Government announces another increase in national minimum wage

In December 2006, the Minister for Labour Affairs, Tony Killeen, announced that he had accepted a Labour Court recommendation to increase the national minimum wage in Ireland to €8.65 from 1 July 2007.

Following an increase in the national minimum wage (NMW) from €7.65 to €8.30 per hour from 1 January 2007, a further rise is to follow from 1 July 2007, resulting in a new wage rate of €8.65. The increases have been approved by the Minister for Labour Affairs, Tony Killeen, who gives effect to the changes through a statutory order.

The sub-minimum rates – which may be paid to certain categories of employees such as people under 18 years of age, first-time job entrants, or those engaged in structured training or study – will also be increased pro rata from these dates.

Labour Court recommendation

The two main social partners in the area of employment, the Irish Business and Employers’ Confederation (IBEC) and the Irish Congress of Trade Unions (ICTU), had been unable to reach agreement on the minimum wage increase; as a result, the issue was referred to the Labour Court in accordance with the provisions of the previous national agreement, [Sustaining Progress (525Kb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/SustainingProgressSocialPartnershipAgreement2003-2005.pdf). Under this agreement, should the social partners fail to reach consensus, the Labour Court must be asked to adjudicate on the minimum wage rate. The same process will apply under the current 10-year national partnership agreement, [Towards 2016 (2.9Mb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/Towards2016PartnershipAgreement.pdf), which was ratified by the social partners in September 2006 (IE0606019I).

Minister’s decision

However, the final legal decision on increasing the minimum wage rests with the Minister for Labour Affairs, under the ambit of the Department of Enterprise, Trade and Employment. On this occasion, Minister Killeen consulted with the Economic and Social Research Institute (ESRI) before giving his formal decision on the Labour Court’s minimum wage increase recommendation. The minister outlined that he was obliged to consider the impact of any pay rise on competitiveness and the economy.

Commenting on the decision to increase the hourly minimum wage, Minister Killeen stated: ‘I am happy that it has been possible to complete the process in time to meet the deadline of 1 January 2007 for the adjustment of the minimum wage as set out by the social partners in the Social Partnership Agreement Towards 2016. The inability of the social partners themselves to agree the increase made for particular pressures in this regard.’

Justifying his decision, the minister added: ‘it has been 20 months since the minimum wage was last increased. Having regard to this and to the period for which these new rates can be expected to remain in force, I believe that these increases provide for a reasonable annual rate of increase in the minimum wage over the period 2006 to 2008 as a whole.’

However, Minister Killeen noted that he was ‘aware of concerns that adjustments of the minimum wage with increases that imply an element of “catching up” can cause unwelcome uncertainty for employers and, indeed, for employees’. He therefore added that he intends to raise with the social partners the issue of how the adjustment process might be better managed to meet these concerns.

Reaction of social partners

Prior to the minister’s decision, IBEC’s Director of Industrial Relations, Brendan McGinty, warned that: ‘given the current rate of the NMW compared with our international competitors, recent budget changes benefiting those on the NMW and the continuing risks to competitiveness, there is no justification for adjusting the NMW by more than the terms of Towards 2016.’

Mr McGinty claimed that Ireland already had the highest national minimum wage rate across Europe, prior to the proposed new increase from 1 July. He added that: ‘this increase will have a detrimental effect on those sectors where the NMW is most prevalent, where labour costs are a high percentage of operating costs and productivity growth cannot offset this rate of increase.’

Meanwhile, the new wage rise received a muted response from the ICTU, which described the increase as being ‘at the lower end of what is acceptable’. The ICTU had called for a minimum wage ratio amounting to 60% of average earnings, which would have resulted in a new minimum wage of €9.35.

Commentary

The national minimum wage rate was first introduced in April 2000, when it was set at £4.40 (Irish punts) (€5.59) per hour. The latest wage hike represents the fifth increase since that time. The percentage of workers on the national minimum wage has fallen substantially from 21% before its introduction in 2000 to 5.2%, or 70,500 workers, in the period 2005–2006 (IE0110103N).

Brian Sheehan, IRN Publishing