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.
We are going to act macho and reduce our minimum wage rate, take it down by one euro. Why is it only reduced by one euro? Who has chosen the rate of €7.65? What is the scientific basis for €7.65, other than it looks good? Where does this come from? The point was made that the philosophy behind the minimum wage is that there should be a threshold. I know plenty of employers but I have met very few who would ever want to have to pay their workers more. Of course employers’ representative bodies and employers will welcome a reduction in the rate of pay they have to pay to their employees and very few employers would say otherwise but that is not the point. We do not allow this to be determined by employers. This is a State intervention, an intervention by the community to say there is a certain level below which we are not prepared to allow wages to go. I will remind the House what that figure is. A rate of €8.65, on a 40-hour week, was approximately €330 a week and €15,000 per year. We decided in 2000 and through all the processes and changes since then that we would not leave the determination of pay entirely to the market, although the market has to have a very strong influence over it. We require and insist, legislatively, that there should be this basic floor of a minimum wage of €8.65 by 2007. These figures were not pulled out of the sky in any manner whatsoever.
I have no difficulty with the issue of the review of the joint labour committees and the registered employment agreements is a separate proposal and the Government intends to implement the review. I have no difficulty with a review. However, Senator MacSharry is incorrect to say that the levels were set at a different time as if these levels were set in a completely different era. I almost had a sense that Senator MacSharry was talking about some kind of Dickensian period back in the distant past when these rates were set. The 1946 Industrial Relations Act meant the process was going on all the time and it is not something that is way back in the dim and distant past.
There is no hard evidence, other than anecdotal evidence from employers, that they would prefer the wages to be lower. There is no anecdotal evidence on which we can reasonably, as a Parliament and as a Legislature, agree to this reduction without a lot more analysis and persuasive argument from the Minister and from the Government. This is the difficulty with both the Minister of State’s speech and this measure, that there is really little or no evidence given to us. It does not affect the bottom line. The Minister in his contribution said that spending has to be reduced. I presume this is in the context of the pensions aspect of the Bill. This does not affect Government spending nor the bottom line.
I refer to the page 7 of the Minister’s speech, that workers in the retail, hotel and restaurant sectors are more affected by the minimum wage. Of course this is the case. This is the reason we need a minimum wage because people are most exposed in these sectors. This has been invoked as an argument for reducing the minimum wage because this is an area where the minimum wage has most impact. There would not be any point if it did not have an impact. The idea was to target areas of low pay, to bring people up to the basic threshold. It should not come as any surprise and it should not be invoked as an argument for reducing the minimum wage. The sectors with low pay are also where the risk of exploitation and abuses are and there should be a minimum standard.
The Minister in his contribution makes a bald assertion:
where a minimum wage is imposed at an excessively high level, unemployment will result. Some workers will be willing to work for a wage lower than the minimum wage but employers are restricted from providing these job opportunities.
We are expected and asked to believe that there are workers anxiously knocking on the doors of these employers who are dying to take them on but they cannot because of the minimum wage. I do not buy it and I would like to see the evidence.