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IRELAND HAS INCREASED its minimum wage year after year for the last decade.
During that time, plenty of business groups have warned that the move could lead to job losses.
The likes of the SFA (Small Firms Association) and ISME (Irish SME Association) have consistently argued that the policy adds too much to labour costs.
They say that small companies operating on narrow margins can’t afford the wage hikes, and could be either forced to cut staff or close altogether.
However, study after study shows that has not actually happened.
The latest one from the Economic and Social Research Institute (ESRI) also came to a similar conclusion.
Published during the week, the study found no evidence that recent minimum wage increases made it more likely for minimum wage employees to lose their jobs.
On the face of it, the result might seem surprising. After all, there’s a certain inherent logic to the argument from employers’ groups.
Make hiring staff more expensive, and businesses will want to hire fewer staff.
The likely reason why it hasn’t caused noticeable job losses is alluded to in a study from the UK.
The Institute for Fiscal Studies (IFS) is the country’s leading independent economics research institute. It has also found that minimum wage increases have caused no statistically significant job losses.
It previously suggested: “Beyond some (unknown) point, a sufficiently high minimum wage must reduce employment.”
This makes sense – if Ireland’s minimum wage was increased to something like €50 per hour, the system of work would be turned upside-down overnight.
To give a quick answer to the question posed in the headline, it is likely that Ireland’s minimum wage has not yet reached that ‘unknown point’ yet either.
That is, a level high enough where employers would be strongly incentivised to start laying off workers.
Now let’s explore this in a bit more detail.
The most recent ESRI study examined the period from 2016 to 2025, during which time the Irish minimum wage increased from €8.65 per hour to €13.50 – an increase of just over 50%.
It specifically looked at potential job losses.
The study found that between 2016 and 2020, minimum wage workers were slightly more likely to lose their jobs. However, it cautioned that the result was “based on a relatively small sample size”.
For 2021 to 2025, “there was no statistically significant impact”.
It’s worth noting that the study looked specifically at possible job losses. But there are a few different ways that employers can deal with a minimum wage increase.
They can also reduce staff hours, pull back on hiring, raise prices and take a hit on profits.
There has been plenty of research done on the first possible outcome. Many studies find that raising the minimum wage does have an impact on hours worked, but it tends to be small.
Again, this is an area that the ESRI closely follows, with plenty of research carried out.
Staff on the minimum wage saw their hours worked reduced by about one hour per week following the 2020 pay increase.
However, these workers tended to see a rise in their earnings overall, due to the better pay per hour.
What’s more, the think-tank also found last year that Irish employers were still actively hiring at minimum wage levels, even after the wage rise. This points away from suggestions of a collapse in demand for low-paid labour.
With regard to the other scenarios, the ESRI itself acknowledged that these areas “remain relatively under-researched, primarily due to data constraints”.
Going back to the issue of job losses, the ESRI research tends to largely line up with studies from the UK, such as the one from the IFS referenced earlier.
In addition, the state’s Low Pay Commission has reviewed decades of evidence and has come to broadly similar conclusions.
That is, there is little or no overall impact on employment from moderate minimum wage increases. However, there may be a reduction in hours worked with some employers, particularly in sectors such as retail and hospitality.
Its findings have led to it consistently recommending relatively significant increases, such as a rise of near 10% in both 2023 and 2024.
A study from Resolution Foundation, a UK think tank, suggested that lowest earners are about £6,000 (€7,000) a year better off due to the minimum wage, calling it the UK’s most successful policy in a generation.
However, findings have been more mixed in the US. Some studies have echoed their Irish and UK counterparts, finding little or no impact on employment.
But there is a group which found that the policy can have a negative impact on employment – although it seems to depend on how much the rate increases.
A review of several US studies carried out to better inform UK policy found: “The best evidence suggests that the employment effects are small up to around 59% of the median wage”.
It added that in areas where wages start out from a low base, the effect on employment can still be small “up to 81% of the median wage”.
In contrast to the average wage, the median tracks the exact midpoint.
It is generally considered a better representative of what a ‘typical’ worker earns, as average wages may be skewed upwards by a small number of high earners.
The findings of many of these studies are why many countries are now looking to benchmark their minimum wage against median earnings.
This includes Ireland, which has set a target of a National Living Wage set at 60% of hourly median wages by January 2029.
Currently, Ireland’s minimum wage is still below that 60% threshold. So it is perhaps unsurprising that the impact on employment has been essentially non-existent.
It’s also worth noting that the UK has actually reached the 60% ratio following its latest round of minimum wage increases, and may even have gone slightly above that level – we still need to wait for the earnings data.
However, the IFS has recently cautioned again about a fall in vacancies in hospitality and retail.
It said this may be due to recent increases in employment costs, which may have led to some companies cutting back on hiring.
Taken together, this all suggests that raising the minimum wage has very little impact on employment up to about 60%.
After that, there are some suggestions that negative impacts could kick in, but this still needs to be studied more and closely monitored.
What this all suggests for Ireland is that it’s unlikely that the country will face any major employment hit from increasing the minimum wage in the next few years.
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