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The Economy

REAL MINIMUM WAGE ALREADY CUT BY 4 PERCENT

Date Released: 26 Jul 2009

The following letter was published by the Sunday Business Post on July 26, 2009

The clarion cry from Dr. Peter Bacon for a cut in the minimum wage is based on an "analysis" which, if it exists it all, is decidedly faulty. The minimum wage was equivalent to €5.59 per hour when first introduced in April 2000. In the meantime, average industrial earnings for manual workers increased by 60 percent up to the final quarter of last year. If there had been a pro rata adjustment in the minimum wage, it would have been set at €8.95 from this January.

As we all know, or should know, it has in fact been frozen for the past two years at €8.65 since July 2007. From May of this year, the Minister for Finance subjected it to a 2 percent income levy, reducing the take-home minimum wage to €8.48 per hour. On top of that, the Harmonised Index of Consumer Prices  increased by 1.8 percent between July 2007 and June of this year. Minimum wage earners have, accordingly, already suffered a 4 percent cut in their living standards.   

There is no evidence that a single job has been lost because of the minimum wage. Small wonder. The latest CSO data shows that the percentage of industrial workers covered by that rate fell from 2.5 percent in the first quarter of 2007 to 1.6 percent in the final quarter of last year. The call by Dr. Bacon for still further minimum wage cuts, accompanied by a variety of "good cop, bad cop" echoes from assorted Government Ministers, is as economically ignorant as it is ethically indecent.

Manus O'Riordan
Head of Research
SIPTU






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