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.

Where does national competitiveness fit into Irish Government-trade union dialogue?

It will be interesting to observe how the issue of national competitiveness is dealt with in the current talks between the Irish Government and trade unions on public sector pay. Ireland's unemployment rate is broaching 13% but the minimum wage in Ireland is second highest in Europe. The following table indicates minimum monthly pay across the EU-27.

Ireland’s Minimum Wage in the cross hairs!

Wage growth moderation from 1986 to 2001 was one of the legacies of Ireland’s social partnership model.  Social partnership agreements between the representatives of trade unions, employer representatives and other stakeholders produced a series of multi-year partnership agreements since 1987 that included a national approach to pay increases.  This facilitated a prolonged period of stable industrial relations and improved work practices.

However, the index of average hourly earnings rose from 139 in 2001 to 196 in 2009.  This compares to an average rise from 121 to 256 in the case of Ireland’s major trading partners.

However, a minimum wage is set under the terms of the National Minimum Wage Act of 2000 and this has been €8.30 per hour since 1 January 2007 and this applies to any employee who has an employment of any kind in any two years over the age of 18 years.

Brian Lenihan TD, the beleaguered Minister for Finance intimated last night at the MacGill Summer School in The Glenties, County Donegal that the minimum wage level “may need adjustment”

The minimum hourly wage in 2006 was €7.65, equivalent to €15,912 per annum.  This was a time of boundless optimism!  The cumulative value of residential mortgages, at €121.2 billion, had increased by 25% in a year, thanks to our harum-scarum banks.  The number unemployed was less than 100,000.  The number of persons on the Live Register was 155,389 - compared to the current number of 418,000.  We were yet to be burdened by the catastrophic consequences of those individuals and entities that are defined as being 'systemically important' - whose appetite for taxpayers cash is voracious and who have the capacity to panic the Government into acceding instantly to their demands.

The latest Statistical Report published by the Revenue Commissioners provides some interesting insights into the potential impact of any reduction.  Some 675,086 persons of the total of 2,261,138 persons paying income tax, earned less than €15,000 per annum in 2006.  They collectively earned €4.77 billion.  This would be equivalent to an average of €3.40 per hour, per person - although I presume that many may of them may not have been in full-time employment.  The gross income earned by all income tax payers in 2006 was €81.51 billion.  This means, that at the height of the economic boom, 30% of all individual paying income tax collectively earned less than 6% of the the gross income of all income tax payers.

Given the current diabolical state of the economy these insights clearly indicate that the degree of neediness in Ireland is probably far greater than generally realised.  A huge percentage of those not on welfare are existing on incomes at, or close, to a very basic level of subsistence and a reduction in minimum earnings will have very painful consequences for hundreds of thousands of people.  It will also aggravate the credit crisis as more individuals are not in a position to repay bank loans.  A decision to reduce the minimum wage could well be a case of the Government chasing its tail because unanticipated consequences may overwhelm anticipated benefits.

Wage trends in Ireland have moderated very significantly with onset of the economic crisis and the adverse impact that this is having on employment and investment levels.

Irish immigrant population hit very hard by slump

The Irish Live Register for April 2009 recorded a record of 384,448 individuals, an increase of 188,850, or 97%, since April 2008, according to data from the Central Statistics Office. All immigrant groups have been hit hard but those who immigrated to Ireland from the states that joined the European Union in May 2004 have been hit especially severely.

There are 349,300 non-Irish nationals in the labour force. They comprise 15% of the 2.2 million Irish labour force. The April Live Register includes 77,850 non-Irish nationals – 22% of the total on the Live Register.

Some 44,727 are from those states that joined the EU in May 2004 – Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania and Slovakia (collectively known as the Accession states EU15 to EU 27). These immigrants account for a labour force of 167,800, of whom 26.6% are now on the Live Register. They were attracted to Ireland by a minimum wage of €8,65 ($11.57) per hour from 1 July 2007 that is guaranteed under the Irish National Minimum Wage Act 2000. The corresponding figure in the UK is £5.52 (€6.21 or $8.31).

The Live Register is not a direct measure of unemployment. It also includes part-time workers who work up to 3 days each week, seasonal and casual workers eligible for a Job Seekers Allowance or Benefit.

However, overall unemployment in Ireland has also risen sharply from 93,400 in February 2007 to 170,600 November 2008 and 40,500 or these are defined as long-term unemployed. The number of unemployed from the Accession states is 16,900, a rate of over 10% and an increase in the number unemployed of 7,500, of 80% more in twelve months.

It is estimated that 210,000 people from Accession states arrived in Ireland since 2005. Three quarters of those who found work were employed in construction, manufacturing and service sectors, such as retail and hospitality. The total number employed in the public sector, education and health is low in comparison. The largest immigrant cohort is from Poland, but there are significant numbers from Latvia, Lithuania, Czech Republic and Estonia. Lithuania and Latvia are currently recording the highest levels of unemployment in the EU. Unemployment in Lithuania increased from 4.3% to 15.5% in the 12-months to 30 April 2009 while unemployment in Latvia increased from 6.1% to 16.1% over the same period. Unemployment levels in Poland has remained relatively stable moving from 7.4% to 7.7%.

This group comprise people predominantly aged in their twenties and thirties and tend to be male with the gender disparity most pronounced among the younger age group. There are relatively few children, or elderly people, among this immigrant group. Despite their relative youth, 42% are married compared to the 46% marriage rate of the native Irish. But almost 20% of the married non-nationals are not living in Ireland with their spouses. Their spouses have typically remained in their native land and this replicates the emigration pattern from Ireland over the decades before economic self-sufficiency. The majority of the immigrants from the Accession states have a secondary school education and slightly over a quarter have a third-level qualification.

The largest decline in employment in Ireland has been in the construction sector and the professions that serve it –(- 45,900) jobs lost in one year. But there have also been significant job losses in wholesale and retail (-18,200), financial and business services (-11,600), hotels and restaurants (-10,500).

Non-Irish nationals are obliged to be habitually resident in Ireland to qualify for social assistance payments in Ireland. The term ‘habitually resident’ is not defined by either Irish or EU law. However, it is intended to convey a degree of permanence – a regular physical presence enduring for some time beginning at a time usually in the past and intended to continue for a period into the foreseeable future. Length and continuity of residence are vital considerations

Non-Irish nationals resident in Ireland can qualify for social insurance payments (e.g. state pension, jobseekers benefit), means tested payments (e.g. jobseekers allowance) and universal payments (e.g. child benefit). 300 extra staff have been transferred from within the civil service to the Department of Social & Family Affairs to deal with the extra welfare claims.

Research published by the Economic and Social Research Institute indicate that non-Irish nationals are facing discrimination when responding to job advertisements with similar creden tials as an Irish native.