Everybody loses if we don’t pay the living wage
Our minimum wage falls far short of satisfying its core aim of being a fair and sustainable
As a society are we content that low-paid workers enjoy a sub-par existence in order for us to maintain our lifestyles? Photograph: iStock
The living wage is now calculated at €12.30 an hour, an increase of 40 cent per hour on the last 12 months. By comparison the national minimum wage set by the Government and offered to 137,000 workers in the State, remains steady at €9.80 – a difference of €2.50 per hour.
The living wage is calculated by the Living Wage Technical Group, which is made up of academics and researchers from University College Dublin (UCD), the Nevin Economic Research Institute (NERI), Siptu, and Thinktank for Action on Social Change (TASC).
They cite the “current housing crisis and associated increases in rent levels” as a main driver in the increase. Since the group’s report in July 2018, which advocated for a living wage of €11.90, a Dublin worker’s weekly housing costs have risen by €21.80.
The living wage is defined as the required amount to maintain a Minimum Essential Standard of Living (MESL), which is identified by the Vincentian Partnership for Social Justice (VPSJ). This is the minimum threshold below which no individual or household should live.
The group believes that the lowest paid workers should live about subsistence levels, and have their physical, psychological and social needs met by their earned income. This is not a radical idea.
Ireland is a rich country. Our economy is once again worryingly close to being described as booming. We are approaching full employment. Wage growth for non-minimum wage workers is nominally strong, if not quite adequate in real terms.
And yet, as a society we insist on maintaining a minimum wage which is perversely suboptimal. Our minimum wage of €9.80 falls far short of satisfying its core raison d’être of being a fair and sustainable wage. There is nothing fair nor sustainable about charging 137,000 of Ireland’s lowest-paid workers €2.50 every hour for the joy of working.
The difference between the living wage and the minimum wage of €2.50 is not an imaginary figure. The minimum wage worker’s desire for a decent standard of living does not evaporate. It it must be funded in some other way. The extra €2.50 per hour worked must be found somehow.
Realistically, the difference is subsidised one of three ways:
– By the State, through social welfare payments such as the Family Income Supplement.
– By the family and friends of the worker, such as the parents of the 460,000 adult children who live at home because they cannot afford to move out.
– By diminished living conditions of the worker, such as skipping meals in order to pay rent on time or cover their bills.
The only certainty is that the shortfall is not provided by the employer, who has benefited from the labour of the employee.
Role of consumers
Consumers we must accept our share of responsibility for the maintenance of barely subsistence level wages in 2019 Ireland, as we are also the net beneficiaries of low wages. Just as employers rely on the unnaturally low wages of the minimum wage employee to drive profitability, we need them to forego an acceptable standard of living so that we can purchase cheaper products.
When we buy our morning coffee, the barista serving us does not make enough to cover her costs.
When we call our numerable service providers to complain about the cost of a bill, the person answering us does not make enough to cover her costs.
When we buy a pint, stay in a hotel, do our weekly shop , go clothes shopping, attend a tutorial in college – when we live in Ireland – the person serving us most likely cannot cover her costs.
The gains in our standard of living are balanced by her loss.
Discussions around a living wage often invoke the spectre of unemployment and reduced competitiveness, yet the real world experience fails to validate these fears.
Whilst it may be suboptimal, our minimum wage is still the fourth-highest in the EU, and since its induction has been increased 10 times in 19 years. But the Low Pay Commission has found it has not had a meaningful effect on employment.
Similar results have been observed in the US – notably researched by economists David Card of the University of California in the 1990s, and more recently by Arindrajit Dube of UMass Amherst, who both found a high minimum wage had no meaningful effects on employment.
As for competitiveness, the World Economic Forum ranks Ireland 23rd (out of 140) citing strong worker rights as key to our strength, and our market size (naturally) and subpar infrastructure as the main draws on competitiveness. No mention of the minimum wage.
The reality of 137,000 workers earning €9.80 (or less) is enough people to represent an ethical problem for Irish consumers and employers, yet small enough that to raise their wages to a fair and sustainable level would not torpedo the Irish economy.
Which poses the question: As a society are we content that low-paid workers enjoy a sub-par existence in order for us to maintain our lifestyles? If so, please thank the next minimum wage worker you encounter for their sacrifice. That’s only fair, they are your patron.
If not, reconsider your choices and choose not to be subsidised by Ireland’s poorest workers.
Fionn Rogan worked in Insight and Strategy as part of the Youth Lab at marketing agency Thinkhouse. He is studying economics