Increasing wages of lower paid in North `would create jobs`

Increasing the rate paid to people who currently earn less than £7.65 an hour in Northern Ireland could potentially generate an extra 2,500 jobs and bring more money into the economy, new research suggests.

A wage increase could also, according to the Northern Ireland Council for Voluntary Action (NICVA), add one per cent to the North’s total wage bill and potentially boost households’ disposable income by more than £133 million.

NICVA, which acts as an umbrella group for the voluntary and community sector, is campaigning for everyone in the North to get paid a “living wage” which is calculated according to the basic cost of living.

In the UK this is estimated to be £7.65 per hour – ahead of the current legal minimum wage which is set at £6.31 per hour.

According to the latest research commissioned by NICVA there were an estimated 173,000 employees in the North two years ago who earned less than the than the living wage of £7.65 per hour.

Oxford Economics, the consultancy firm, which carried out the research found that the majority of the workers were young, female part-time employees who had low skill-levels and were employed in the private sector.

The highest proportion of workers were in sales and customer services.

Seamus McAleavey, chief executive of NICVA, believes that the introduction of a higher rate of pay for more people in the North would in turn generate more tax income for the government.

“A living wage in Northern Ireland would generate lots of benefits: it would bring more money into the economy in the form of increased spending, it would make work pay for those on social security who want to return to work and it would help families experiencing ‘in work poverty’, people who are working but are struggling to make ends meet.

“At the moment things like working tax credits act as a subsidy to low paying employers. Increasing the wages of low paid workers will mean they will have to rely less on these government subsidies to top up their wages,” Mr McAleavey said.

Oxford Economics calculated that had a Living Wage been introduced in 2012 in the North then the 173,000 workers who earned below the rate would have received an additional £221 million in gross wages - equivalent to one per cent of the local total wage bill.

Out of this the UK exchequer would have received £88 million through direct taxation and reduced benefits.

The introduction of a living wage could also have boosted consumption in the North by 5 per cent or £132 million.

Oxford Economics estimated that the net result could have generated an extra £84 million gross value added contribution to the Northern Ireland economy and in turn help create a knock on 2,500 local jobs.

But the consultancy firm did concede that while a higher living wage would deliver benefits for its recipients it would also result in increased labour costs for businesses that employ low-wage labour and that these costs would have to be borne in some way.

Ian Mulheirn, from Oxford Economics said: “Evidence on minimum wages around the world suggests that negative employment effects tend to be small and higher minimum pay often results in a more productive workforce. For that reason a higher minimum wage could boost the Northern Ireland economy.”