voluntary approach to movement towards a ‘living wage’ hourly wage rate is likely to be ineffective because most employers in the retail and hospitality sector are likely to resist such a movement claiming inability to pay. If there is evidence that competitive pressures rule out upward movement to a living wage rate then this evidence can be cited in seeking a derogation as is the case under existing minimum wage law on application to the Labour Court.
Who cares? Report on Childcare Costs and Practices in Ireland (ICTU)
This is a policy report that examined the evidence on use and cost of early childhood care among a sample of trade union members. The report presents a number of recommendations to help ensure that working families have access to affordable childcare. These include:
- Increased funding to reach 1% of GDP per annum;
- Increased employer PRSI to contribute to costs;
- Paid parental leave of six months;
- A review of capitation payments to childcare providers;
- A minimum level of pay corresponding to €11.50 per hour for childcare professionals;
- Extension of the ‘Learner Fund’ to support existing staff with a target of NFQ level 7 or 8 (Ordinary and Honours Bachelor Degree respectively); and
- Enforcement of legislation on pay for ‘domestic workers’.
How much funding and how? (my own views and suggestions)
A properly funded early childhood education and care system to cater for all pre-school children on the basis of a full-session and full-year provision stretching over four years (say from the age of 1 to 4) would require a very significant investment in facilities, staff, training and quality assurance – none of which is in place to the extent needed at this time. Average employee costs are likely to be lower than is the case at primary school level at least for the coming years. At the same time, the ratio of staff or carers to children will need to be significantly less than the average pupil-teacher ratio at primary level as is the case already. A stylised and ideal ‘rule of thumb’ is that an age-appropriate ratio of staff to children could be as follows:
- 1 child aged under 1 with 1-2 adults (at home)
- 2 children aged 1-2 with 1 adult (in a formal care setting)
- 3 children aged 3-4 with 1 adult
- 4 children aged 4-5 with 1 adult
- And so on until
- 18 children aged 17-18 with 1 adult.
If such a ‘rule of thumb’ were maintained all the way from birth up to 18 and even beyond then we would be investing heavily in the early years; ‘getting it right’ early on; avoiding drop-out and late interventions up the age scale and then enabling older students to learn well because the building blocks have been put in place early on. Investing in the early years is all about building the ‘scaffolding’ to allow young people to ‘learn how to learn’ and grow into more self-directed learning as they reach adulthood. Instead, what we have is an upside down education system that back-loads investment and under-invests in the early years and ends up under-investing relative to needs in the later years partly because of under-investment in the early years.
So, how much would a properly functioning early childhood system cost? It depends on what we want. A full provision from age 1 to 4 (which is typical in some European countries) would proably require a level of expenditure per child equal to that in primary level. This is so because lower staff-child ratios offset the impact of lower average salaries in the case of early childhood care and education. The total annual budget might be somewhere in the region of €1.5 billion (almost one half total net primary school budget in 2015) representing around €6,000 per child per annum. It should be noted that such a level of spending would be equivalent to about 1.5% of GDP – somewhat above the UNICEF recommended level of 1% of GDP in 2015. Were GDP to grow at 3% per annum on average over the coming decade (a possibly optimistic assumption!) then an indicative spending of €1 billion to €1.5 billion is not at all unreasonable as a policy goal in the medium-term. I hasten to add that these estimates relate to pre-school provision and do not account for spending on primary school children in infant classes of school (which typically are reported as ‘early childhood education and care’ in conformity with international statistical guidelines).
It is also necessary to consider the capital costs especially as centres of early childhood care and education need to be adapted for very young children (primary school buildings may not be suitable). An investment of at least a few hundred million euro would be required.
Would such a level of investment and ongoing cost as suggested in the previous paragraph be (a) politically realistic, (b) fiscally possible given the rules on deficits and debt, and (c) necessary given some alternative arrangement including ‘out-of-pocket’ spending. Clearly, a European level of investment in early childhood care would take years to design and implement. It might be possible to implement a system in stages but with a very clear long-term goal. Would it be affordable? Let us suppose that the financial crisis of 2008 never happened. If, a 10-year planned total current expenditure of €15 billion and €1 billion on capital were mooted by anyone in the early months of 2008 they would be dismissed as 19th century utopian socialists. Yet, within two years, a sum of €30 billion of our money (and that of the coming generations) would sunk into a dead bank on the basis of a series of ‘promissory notes’ subsequently to be converted into sovereign government bonds with a maturity of many decades. What is affordable reflects our priorities and our values. Clearly, going on the basis of past and recent experience children have not been a priority.
This should be a time not only to proclaim a new set of 21st century civic republican values based on equality for all the children of Ireland but to actually do something about it.