Minimum wage may endanger jobs

The national minimum wage due to be introduced in April 2000 may present a greater risk to employment in Ireland than was the case when a similar scheme was introduced in Britain earlier this year, according to Professor George Bain, chairman of the Low Pay Commission in Britain and vice-chancellor of Queen's University, Belfast.

The forthcoming Irish national minimum wage, expected to be set at £4.40, is approximately equivalent to the £3.60 sterling rate introduced in Britain last April.

An estimated 13.5 per cent of the Irish labour force will be entitled to higher pay as a result of the new minimum wage - a significantly higher figure than the 8.2 per cent who became eligible in Great Britain and the 10.5 per cent in Northern Ireland, said Professor Bain.

The Irish figure is a "large bite" of the workforce, he said, adding that "in the UK, we were determined to keep the figure below 12 per cent".

"The big question for Ireland is whether the minimum wage will have an effect on employment. Maybe Ireland, with its booming economy, can absorb the effects," said Professor Bain, who was speaking at a seminar at the University of Limerick.

More than 40 per cent of Irish beneficiaries will be young people under the age of 25 - around twice the figure in Northern Ireland. Since young people are traditionally the group most adversely affected if the rate is too high, the risk of causing unemployment is greater, said Professor Bain.

Ireland tops the scale of major industrialised countries in terms of low pay, on the OECD standard whereby low pay is reckoned at less than two-thirds of the average median wage, said Mr Thomas Turner of the College of Business at the University of Limerick.

Professor Bain said the introduction of a minimum wage in Britain was remarkable for the ease of its implementation, in spite of the "predictions of gloom" beforehand.

Some two million British workers - about 8 per cent of the workforce - were eligible for pay rises averaging 30 per cent, he said. One in three home workers, one in five part-time workers and one in eight minority workers were due to benefit. Almost three-quarters of those were women, he said.

In spite of the magnitude of the change in Britain, it has been broadly accepted. This was all the more remarkable because until recently, he added, the principle of a national minimum wage was the subject of fierce debate.

Empirical evidence did not support the neo-classical economic view that minimum wages are bad for the labour market, destroying jobs, especially for the young, and so harming the very people they are designed to help, he said.

Although the British Low Pay Commission's recommended figure of £3.60 was very close to the half male median earnings figure argued for by many trade unions, Professor Bain said he did not believe in relying on a mechanistic formula in setting a national minimum wage.

Instead, the commission was concerned to "consider the dynamic nature of the labour market, to have regard to the wider economic and social implications; the likely effect on the level of employment and inflation; the impact on the competitiveness of business, and the potential impact on the cost to industry and the exchequer".

The commission was clear that risks to the economy rather than definitions of a "living wage" should determine the level at which the national minimum wage is set, he said. While some people were arguing for a £5 an hour figure, such a policy "would have a devastating impact on the economy.

The national minimum wage was not designed to be the sole policy to eradicate poverty linked with low pay, he said. It could best tackle poverty by not risking jobs and being linked with other measures on tax and benefits, such as the new Working Families' Tax Credit starting this month in Britain. It raises the effective hourly rate of a lone parent on the minimum wage to £5.81.