The living wage: should €11.45 an hour be the new minimum?

It’s a message the Government has been selling for months: the dark clouds of austerity are parting; the wind is at our back; we are finally emerging into a better world of broad, sunlit uplands.

Much of this is true. The economy is growing faster than almost anyone expected, unemployment is tumbling, the tax take is increasing and growth projections are being revised upwards. But peel away the shiny veneer and a more troubling picture emerges.

Real income is falling, chipped away by a conveyor belt of new taxes and charges. Wages have shrunk over the past five years, with average annual earnings down by about €1,000 since 2009. More people are finding it harder, not easier, to make ends meet, despite Ministers’ repeated assertions that our sacrifices have paid off.

These days a job is no longer a guarantee of escaping hardship. One in five workers is earning less than the “living wage”, a sum above the minimum wage but below what campaigners consider to be enough to make ends meet. One in six people in poverty has a job, a figure that has grown during the recession.

Many on low incomes are part of a growing “precariat”, stuck on short-term contracts and with little hope of progression in their jobs. It’s an environment where insecure work, exploitation and free-riding on internship schemes is increasingly common.

All of this poses a big test for the Coalition as it prepares to finalise next month’s Budget.

Fine Gael's pre-Budget narrative suggests any tax changes will focus on top-rate earners only. Labour, meanwhile, has flagged a new "return to work" dividend for people moving off welfare and a commission on low pay to tackle poor wages.

Whether there is real appetite for the kind of bold steps most experts agree are needed to make work pay – such as raising the minimum wage or lifting the tax burden on the lower paid – remains to be seen.

In the meantime, thousands of vulnerable workers and their families feel as if they are living on a crumbling financial cliff edge.

Enamur Chowdhury has seen first-hand how the world of low-paid work has changed during the downturn. His wages as a chef have fallen back to the minimum wage of €8.65 while his expenses have been going up.

The restaurant sector used to be covered by a joint labour committee, which set minimum wages at about €9.32 an hour. But the agreement was deemed unconstitutional after a legal challenge, in 2011, by fast-food restaurants.

Ever since then it has been open season, he says. Not only are wages at rock-bottom levels but a growing trend of “zero-hour” type contracts has left employees with no guarantee of working hours.

“This is a civilised country,” says the 39-year-old chef and father of two. “But people who are at work shouldn’t be living in poverty . . . I don’t want to be a burden on the State; I want to earn money. I would feel much better if the minimum wage was increased, over time, so that it’s enough for families to make ends meet.”

His monthly rent is €930. His car, which he needs to get to work outside public-transport hours, seems to devour money. And his utility bills creep upwards.

Take what you can get

“You can’t bargain for a higher wage, even if you are very experienced,” says Chowdhury, who has been working in the restaurant trade since he moved here from Bangladesh, 12 years ago.

“All you hear is that there are many others who are willing to work for lower. So you just need to take what you can get.”

Campaigners point to the living wage as part of the solution. The concept has gained traction recently in the US and the UK, both of which are also grappling with problems around low-paid work.

In Ireland a living wage of €11.45 per hour has been put forward by a technical group of campaigners, trade unions and think tanks. It estimated that this was the minimum needed to maintain an acceptable standard of living.

The group that researched the figure argues that the rate could be reached over a number of years and would benefit society through higher employment, increased consumer spending and reduced poverty.

As many as 300,000 workers earn below the living wage. The sectors of work most likely to benefit from any increase are hospitality – where more than half earn below the living wage – followed by call-centre or support jobs, the retail sector and the construction industry.

“The living wage is the new common sense,” says Michael Taft, who is a researcher with the Unite trade union. “The majority of people would agree that a job should provide enough of a wage to meet basic needs . . . The goal should be to ensure that by 2020 everyone who is working should earn a living wage. That is both a feasible and an economically desirable goal.”

Affordability of living costs for workers is just one side of the argument. What about affordability for employers?

One fact often glossed over by campaigners is that Ireland’s minimum wage is one of the most generous in Europe, second only to Luxembourg’s. (When adjusted for the cost of living, however, Ireland slips down the league table to fourth or fifth place, depending on various measurements.)

Any move towards raising the minimum wage or striving for the living wage would be fiercely resisted by employers. They argue that it would raise labour costs, threaten economic recovery and erode Ireland’s competitiveness.

The employers’ group Ibec, for example, says Irish labour costs are significantly above the EU average. It points to tax cuts rather than pay hikes as the most effective way forward.

Similar arguments against the living wage were made in London. Yet hundreds of employers have moved in recent years to embrace the concept voluntarily, since it was championed under Mayor Boris Johnson, a man hardly known for his left-leaning politics.

Research in the UK capital shows little evidence that the living wage is harming business. On the contrary, mounting evidence points to increased job retention, lowered recruitment costs and decreased absenteeism. The exchequer has also benefited through a higher tax take and reduced tax credits.

Win-win situation

“It’s one of the few things I have in common with Boris Johnson,” says Tánaiste and Minister for Social Protection

Joan Burton

. “As the economy recovers there needs to be an emphasis on sustainable work which also benefits employers. It’s a win-win situation.”

They’re warm and noble aspirations, but what concrete measures is her department taking to make this a reality?

Burton points to the establishment of a commission on low pay, which will advise the Government on increasing wages in low-paid areas of employment.

