Sunday, January 30, 2011

Fine Gael to reverse minimum wage cut

Fine Gael’s Michael Noonan TD has unilaterally confirmed that a Fine Gael government will reverse the minimum wage cut imposed by Brian Lenihan in the 2011 Budget. Noonan presumably believes that his solo run will not have moral hazard consequences but he omitted to indicate what Ireland’s rankings in the EU Harmonised Labour Cost Index is likely to be one year after a Fine Gael led government takes office.

The National Minimum Wage Act 2000 set the minimum wage for an adult at €4.40 per hour. The Irish minimum wage increased by over 96% from 2000 to 2009 while GDP per capita in that period had increased by 11.8%.

The restoration of the statutory minimum wage to €8.65 per hour (€17,542 per annum) on the basis that ‘only 3% of the labour force are paid the minimum wage and that its reduction was merely ideological flag waving on the part of Fianna Fáil’.  That begs the question – what happens to the other 97% of the nation’s labour force.

Approximately 3.3% of the labour force received the minimum wage in 2005 when the hourly rate was €7.65; 155,000 were on the Live Register and 91,300 were unemployed.

But in 2006 data from the Revenue Commissioners indicates that 675,000 of those assessed for income tax declared an annual income that was significantly less than the minimum wage before it was increased to €8.30 on 1 January 2007 and to €8.65 on 1 July that year. There are also more minimum wage recipients in the public sector than in the private sector.

Wages and salaries in Ireland dropped by 10.6% in overall terms in the year ended 30 September 2010, before the 2011 Budget was announced.   29% of the labour force do not even make the equivalent of the minimum wage annually and a further 13.5% are unemployed

Fine Gael intend to slash tens of thousands of jobs from the public sector and close 145 State bodies.  Who is going to pay the cost of this proposal and what impact will it have on investment, exports, job creation and job maintenance of a scale sufficiently large to reduce chronic levels of unemployment and forced emigration, both documented and undocumented? 

Fine Gael need to clearly articulate the character and stability of living standards and hardship avoidance that will evolve for all citizens under their governance and the relative importance that wealth, welfare and debt will have in underpinning these.

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