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4 February 2010 Edition

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No level to which they won't stoop

Minimum wage next in line for chop


AND SO the battle is on. The cuts to social welfare and child benefit in Budget 2010 saw the government cross the Rubicon to a place where no ‘right’ is safe anymore. That means that the long-time target of employers’ groups, business lobbies and vested interest politicians – the minimum wage – is back on the table for discussion.
Followers of economic news will tell you they are surprised we have gotten this far with the wage (€8.65 an hour) intact. The first real public salvo against it came in 2008. Patricia Callan of the Small Firms Association baldly stated that Ireland had ‘lost the plot’ on competition and should immediately reduce the wage to €7.65. She was roundly dismissed at the time by union leaders as having lost the plot herself and no more was said on the matter. But these were union leaders safely ensconced in social partnership – any notion of cuts to the minimum wage could be dismissed out of hand.
2009 was a new year and with unemployment growing at an exponential rate, and a public seeking answers and solutions, the race was on to attribute blame. Questions are still being asked. Why are we losing jobs and why aren’t we competitive anymore? It can’t be that we have a government more interested in investing billions into a failed financial system than into saving and creating jobs (think Waterford Crystal and SR Technics). It can’t be that that same sector ceased almost all lending to business last year. It can’t be that local service costs and rates were allowed to balloon in the boom years to accommodate a lack of central government funding. It can’t be the lack of physical infrastructure across the state, from half built motorways to a lack of broadband. It isn’t the failure of the government to put conditions on the enormous grants paid to the likes of Dell and other multinationals to stop them pulling out of Ireland after receiving millions in taxpayers’ money. And it certainly cannot be the out-of-this-world salaries and bonuses CEOs and top managers decided to pay themselves when the going was good.
All or none of these may have factored in the 200,000 job losses from 2008 to 2009, but you’d never guess if you listened to the employers’ groups.
The fault lies at the door of the minimum wage. €8.65 an hour. €346 a week. Even the government has jumped aboard the reduce-the-gravy train and are spouting the same ‘facts’ as Callan and ISME. These are that Ireland’s wages are among the highest in the world, that our minimum wage is the second-highest in Europe (after Luxemburg), that Irish employers have it the hardest of everywhere and really, we the workers, should be paying them for the privilege.
The dirty little secret is that the ‘facts’, the real facts, do not support these assertions and never have. In 2008 when the claims were kindled, UNITE the union did a good job of looking at the actual statistics. They found the following:

  • The Organisation for Economic Co-operation and Development (OECD): Found that in the private sector, Irish wages rank in the bottom half of the EU-15, lying 11th and falling nearly 11% behind the average EU wage.
  • EU AMECO: In this database, maintained by the EU’s Economic and Financial Affairs Directorate, Irish industrial wages lie 11th as well, nearly 7% behind the EU-15 average.
  • The US Bureau of Labor Statistics: The American database shows that Irish manufacturing wages are over 17% below the EU-15 average (and an incredible 42% below Norway’s average manufacturing wage).

The reports dig deeper, looking at Irish purchasing power, or living costs. When this analysis is applied in the OECD examination, Irish wages end up barely higher than Spain, falling from 11% behind the average EU15 to 20%.
Percentages and facts have all been deliberately confused by government and business groups and repeated, mantra-like, to drive home the fact that Irish wages are too high.
An employee studying all the information about their alleged high wages would be astonished to discover that not only are their wages not that high, but that Irish employers contribute among the least to their workers’ social security payments in Europe.
For good measure, the UNITE study found that in competitiveness reports, Ireland sat behind nine other countries in the EU 15 and that they all had higher wage levels than Ireland.
The problem is, the same people who have targeted social welfare also have the minimum wage in their sights and they have just been waiting for an opportunity to push their agenda down our throats. The recession has afforded them that chance. In a time of full employment and high revenue, the line ‘we need to make poor people live on less’ would not be well received. In a recession, that can be dressed up as ‘we need to make poor people live on less so we can keep people in jobs and save the country. Be patriotic – take a minimum wage cut!’
It’s not naïve nor economically illiterate to want to safeguard this wage and social welfare. Speaking purely economically, cutting the spending power of those who consume the most in a society dependent on consumption taxes, is utter madness. It will further contract a contracting economy. Speaking from a societal perspective, it is just so damaging. €346 a week is not a lot of money for 40 hours work. Take the cost of living. The average mortgage is €200 a week and rent for a two-bed apartment the same. Childcare in Dublin is on average €150+ a week. Gas/ESB bills run at about €150 a month. Bus travel, €20+ a week. Grocery bills, €100+ a week. These are just a small sample of every day expenses faced by people. They’re not scientific by any means, but a rough and perhaps cautious approximation. Nobody on the minimum wage could cope with these expenses and that is why the state runs the Family Income Supplement (FIS) scheme - effectively a state run subsidy for low paying employers. If the minimum wage was to drop to the Small Firms Association’s demand of €7.65 an hour, applications to FIS could end up through the roof.
It doesn’t take a genius either to realise that if the minimum wage comes down, that gives the government license to again reduce social welfare rates. Welfare rates that fall just short of the basic working week’s pay are not sustainable. And that’s before we deal with the reductions in minimum wage that are already allowed for under-18s and trainees.
These effects are not being talked about. These groups have an agenda and their goal is to make sure that coming out of this recession, with a broken social partnership, low wages will be a feature for years to come. That’s why this battle is so important. If the minimum wage goes, we can be sure of one thing – it will only be the start of the erosion of workers’ rights in Ireland.

Also see: Taoiseach ducks Dáil challenge by Sinn Féin TD to protect minimum wage 

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