The increased numbers availing of the family income supplement, a weekly tax-free welfare support for working families on low pay, is another example of Government support. Although some grumble that it’s an expensive State subsidy for low pay, Burton says the increasing numbers taking up the supplement – it is paid to 46,000 families, up 75 per cent since 2012 – show that it is helping recipients to gain a foothold in the world of work.

Another development under way, she says, is a “return-to-work dividend” promised by Minister for Jobs Richard Bruton in next month’s Budget and aimed at improving incomes for families that move from welfare to work. (Bruton has ruled out wage increases on the basis that the Government needs to focus on job creation and hitting its budgetary targets.)

The social-welfare system has long been criticised for so-called poverty traps, which result in families losing out if a parent takes up work. Under changes being proposed, a parent who takes a low-paid job would be able to keep welfare payments – known as qualified child increases – worth up to €30 per child a week.

“In order to make work pay,” the Tánaiste says, “we know that the biggest difficulties are experienced by those with children. This will provide a significant additional financial incentive for these families, particularly if a parent is heading into an entry-level job.”

Low wages are only part of the landscape of the new working environment as far as Liza Kavanagh, an archaeologist, sees it. In addition to deteriorating pay and conditions, the 26-year-old says contracts are increasingly insecure and short-term. “You have people being paid the minimum wage and offered eight-week contracts, which turn into four-week contacts,” she says.

She believes her profession has brought the situation on itself: it’s an area that tends to attract people who see it as vocation rather than a money-earner. “People are willing to work for very low wages . . . We’ve brought wages down ourselves. And the companies are tendering against each other for less and less work,” she says.

Last year she earned €9.75 an hour, which works out at about €375 a week after tax. Her earnings have since increased, in a new contract, to €12.50 an hour. The only hope for improving wages, she says, is to organise the profession.

“We need a registered employment agreement, or a minimum wage for archaeologists, and to take it from there. It would guarantee wages for us, while employers wouldn’t have to undercut each other on wages.”

But even areas of employment covered by wage agreements are not immune to controversy about low wages. In the construction industry, registered employment agreements set decent rates for grades within the sector. The rate for a “skilled operative”, for example, is about €16 an hour, or €21 for a “mechanical worker”. Yet the latest figures indicate that one in four people employed in the construction trade is earning below the living wage.

Part of the problem, say some employed in the sector, is a race to the bottom as contractors increasingly use agency workers for a little over half of the agreed industry rates.

“Contractors are using agency workers who are not only paid well below the agreed rates but are expected to work free overtime while receiving no pension contributions,” says Rob Kelly, an organiser with Unite. “It’s threatening the long-term future of the sector, as school leavers look at the worsening terms and conditions and decide to look elsewhere for a career.”

Gary Gleeson is one of those affected by a recent site dispute. He had been working for four weeks, until recently, on a large project building a school in Lucan. Money was paid in dribs and drabs, he says, but he received the equivalent of only €2.60 an hour.

He also claims that he, along with many others on the site, was forced into bogus self-employment. It can save money for contractors but leave those working much more vulnerable. JJ Rhatigan, the main building firm at the site, denies this.

Gleeson, meanwhile, is demonstrating outside the site with other workers who are affected. “I’ve had to [borrow] money off people,” he says. “I just want to work for the wage that was agreed. Construction is the backbone of the country, or at least it should be, but not if we can’t look after our families. It’s just demoralising.”

It would be comforting to think of a recent growth in self-employment – running at twice the rate of overall employment growth – as a sign of an entrepreneurial population rising from its slumber. But many of these self-employed people work in healthcare or the caring sector and are following careers that would have once have guaranteed staff jobs but now involve hustling for casual shifts.

In these cases, the self-employed coming together to organise and improve conditions simply isn’t feasible. They don’t have colleagues. They work but not in a regular workplace.

Slipping living standards

Meanwhile, as the economy expands, living standards are slipping for many people on low wages. Many qualify for almost nothing yet pay for everything. Outside the income thresholds for rent allowance, or medical cards, they are exposed to the full force of cost increases, taxes and charges.

Most muddle through, but they have no wiggle room. So when a larger-than-expected utility or health bill arrives it can be almost impossible to pay.

The social consequences of failing to tackle this problem, says Tom Healy, director of the Nevin Economic Research Institute, will be widening inequality and greater reliance on welfare.

We now have more people on low wages than most other European countries. Figures from Eurostat, for example, show that a significantly higher proportion of Ireland's workforce is classified as "low-wage earners" than the average for the EU.

The Government says it is committed to tackling these issues and is working on the introduction of new registered employment agreements. These could set a new floor for workers in low-paid sectors.

In addition, Minister of State Ged Nash has pledged to have legislation on collective-bargaining rights enacted by the end of the year. This legislation could significantly strengthen the rights of workers in companies that refuse to bargain collectively, while also giving statutory protection against the victimisation of workers.

Ultimately, the answers to these issues will be a mixture of Government action and movement by employers, says Healy.

Hours of work, access to continuous employment, pension contributions and benefits, paid holiday leave and sickness benefit are all crucial to what might be regarded as a decent work package.

“The State, in any society, has an important role in providing for the needs of workers and their families through the tax and welfare system, as well as through regulation and legislation,” he says. “However, employers are also responsible in paying wages and offering employment conditions that are fair and affordable .”