Arguments in favour of reducing minimum wage unconvincing

The Financial Emergency Measures in the Public Interest (No. 2) Bill is the piece of legislation seeking to reduce the minimum wage to €7.65 per hour.  Labour has strongly opposed this in both houses.  Last night, an initial debate took place in the Seanad.

One of the features of this debate on the national minimum wage is the dearth of evidence on which the measure is based. A reference to the Forfás report, to appeared in the Minister of State’s speech. Perhaps Senator Mark Dearey was going a little too far, even from the point of view of his own argument, when he said Forfás had confidently predicted job creation would flow from this measure. The Minister of State did not go that far, although he did point out that Forfás had stated it was likely that the presence of the national minimum wage influenced wage levels for a further 26% of the labour force, that is, those within 1.5 times of the national minimum wage. That point is often invoked.

Senator Dearey has said Forfás confidently predicts that the €1 reduction from €8.65 to €7.65 in the national minimum wage will lead to job creation. With all due respect to my colleague, I very much doubt if it has stated this because one thing is certain: if the Minister of State had such a clear argument available to him to support what he was doing, it would have been included in his speech, but it is not. He was much more careful and made the point, which is not untrue, that Forfás had spoken about the fact that the national minimum wage as a benchmark had an influence on pay levels in a wider section of the labour force.

In 2000 the Oireachtas put in place a regime under the National Minimum Wage Act which involved a process to determine the appropriate level for the national minimum wage. This was one of the last western countries to do so. It was not a figure which was supposed to be pulled out of a hat. On the various occasions it has been reviewed by the Labour Court it has been reviewed on the basis of a clear process set out in the legislation, involving an analysis and a consideration of labour market trends, the wider economic environment and the context in which it was set. The national minimum wage has been increased five or six times since 2000 and on each occasion there were lengthy debates on what the rate should be in the context of national pay agreements and programmes. The 2000 Act contemplates an agreement between industry and the trade unions on the basis of discussions and the Minister actually makes the order. That is a satisfactory process because it involves an input from both sides and, ultimately, a decision being made by the Minister.

The biggest concern I have in regard to the change in the national minimum wage is that it seems to amount to an arbitrary reduction to €7.65 without the presentation of evidence or an analysis as to why there should be a reduction. I do not accept Senator Dearey’s point that there is a clear nexus with job creation. Not only is it problematic in regard to the figure chosen, but the process put in place under the 2000 Act for careful consideration and deliberation involving people who know about and have experience of the issues involved, including employers, has been set aside by this arbitrary decision which, it seems, has been made not on the basis of analysis but on what looks good for the optics.