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How the 50c minimum wage increase affected wage inequality

Ireland’s minimum hourly wage is more than €2 less than the appropriate living wage recommended in a European Union report.

Image: Shutterstock/Michael Kachalov

A NEW STUDY has found that 2016′s 50 cent increase in the minimum wage reduced wage inequality between high and low earners by up to 8%.

The minimum wage rose from €8.65 to €9.15 per hour in January 2016. Had the change not been implemented 10% of workers would have earned €9.15 or less for an hour’s work. 

A new study from the Economic and Social Research Institute (ESRI) has found that, thanks to the hike, this figure dropped to around 6%.

However the researchers found that the pay rise had no strong impact on household income.

“By boosting the hourly wage of low earners, the 2016 minimum wage increase led to a reduction in hourly wage inequality. However, household incomes were not strongly impacted,”  Dr Paul Redmond, an author of the report, said.

This is consistent with previous work which shows that minimum wage workers are often located in households at the higher end of the income distribution and are typically not primary earners within households.

The Chairman of the Low Pay Commission, Dr Donal De Buitléir, welcomed the findings. “This report provides valuable data on the impact of the National Minimum Wage on the distribution of income in Ireland,” he said.

The minimum wage now sits at €9.80 per hour following another rise on 1 January. However an EU report from last year recommended €11.90 per hour as an appropriate living wage for Ireland.

A living wage is a wage which makes it possible to maintain a basic but socially acceptable standard of living. 

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Ceimin Burke

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