What is the price of a minimum wage?

Over the next few weeks the serious horse trading will take place between the social partners on the rate at which a new national minimum wage will be introduced next April.

As the impact study released by the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, last week shows, a national minimum wage of £4.40 (€5.60) will have much less effect than originally feared.

The study, commissioned by the Government's Inter-Departmental Group, suggests a rate of £4.40 per hour will increase overall wage costs by about 1.6 per cent and reduce the expected growth in employment over the next decade from 18.9 per cent to 19 per cent.

To put this in context, annual wage rises have averaged 2.5 per cent to 3 per cent under national agreements and jobs growth would be 9,500 to 17,400 less than anticipated by the year 2010.

The study also predicts a long-run increase of 1.4 per cent in consumer prices and a 2.85 per cent increase in wage costs.

Even if the national minimum wage is struck at £5 an hour - the original rate sought by the Irish Congress of Trade Unions - the study suggests the national pay bill would still only increase by about 3 per cent, although perhaps twice as many workers would benefit to some degree from the measure.

These figures are markedly lower than those cited in a similar impact study for the National Minimum Wage Commission published in April 1998.

Both studies were based on research conducted primarily by Mr Brian Nolan of the Economic and Social Research Institute. The differences in the findings are startling.

For instance, the IDG study finds only 13.5 per cent of all employees now earn below the proposed £4.40 rate, compared with 23 per cent in the original study.

This suggests the tightening labour market has already forced most employers to increase wages.

Companies such as Bewley's and McDonalds have recently struck rates of more than £4.40 an hour for permanent staff in Dublin, where competition for staff is most fierce. In the construction industry a thorough review of pay rates is under way, following the highly disruptive unofficial dispute by scaffolders.

And the trade union Mandate has negotiated a review of pay rates for shop-workers employed by most of the major multiples in the republic in anticipation of the minimum wage legislation.

Even one of the strongest opponents of the legislation, the director of the Small Firms' Association, Mr Pat Delaney, accepts that wage rates are increasing, even in traditionally low-paid sectors from which much of the association's membership is drawn. His objection to setting a rate is that it is based on political imperatives rather than higher productivity.

"It will not be a major problem in Dublin, where the economy is booming and people have to raise rates anyway. But it will affect cost competitiveness in the regions. We've already seen what this means in Donegal in the past year," he says, in a reference to redundancies at Fruit of the Loom.

Mr Turlough O'Sullivan, director of industrial and employee relations for the Irish Business and Employers Confederation, also opposes the legislation, although most employers pay well above the proposed rate.

Again, his opposition is based on the potential effect it will have on competitiveness and he argues that it is not the way to tackle poverty.

Both IBEC and the SFA argue that setting a rate will have a disproportionate effect on weaker sectors where many of the low paid are concentrated, such as textiles, retailing, personal services and tourism. The report does indeed predict that wage costs in these sectors could rise by 5 to 10 per cent.

Mr O'Sullivan takes "some comfort" from the fact that Ms Harney "is on record that the rate should not exceed £4.40 per hour in the Year 2000 and that repercussive claims must be totally debarred". The unions naturally take a different view. SIPTU's head of research, Mr Manus O'Riordan, says that £4.40 was based on 1997 figures and equates to around £4.70 now. Its general secretary, Mr John McDonnell, has said unequivocally that the union will seek £4.80 by April 2000, when the minimum wage is due to be introduced.

The general secretary of Mandate, Mr Owen Nulty, is still looking for £5 an hour, the original figure sought by congress. Mandate has thousands of members in the retail trade with starting rates as low as £3.40 an hour.

Mr Nulty, who is one of the congress representatives involved in consultations with the IDG, says the report proposed £4.40 on the basis that it was two-thirds of median earnings in 1997.

Nor is it simply private sector unions with low-paid members who have a vested interest in securing a high minimum wage. Clerical officers in the Civil Service start at £171.21 a week. This is exactly 40p less than everyone will earn if the minimum wage is £4.40 per hour.

But if the minimum wage was set at £4.80 then they would be entitled to £187.20 a week. There is a complicating factor, however. Civil servants and thousands of low-paid white-collar workers in the private sector have a 35-hour week. On this basis, a minimum wage of £4.40 an hour is only £154 a week and a rate of £4.80 is only worth £168.

Talks are continuing between the social partners on how to factor these workers into the equation.

The general secretary of the Civil and Public Service Union, Mr Blair Horan, believes, however, that another problem that will not go away is the significant anomalies regarding clerical supervisory grades in areas such as the Civil Service and retail trade. When the ICTU first sought £5 an hour it foreswore "knock on" claims for higher-paid workers. Mr Horan, a member of the ICTU executive, says this remains the overall position, but there would have to be "logical adjustments" for other low-paid workers to deal with pay anomalies.

What Mr Horan calls "logical adjustments" are dubbed "repercussive claims" by Mr Delaney. He predicts these will be a major problem for members after April.

While the employers are relying on the Tanaiste to hold their line, anaiste, the unions will look for succour to the project's originator, the Taoiseach, Mr Ahern. What began as an election bid to wrongfoot the Rainbow Coalition in 1997 is now a central issue in any talks on a successor to Partnership 2000.