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Ireland's political and cultural magazine
32 February 2015
L
OW pay is endemic and entrenched in the Irish
economy, and the situation for many low paid
workers can only be described as grim. The gov-
ernment is setting up a Low Pay Commission
and introducing a range of legislative changes
to address a number of issues relating to low pay. Will
it be enough to reverse the trends of erosion in workers
terms and conditions?
The incidence of low pay refers to the share of work-
ers earning less than two-thirds of gross hourly median
earnings. Median earnings is the level of earnings which
divides the employees into two equal groups. Half earn
less than the median and half earn more. Recent inter-
national data from the OECD show that the incidence of
low pay in Ireland was among the highest in the OECD
at 21.8% (more than 1 in 5 Irish workers) and this has
increased since 2003 (See Chart 1).
Research by Eurostat (2012) calculates the low pay
threshold in Ireland at €12.20 per hour, which is paid to
a single adult. The Eurostat research uses 2010 data, and
incomes have continued to fall since then, which means
the low-pay threshold will also have fallen
in recent years. Using the latest CSO income
data for 2013 it is possible to estimate that
the low-pay threshold is now approximately
€11.50, which is very close to the ‘living
wage’ rate of €11.45.
The low-pay threshold of around €11.50
is significantly higher (over 30% more) than
the minimum wage, which is set at €8.65. The
minimum wage is the wage floor but this is
not sufficient for working people to make ends
meet. 12.6% of adults who are employed are
living in poverty. A growing number of work-
ers earn so little that they qualify for Family
Income Supplement (FIS), an in-work, means-
tested State benefit for low-income working
families with children.
The Department of Social Protection’s annual report
shows that in 2013 the number of working families
in receipt of FIS increased by almost 30% to 42,000
families, supporting over 90,000 children. While FIS
provides essential income support to families on low pay,
is it being used as a State subsidy to low-paying employ-
ers who could pay their workers more?
There is a gender dimension to low pay, with the
Eurostat research finding that almost one quarter
(23.6%) of women are in low paid jobs compared to
17.6% of men. Education is a factor influencing the
extent of low pay. Over 30% of workers with a low level
of education are in low paid jobs compared to 13% of
workers with a higher level of education.
The type of contract of employment impacts on the
prevalence of low pay. Twenty-eight percent of workers
on fixed-term contracts are on low pay, compared to 20%
of workers on contracts of indefinite duration. Zero-hour
contracts have become increasingly common. These con-
tracts oblige workers to be available at the employer’s
discretion, with no guarantee of a minimum number
of paid hours per week. They are particularly prevalent
in the catering, hospitality and the fast food
sectors. Workers on zero hour contracts are
more likely to be on low rates of pay with no
minimum number of hours guaranteed.
The Low Pay Commission is expected to
consider a range of issues including:
• The changes in earnings since the minimum
wage was last increased in 2011.
• The unemployment and employment rates
generally.
• The expected impact of a change in the mini-
mum wage on employment, the cost of living
and national competitiveness.
• Changes in income distribution and cur-
rency exchange rates.
The Low Pay Commission will be made up
of employer and employee representatives,
labour-market experts and civil-society organisations.
It will be set up on a non-statutory basis initially pend-
ing an amendment to the National Minimum Wage Act,
expected in 2015. The government has given approval to
legislate in 2015 for an improved framework for workers
who seek to better their terms and conditions where col-
lective bargaining is not recognised by their employer.
These are positive and necessary steps required to
improve the terms and conditions of low-paid workers.
While the Low Pay Commission does not appear to have
the scope to deal with the issue of zero-hour contracts,
research has been commissioned by the Department of
Enterprise, Jobs, and Innovation into the prevalence of
zero-hour contracts and the impact of such contracts on
Low pay
threshold now
approximately
€11.50, close to
the ‘living wage’
of €11.45
21% of Irish workers are low-paid
SINÉAD PENTONY
Family Income
Supplement is
being used as
a State subsidy
to low-paying
employers who
could pay their
workers more
“
February 2015 33
employees. Hopefully this will highlight the exploita-
tive nature of these contracts and pave the way for their
abolition.
