Government asks Low Pay Commission to design ‘living wage’ in Irish context

The Low Pay Commission has been asked by the Government to look at the design of a "living wage" for workers in an Irish context.

As part of its study the Low Pay Commission is to examine whether there should be a special rate for those in Dublin and whether there should be “a provision for slowing down/pausing wage increases during recession and speeding them up during expansions, such that the target could be met over the business cycle”.

The Cabinet on Wednesday noted the proposed terms of reference for the study.

The Programme for Government commits the current administration to “progress to a living wage” over its lifetime.

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The Department of Enterprise and Employment said the Low Pay Commission understood the definition of the “living wage”’ as the minimum income necessary for a single adult worker in full time employment, with no dependents, to meet his or her basic needs and afford a minimum acceptable standard of living.

It is generally considered to be higher than the national minimum wage.

In 2020 the living wage for Ireland was calculated by campaigners to be €12.30 per hour. The national minimum wage is €10.20.

Mr Varadkar said that one of the legacies of the pandemic must involve the provision of better terms and conditions for lower paid workers.

He said the Low Pay Commission had formally begun work on examining how Ireland could move towards a living wage.

The Tánaiste said: “One of the legacies of the pandemic must be a more inclusive society that rewards work and enterprise better. That means better terms and conditions for lower paid workers. Moving to a living wage is an important part of this.

“Of course, in doing so we need to recognise that many businesses are closed and are now loss-making, so we must do it in way that does not cost jobs or cause people’s working hours to be reduced. That would be counter-productive.”

Mr Varadkar said the Low Pay Commission study would examine the design of a living wage in an Irish context and consider the policy, social and economic implications of such a move.

International evidence

He said it would do this by looking at international evidence on living wages, studying different calculation methods and examining the policy implications of moving to a living wage in Ireland.

It is expected that the report will be completed in the second half of 2021.

As part of its terms of reference the Low Pay Commission study will, among other areas , look at a living wage as a percentage of the country’s median wage, taking into consideration any possible distorting effect of multinational companies on the median wage in Ireland versus other countries.

It will look at whether a living wage should be age-related or whether there should be different regional rates such as the possibility of one for Dublin.

It will also examine policy implications for employment, hours of work and consumer prices. It will consider how a living wage at each of the rates implied would be expected to change labour costs and total costs at an economy-wide level and across sectors.

It will also examine possible interactions between a living wage and other policy instruments, such as tax rates, social insurance rates, social policy and (if calculated on a cost-of-living basis) health, education, and housing policy.

The study will also consider whether a living wage should be introduced as a statutory or non-statutory basis.