The question of a living wage?

There is a lot of talk about raising the minimum wage in Ireland and bringing it up to a living wage of €11.45. Currently the minimum wage in Ireland is €8.65 and this is the fourth highest minimum wage in the European Union only lower than Luxemburg, France and Belgium and at a higher rate than Germany and the United Kingdom, the economic engine of the EU. The living wage of €11.45 would be higher than the minimum wages in Luxemburg, France and Belgium.

Unions maintain that the minimum wage is too low to make a decent living in Ireland and that is probably true and they propose to increase the minimum age and introduce a living wage which would make it possible for people to live from. A noble thought. 

Furthermore they say an increase of the minimum wage would boost the economy! However the socialist government in France increased their minimum wage to €9.43 in 2012 and the French economy is still in the doldrums.

Mark Fielding of the small and medium employers’ organisation ISME says that employers can’t afford to increase the minimum wage and that if there would be any increase this would have a detrimental effect on the Irish economy. Mark is right a further increase of the minimum wage would put many small and medium size companies to the pin of their collar and would stop any growth in employment. This is practical realism of ISME and Mark Fielding.

Now get me right I am not suggesting to decrease the minimum wage either I am making the point that an increase is now not opportune.

Is there a third option which could square these opposing views? In my opinion there is but it would mean a different approach to industrial relations than we have had in Ireland up to now. Up to now the focus on industrial relations has been very much on wage increases and very little else. Yes there was a broader approach in National Wage Program Towards 2016 however at the first difficulties the other ideas were quickly dropped and the focus was back on wage increases. Wage increase is a topic which is easy to sell for the unions. It is easily understood by their membership that is why it has been so popular.

However establishing the highest minimum wage in the EU, as a struggling economy is in my opinion not a smart move. The case is that with one of the highest minimum wages in the EU, Ireland is not underpaying their employees but the cost of living is too high.

To give a recent example in the last year the charge for peoples renting houses as gone up considerably and the same for house prices. It has increased in such a way that it puts an enormous pressure on the wages of people working with a result they are demanding higher salaries. In a modern society this topic needs to be resolved if an economy wants to thrive for all. Rent controls need to be introduced and social housing needs to be developed. To let the market organise this itself is an out of date approach in a modern European social democracy. Our recent economic problems proved that this approach doesn’t work in the 21^st century.

The government and the social partners need to address this issue and other issues like affordable health care. A broader methodology to industrial relations than just a focus on wage increases would benefit the economy, employees and employers.

Government, unions and employers should take action on this and not drive wage cost up in order to get everybody a Living Wage of €11.45 while still nobody can afford to rent or have decent health care.