The minimum wage will be phased out by 2026 and replaced by a new living wage, under new plans presented to Cabinet on Tuesday.
Tánaiste Leo Varadkar brought a memo to Cabinet proposing the living wage be set at 60 per cent of the median wage in any given year.
The national minimum wage is currently €10.50 an hour.
Depending on the existing economic conditions of the time, it is proposed to give the Low Pay Commission discretion to introduce the full living wage faster or slower than the four years.
While the exact living wage would depend on the median wage in a given year, the Department of Enterprise gave indicative figures illustrating how progress to a full living wage would be achieved by 2026 based on current projections.
That would see the living wage set at €12.17 an hour in 2022, €12.54 in 2023, €12.92 in 2024, €13.30 in 2025, and €13.70 in 2026. Mr Varadkar said he intends to bring his plan before various interested parties, including employer and worker representative groups, unions and the public, for consultation before bringing a final plan back to Government.
Making work pay
Speaking after Cabinet, Mr Varadkar said Ireland is almost at the point of full employment but “it is crucial we also make sure that work pays”.
“So whether you get up early in the morning or work late at night, if you are going to do 38–40 hours a week, we should make sure that you have enough to live on and have a decent standard of life.”
He said that the living wage could be implemented from next January.
Mr Varadkar said if there was a living wage today it would be €12.17. He said implementing a living wage above the threshold of 60 per cent of the median wage could cause viability issues for businesses.
He said when the original minimum wage was introduced decades ago it was also roughly 60 per cent of the median wage. However it has not kept up with average earnings.
Asked whether 60 per cent of median earnings constitutes a paltry sum, particularly when inflation is running high, Mr Varadkar said that “everyone’s circumstances are different. At the moment we have one of the highest minimum wages in the world, however if you factor in the cost of living, it comes in around sixth or seventh but still quite high relative to other countries”.
He said if the Government went too high too fast in increasing the wage, businesses could close or people could see their hours cut.
Legislation will be required down the line for the new measures, because the minimum wage will be effectively phased out, but the Government can move ahead with implementing the proposals in the meantime.