LAST UPDATE | 14 Jun 2022
THE GOVERNMENT IS set to phase in a ‘living wage’ over the next four years, under plans to scrap the minimum wage by 2026.
Plans announced by Tánaiste Leo Varadkar this afternoon would see the living wage labelled as 60% of the median wage in any given year, with the minimum wage rising each year until it catches up with the living wage.
He said the Commission has a statutory basis in law, while other groups that believe a higher rate is needed, do not.
Currently, the living wage is €12.17 an hour while the minimum wage is €10.50 an hour.
Under the plan, from 2026 the minimum wage would be scrapped and the living wage would be the lowest wage payable to employees.
The plan comes following a report from the Low Pay Commission, which Varadkar sought last year.
Varadkar says that a public consultation will get underway, with final decisions being made in September before changes are made to the scheme in January next year.
Varadkar says there are plans to phase in the living wage - a public consultation will now be rolled out on the proposals.
— Christina Finn (@christinafinn8) June 14, 2022
Decisions will be made in September with changes to come in from January . pic.twitter.com/qJqCR2DeQi
Varadkar said the €12.17 rate is an “an objective basis for calculation” which was backed up by research.
The rate is far lower than what unions previously estimated, putting forward proposals that the average worker needed €12.90 per hour to cover the basic cost of living.
Varadkar defended the rate put forward by the Low Pay Commission, stating that the Commission, which is made up of employers’ representatives, unions and independent experts, made a unanimous decision on the rate.
There is a need for a “sensible and balanced” pay increase, he said.
He said that an increase is needed to improve people’s standard of living, but not to the extent that it ends up forcing employers to close their businesses, cut people’s hours or make them redundant.
If the calculation goes above 60% of the median wage “it becomes a real possibility” that jobs could be lost, he said.
While minimum wage has increased over the last few years, the gap between a minimum wage earner and an average wage worker has widened over the course of the past 20 or 30 years, said Varadkar.
This change will “restore relatively” and close that gap, Varadkar maintains.
If Government went “too high or too fast” jobs could be at risk.
While the plan is to phase the plan in by 2026, Varadkar said it could be done in less than four years, if possible.
Legislation will be required to bring about the changes as the minimum wage will be abolished.
If the final proposals are signed off by Government in September, the Commission will issue a recommendation to Government for both a national minimum wage and living wage for next year, the first time that will ever occur.
Varadkar said that those in opposition can call for a much higher rate, but he said if businesses or workers have their hours cut as a result of a big and sudden increase, “no one wins in that scenario”, he added.
With reporting from Christina Finn
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