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Joan Burton: Why it's time to talk about a Living Wage for Ireland

Our social welfare system already supports those in work by topping-up low wages. This is why a Living Wage could increase tax revenue and decrease spending on benefits, the Social Protection Minister argues.

Joan Burton

A LOT OF people understandably think the social welfare system helps only those who are out of work.

In fact, it also helps people to stay in work, so that they can build a better financial future for their families over time.

Family Income Supplement (FIS) is the best example. FIS is a weekly tax-free top-up payment for workers on low pay with children.

Last year, we spent €224 million on FIS. Next year, we will spend more than €280 million – despite having to make savings in the overall welfare budget.

At present, more than 40,000 working families with more than 90,000 children benefit from the scheme.

I think that’s money well spent, because FIS makes the crucial difference for them in terms of being better off in work and gradually building a more secure future for their families.

But a spend of that size also raises major questions about the relationship between work, wages and welfare.

Put simply, these payments are necessary because people are not earning enough to support a family in their jobs – either because of low wages, insufficient hours or both.

Low wages subsidised by welfare

The low wages and zero-hour contracts offered by a growing number of employers are effectively being subsidised by social welfare.

This presents a profound challenge to both the welfare system and the wider economy.

That is why I moved quickly to restore the Minimum Wage to €8.65 an hour when I first entered Government. It’s also why I’ve suggested the possibility of introducing a Living Wage in the future.

A Living Wage would be higher than the Minimum Wage, and would provide the income necessary to meet basic needs, including housing and healthcare, on top of items such as food and heating.

The idea is that an employee earning this amount will not need significant welfare assistance, in stark contrast to many on the Minimum Wage.

London has a Living Wage, and it is set above the UK Minimum Wage to recognise the higher costs of living in the capital. The UK Minimum Wage set by law is £6.31 (€7.56) an hour for those aged 21 and over. But the Living Wage in London – which is voluntary – is set at £8.80 (€10.55)

Despite it being voluntary, the Living Wage is willingly paid by a number of London employers – because they recognise its potential benefits, such as significantly lower rates of staff turnover and lower rates of absenteeism.

Boris Johnson is also a staunch proponent of the Living Wage. In fact, he was the one who increased it in recent weeks to £8.80.

Works for employees and employers

Yes, you read that right – Boris Johnson, a politician loath to ever place any obstacles in the way of business – is one of the biggest fans of the Living Wage.

The reasons are simple – it works for employees and employers alike, and also benefits the exchequer by increasing tax revenue and reducing welfare expenditure.

I believe we should consider a gradual phasing-in of a Living Wage – like London, it could begin on a voluntary basis. And it could also be tied to a set number of hours, to ensure that workers have the security of knowing what their income will be.

Of course, some people will argue that anything beyond the Minimum Wage would undermine competitiveness.

But equally, fair wages and ensuring that people earn a decent living puts more money back into the economy and increases demand – and good employers know this.

I think now is the right time to have the debate, especially given this week’s very encouraging employment figures showing an increase of 58,000 in the number of people at work over the last year.

Full time doesn’t mean sufficient pay

The unemployment rate has decreased from 15.1 per cent at its height to 12.8 per cent now.

Especially important is the fact that the majority of people returning to work are returning to full-time employment, as demonstrated by the figures.

But while these figures are a welcome sign of the economic recovery bedding down as Ireland prepares to exit the bailout programme, there remains a long way to go in terms of getting people back to work.

And full-time employment does not necessarily mean sufficiently-paid employment, as the top-ups paid by my Department to working families demonstrate.

So if full employment must be the overarching goal of our economic policy, we must also strive to ensure that work is secure and decently paid.

The introduction of a Living Wage would be a solid step in that direction.

Joan Burton is the Minister for Social Protection and a Labour TD Dublin West.

We’re interested in your ideas and opinions – do you have a story you would like to see featured in Opinion & Insight? Email opinions@thejournal.ie

Read: Burton calls for ‘living wage’ and says welfare state makes employers ‘efficient’

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