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
“