Low paid benefit from minimum wage hikes despite ‘loss of hours’

Some low-paid workers saw a reduction in hours as a result of increases in the minimum wage between 2016 and 2018, but average take-home pay rose, a new study has found.

Research by the Economic and Social Research Institute (ESRI) examined the cumulative effect of three recent minimum wage increases on the hours worked by minimum wage employees.

From 2016 to 2018, the minimum wage increased on three occasions, rising from €8.65 to €9.55 per hour.

The ESRI’s study found that the hours worked by minimum wage employees fell by almost one hour per week as a result of these hikes in the minimum statutory pay.

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“However, the minimum wage increases were large enough to offset any earnings loss due to reduced hours, leaving the average minimum wage worker financially better off,” the report said.

There have been concerns that hikes in the minimum wage could backfire, with certain casual and part-time workers seeing their hours and income reduced.

The ESRI's study was commissioned by the Low Pay Commission, which makes recommendations to Government on the minimum wage.

It noted that the effect on hours worked was greater for employees in certain sectors.

Minimum wage employees in the “industry” sector, which mainly covers manufacturing workers, saw a reduction of three hours per week over the 2016 to 2018 period while those in accommodation and food saw a reduction of 2½ hours per week.

Large enough

However, for the average minimum wage worker in these sectors, the minimum wage increases were large enough to offset any earnings loss due to working fewer hours, it said.

The report noted that for many the minimum wage is a stepping-stone to higher pay but for some it may represent a longer-term circumstance.

"As the minimum wage increases, it is important that we monitor the impacts on employment," said the report's author Paul Redmond. Commission chairman Ultan Courtneysaid: "The Low Pay Commission has an evidence-based approach to making its recommendations. The report published today increases our knowledge and understanding of the impact and effects of increases in the National Minimum Wage."