The UK experience provides some useful lessons. A
Low Pay Commission was established there in 1998 to
address issues including: eliminating ‘extreme’ low pay
and introduce a wage-floor; addressing the situation
whereby many people on very low pay who also qual-
ified for in-work benefits were subsiding low-paying
employers; and reducing the incidence of child poverty
by increasing family incomes.
The UK Low Pay Commission is charged with balanc-
ing the need for wage growth with concerns about the
impact on employment, and enjoys widespread industry
support as a result. However, its role is now seen as too
narrow and short term. Some say it should have been
called the Minimum Wage Commission as that is its main
remit. A broader and more ambitious strategy is required
to tackle low pay in the UK, the prevalence of which has
increased in recent years.
The Irish Low Pay Commission should have a broad
‘decent work’ agenda, which is more than setting wage
rates. Fragmentation in the world of work needs to be
addressed – characterised by job insecurity, non-fam-
ily friendly working conditions, and a lack of quality
opportunities. The planned introduction of collective
bargaining rights and approval for new legislation that
will replace sectoral wage-setting mechanisms will help
address some of the issues on this agenda.
However, the protection of part-time workers’ terms
and conditions remains a big issue. Mandate and the Irish
Congress of Trade Unions argue that the EU Directive on
the protection of part-time workers has not been fully
incorporated in the relevant Irish legislation. Unions are
concerned that in the current climate, employers can too
easily reduce the size of their full-time workforce, and
increase the proportion of part-time workers.
The Code of Practice, designed to give effect to this
Directive in Ireland, merely provides for changes in
working hours of employees to be agreed between
employer and employee. In effect, employers have a veto
in this regard. Further, even when conditions improve,
many part-time workers may be denied the opportunity
to transfer to full-time contracts. Unless action is taken
to fully incorporate the EU Directive on part-time work
there is likely to be a growing incidence of precarious
work in the Irish economy.
The Irish Low Pay Commission should engage in build-
ing an evidence base and setting targets to reduce low
pay. The government recently set a 3 year target for full
employment by 2018 to illustrate political commitment
to creating more jobs. The same commitment should be
applied to low pay, with a 3 year government target to
reduce the incidence of low pay from 21.8% to the OECD
average of 16.3%.
The Irish Low Pay Commission should take a lead role
in developing the research and evidence base on low pay
and its wider impacts. This is central to an informed
debate on this issue and the policy measures that are
required to reduce the incidence of low pay. The evidence
base should include the identification of profitable sec-
tors in the economy and place the burden of proof on
employers to provide evidence to support any claims
relating to ‘inability to pay’.
The Irish Low Pay Commission should aim to have a
broad remit on matters relating to pay, and be much more
than just the minimum wage plus a cent. This means cre-
ating the conditions for more low-paid workers to be paid
a ‘living wage’. Ireland has joined a growing international
living-wage movement and a Living Wage Technical
Group was established in 2014.
A living wage is intended to establish an hourly wage
rate that should provide employees with sufficient
income to achieve an acceptable minimum standard of
living. The living wage for Ireland is €11.45 per hour.
The government should use its power of procurement to
ensure that all government funded bodies and contrac-
tors pay a ‘living wage’.
Many in Government have lauded 2015 as being the
year of the pay rise. We will have to wait and see if 2015
is the year of the pay rise for the workers who need it
most. •
Source: OECD Employment Outlook 2014
30.025.020.0
2012
2002
15.010.05.00.0
Belgium
Portugal
Finland
Switzerland
Chile
Italy
Greece
Japan
Spain
New Zealand
Iceland
Mexico
Austria
Hungary
Germany
Australia
Slovak Republic
Denmark
Czech Republic
U.K.
Poland
Canada
Ireland*
Israel
Korea
OECD AVERAGE
Chart 1: Incidence of low pay in the OECD
The UK Low Pay
Commission should have
been called the Minimum
Wage Commission as
that is its main remit.
The Irish Low Pay
Commission should have
a broad ‘decent work’
agenda
“
