Ireland set to introduce a national minimum wage in 2000

A single national minimum wage is set to be introduced in Ireland by 2000, following the publication in April 1998 of a report by the National Minimum Wage Commission, established by the Government in summer 1997. The proposed hourly rate of IEP 4.40 per hour has been largely welcomed by the Irish Congress of Trade Unions, but has been heavily criticised by all employer groups.

The long-awaited report of Ireland's National Minimum Wage Commission, published in April 1998, is set to herald the introduction of a national minimum wage of around IEP 4.40 per hour. The target date set by the Commission is 1 April 2000, a date which would deliberately coincide with the commencement of a new national agreement between the social partners when the current Partnership 2000 (P2000) deal (IE9702103F) expires. Therefore, the precise details of the minimum wage will also, as asserted by Enterprise, Trade and Employment Minister, Mary Harney, be hammered out "in the context of negotiations on a successor to P2000".

The Commission does not specify the exact hourly rate but says that it should be set at "around" two-thirds of median earnings as defined by the Economic and Social Research Institute (ESRI), a government body established for the purposes of carrying out independent research. The Commission used a 1994 ESRI study Living in Ireland, to arrive at its central conclusion. The advantage of the ESRI study is that, unlike the figures supplied by the Central Statistics Office (CSO), it takes an average of all earnings and not just those in the manufacturing and extractive industry.

Average hourly earnings for all employees in the ESRI survey were IEP 7.23 and median hourly earnings were IEP 6.00. The Commission, therefore, has added a notional 10% to cover the period between 1994 to 1997 in arriving at its conclusion that the minimum wage would work out at IEP 4.40 per hour. It also estimates that this would cost just under 4% of the total national paybill.

The Commission is also "particularly conscious" of the possibility of a change in economic circumstances arising out of EU Economic and Monetary Union and, "in line with the arrangements in P2000 dealing with pay under that agreement, recommend that the minimum wage should similarly be subject to review under the partnership process".

Entry rates

While a single minimum wage rate is proposed, there are important provisos. Lower rates are proposed for workers who are under 18 (70% of the full-time rate), with job entrants, apprentices and trainees to receive 75%, 80% and 90% for the first, second and third years of employment respectively. However, any employer who wants to pay the lower entry rate has to state in that worker's terms and conditions exactly what training will be provided during the first year of employment. Otherwise, the full rate will have to be applied.

Comparing minimum wages in different OECD countries, the Commission found that three broad ranges have been used. Countries such as Belgium and France used a "high" ratio of 60%-70% of average earnings, countries such as the Czech Republic, Spain and Mexico used very "low" ratio of just 20%-25%, while the USA, Netherlands and New Zealand used a medium ratio of 40%-50%.

Relativity claims

Employers are fearful of the prospect of pay relativity claims arising out of a national minimum rate. The Commission says, however, that the Irish Congress of Trade Unions (ICTU) would be prepared to agree a joint statement with the Irish Business and Employers Confederation (IBEC) that such claims should be rejected by the Labour Court. One of the difficulties is that because of the voluntary nature of Ireland's industrial relations system, a number of such claims could still be pursued. If successful, they could put upward pressure on pay generally.

The Commission itself appears to recognise this danger by proposing a tripartite agreement which would bar such claims. This could be agreed prior to the introduction of the minimum wage in 2000, in the context of talks on a successor to P2000.

Sectors which are most likely to be affected by the minimum wage have also been identified by the Commission. These include agriculture, forestry, fisheries, personal services and retailing.

One of the difficulties which will face the social partners when they sit down to negotiate the fine detail of an agreement in national talks is how non-basic pay systems will be treated. For example, will service charges or "piece" rates be assimilated into the basic minimum wage? To guide the negotiators, the Commission proposes that the practices which are currently used by the existing Joint Labour Committee (JLC) system should used. These JLCs fix, by way of a legal order, minimum rates in certain defined sectors.

Commentary

One of the surprising aspects to the release of the report was the fact that it was published prior to completion of the much-awaited report of the UK's Low Pay Commission (UK9708158N), which is to recommend the rate of that country's forthcoming national minimum wage (UK9712190N). Given the fact that the UK remains Ireland's main trading partner, there had been speculation that the proposed Irish rate would need to remain at or below the rate to apply there.

Apart from employer hostility to the report, it has received a broad welcome not just from trade unions and groups representing the socially excluded, but across the political spectrum generally. There is little by way of political "capital" to be gained from opposing it. This leaves the employer bodies relatively isolated, but they will be determined, in the context of talks on a new national agreement in 2000, to minimise its impact on employers' costs.

A national minimum wage was not a commitment in P2000 but was promised by the majority Fianna Fail party in the current coalition Government prior to the general election in June 1997 (IE9706218F). The current Taoiseach, Bertie Ahern, told delegates at the ICTU conference in July of that year that the Government would act on his party's pre-election commitment. Meanwhile, Fianna Fail's small partner in government, the Progressive Democrats, although previously sceptical about the idea, later "signed up" to the larger party's commitment to a minimum wage. (Brian Sheehan, IRN and John Geary, UCD)

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