Why is a large increase in the minimum wage being recommended?

What is the minimum wage?

It is the minimum national level that employees must be paid on a per-hour basis and it currently stands at €11.30. It increases every year on the basis of recommendations from the Low Pay Commission, a small group with representatives of businesses, unions and economic exports. The Government makes the decision, but generally accepts the commission’s view.

What have they recommended for 2024?

For next year, The Irish Times reports today that the commission is recommending a 12 per cent increase, or €1.40 in cash terms, bringing the minimum wage to €12.70. This is a much bigger than usual increase; the increase this year was 80 cent, for example. We do not know the detail of the Low Pay Commission’s reasoning, but the rise is likely to have been driven by two things: one, the high rate of inflation; the second, an agreement to increase the minimum wage in the years up to 2026 to the level of what is called the living wage.

What is the living wage?

The living wage is an income level giving people enough to live and buy necessities. There is some disagreement on the best way to measure it. The Government formula, recommended by the commission, is to aim for a level equal to 60 per cent of average wages across the economy. This is calculated at about €13.10 at the moment, compared with a minimum wage level of €11.30. And the target will rise over the next few years as earnings rise across the economy. The idea is to bring the minimum wage to the 60 per cent level of average wage by 2026 and then rename it as a living wage. The Government committed to this last year.

What will the 2024 increase mean?

It would increase the weekly earnings of someone on the minimum wage who is working 39 hours a week by just under €55 from next January, so the increase is significant. Many minimum wage employees work atypical hours or work part-time, so the impact will vary. There is a total of 164,000 people out of a workforce of 2.4 million on the minimum wage, many in sectors such as retail and accommodation.

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Does everyone get the minimum wage?

There are very few exceptions. People under the age of 20 get lower minimum rates depending on their age. There is a consultation process under way at the moment on this under the aegis of the commission, so new proposals may come forward here. There are about 20,000 workers under the age of 20 on the minimum wage level. Apprentices also have separate rates. Sole traders can employ someone from their own family and avoid paying them the minimum. But apart from that it more or less applies across the board.

Will the increase have a knock-on impact?

Probably, yes. It will certainly lead to pressure on wages for those earning a bit above the minimum wage at the moment. It will also be interesting to see how it plays into more general wage demands. However, special factors do apply to the minimum wage, including the move to a living wage.

What will trade unions and businesses think?

We will have to wait and see. The Irish Congress of Trade Unions (Ictu) had sought an increase of €2 per hour, but it will still presumably recognise the significant 12 per cent increase. Businesses will have known a larger-than-usual increase was on the way, but may still be taken aback by the scale of the increase. They are likely to point to the host of additional costs facing businesses, particularly small and medium-sized enterprises (SMEs) which will also have to account for pension auto-enrolment, possibly another increase in parental leave and the general rise in costs.