Factsheet for measure
IE-2021-16/1959
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Updated
– measures in Ireland
Agreement on terms of reference for report on move to Living Wage
Background information
In April the Government agreed terms of reference for a report by the Low Pay Commission on a move to a Living Wage. The Programme for Government commits to “progress to a living wage over the lifetime of the Government. The Tánaiste has also stated that a living wage could be a legacy from the pandemic.
He said: “The pandemic has caused us to redefine frontline or essential workers and to reconsider the value we place on their work and the reward they should get for that work.
“Traditionally, when we thought of frontline or essential workers, we thought of nurses, doctors, Gardaí or firemen. Generally, people working in the public service with relatively well paid, secure and pensionable jobs. Now with think also of retail workers, drivers, security guards, transport workers and cleaners.
“One of the legacies of the pandemic must be a more inclusive society that rewards work and enterprise better. That means better terms and conditions for lower paid workers. Moving to a living wage is an important part of this. Of course, in doing so we need to recognise that many businesses are closed and are now loss-making, so we must do it in way that that does not cost jobs or cause people’s working hours to be reduced. That would be counter-productive.”
Content of measure
The Low Pay Commission study will examine the design of a living wage in an Irish context. It will consider the policy, social and economic implications of a move to a living wage and the process by which Ireland could progress towards a living wage.
It will examine international evidence, different calculation methods and policy implications of moving to a living wage in Ireland.
The Commission will complete the report in the second half of 2021 and will submit it to the Tánaiste for consideration.
Terms of Reference for Living Wage Study.
The report will take account of:
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National and International experience of a Living Wage
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A Living Wage in Ireland
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Policy implications of moving to a Living Wage
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Moving towards a Living Wage in Ireland
Updates
The following updates to this measure have been made after it came into effect.
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15 June 2022
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In June 2022, a public consultation was launched to seek views on the Low Pay Commission recommendations and on a ‘Strawman Proposal’ which provides an illustrative example of how a living wage might be phased in. The consultation is intended to inform the proposals the Tánaiste and Minister for Enterprise, Trade and Employment intends to bring to government on the phasing in of a living wage.
The submission from the SIPTU union recommended:
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That a fixed-threshold be used to target the implementation of the Living Wage.
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That the Living Wage is set at 66% of the median wage
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That the Living Wage be introduced in two phases: the first phase involves raising the National Minimum Wage to 60%t of the median wage within three years; in the second phase the National Minimum Wage to be raised to the Living Wage within three years – that is, to 66% of the median wage.
Employer group Ibec said it had highlighted the challenges presented by the lack of coordination in introducing this measure at a time when employers are also facing multiple other legislative costs and the impact of inflation in the economy.
These costs are on top of the existing significant cost pressures facing Irish companies, with energy, commodity, and transport costs challenging profitability for many. Whilst many of the additions to the so-called Social Wage have merit on their own terms, if phased correctly, they represent a major change in the Irish labour market model. The ongoing lack of co-ordination regarding their phasing is causing major concern amongst our members – particularly in the current economic environment.
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14 June 2022
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In June 2022, the Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar TD today outlined his proposal outlined plans to introduced a new living wage, phased in over 4 years, starting in 2023. The wage will be 60% of median wage proposed as new living wage as per the recommendations of the Low Pay Commission.
He stated: “From 2026, we will no longer have a national minimum wage, the living wage will be the floor and will be mandatory for all employers.”
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31 March 2022
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In March 2022, the Low Pay Commission published a report setting out a number of recommendations including:
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Progressing to a living wage through a gradual adjustment to the minimum wage.
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Adopting a fixed threshold approach for the calculation of a living wage.
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Setting the fixed threshold at 60% of the median wage.
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That the adjustment to a living wage of 60% of median wage is made within a period of no more than five years. This does not rule out a shorter timeline.
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After the 60% of the median wage target has been reached, subject to an assessment of the impact of the progression to the 60% target finding no significant adverse effects on employment, and the increased availability of international evidence on the impact
of increases above the 60% threshold, the Commission should assess the economic practicality of gradually increasing the targeted threshold rate towards 66% of the median wage and make recommendations accordingly.
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The existing National Minimum Wage youth rates should also be applied to a living wage. However, the Low Pay Commission further recommends it reviews the issues around retaining, removing, or expanding youth rates and make recommendations to the Minister for Enterprise, Trade and Employment on this issue.
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No sectoral variation in the living wage.
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Consideration is given to how employers with a substantial proportion of minimum wage employees can be supported during the progression to a living wage. It is recommended that the details of such supports should be discussed between the relevant representative groups as facilitated by the Labour Employer Economic Forum (LEEF).
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Use of measure
N/A
Target groups
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Workers
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Businesses
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Citizens
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Applies to all workers
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Applies to all businesses
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Does not apply to citizens
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Actors and funding
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Actors
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Funding
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National government
Social partners jointly
Trade unions
Employers' organisations
Other social actors (e.g. NGOs)
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No special funding required
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Social partners
Social partners' role in
designing the measure
and form of involvement:
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Trade unions
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Employers' organisations
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Role
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Consulted
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Consulted
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Form
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Consultation through tripartite or bipartite social dialogue bodies
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Consultation through tripartite or bipartite social dialogue bodies
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Social partners' role in the
implementation, monitoring and assessment phase:
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Unknown
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Main level of involvement: Unknown
Involvement
The social partners have members on the Low Pay Commission. The Commission has been asked to investigate how Ireland can move towards a living wage and will report in the second half of 2021.
The Low Pay Commission is made up of representatives of the social partners and other stakeholders and makes recommendations to Government on the rate of the National Minimum Wage.
Views and reactions
The Small Firms Association has said now is not the time to discuss putting additional costs on business.
Sven Spollen-Behrens, Director of Small Firms Association said: "Small businesses are dealing with a huge amount of anxiety and the path to reopening seems to be getting longer every day. They need to know what this pathway will look like and they need to know sooner than later.
"We will see increased minimum wage, increase in family leave, statutory sick pay will be introduced, we have Brexit costs and now this morning the idea of a living wage being introduced. This is the wrong time for this."
Laura Bambrick, head of social policy and employment affairs at the Irish Congress of Trade Unions (ICTU), said the current minimum wage is not enough to protect employees from the risk of poverty. For a lot of people there will “never be a good time” to have a conversation regarding minimum living wages, Ms Bambrick said.
Sources
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22 February 2021: Low Pay Commission
(www.gov.ie)
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15 April 2021: Work on progressing to living wage to formally begin – Tánaiste
(enterprise.gov.ie)
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15 April 2021: Government asks Low Pay Commission to design ‘living wage’ in Irish context
(www.irishtimes.com)
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16 April 2021: Business group criticises the timing of living wage debate
(www.independent.ie)
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31 March 2022: Publications from the Low Pay Commission
(www.gov.ie)
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14 June 2022: Tánaiste outlines proposal to bring in living wage for all
(enterprise.gov.ie)
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15 June 2022: Public consultation on the phase in of the living wage
(enterprise.gov.ie)
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20 July 2022: https://www.siptu.ie/services/policyresearchunit/siptupolicysubmissions2022/name_23072_en.html
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28 July 2022: Government launches public consultation on plans to phase in a new Living Wage by 2026
(www.ibec.ie)
