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Opinion: Raising the minimum wage sounds nice, but it could price young people out of work

A substantial minimum wage rise right now would be a very hollow victory if it meant that businesses couldn’t remain competitive and collapsed.

Lorraine Courtney Freelance journalist

SIPTU’S PRESIDENT, JACK O’Connor, recently said that his union is about to start a campaign for pay increases here of 5% right across the board.

O’Connor was speaking at an event marking the commemoration of Jim Larkin’s death in 1947 and also said that his union will engage in “a new battle to establish a minimum living wage of €11.45 an hour across all those sectors of the economy, where the gross exploitation of vulnerable workers is the order of the day.” The current minimum wage here is €8.65 per hour.

Of course, it’s all about striking the right balance between protection for workers and job creation but we already have one of the highest minimum wage packets on the planet, according to a Movehub study that was conducted last year.

Ireland has the seventh highest minimum wage in the world

In a survey of 214 countries, Ireland was found to have the seventh highest minimum wage at just over €18,000 a year ahead of France, the Netherlands, and Canada. The UN’s recent Global Wage Report also revealed Ireland’s high wage rate in comparison to the rest of the world. Ireland came fourth behind Australia, Switzerland, and Denmark when it came to hourly rates in the manufacturing industry.

What is fair pay? How jobs are rewarded may always be irrational, an unruly jumble of tradition and notional markets. But raise the price of lettuce and consumers eat fewer salads. By the very same logic, if we raise the price of labour at the lower end of the market, employers will use more machines, employ fewer workers and sell fewer products.

For those already in work, the effects might not be noticeable; but for those locked out of it, they certainly would be. Our youth unemployment figure still stands at a whopping 21.6%. And we all should fear a lost generation of young people who never learn the habits of work and face a lifelong struggle ever to find employment. Economic studies show that when a young person cannot find a job, they are statistically far more likely to slide into long-term unemployment than someone who has worked before.

Employers will find it too expensive to give a person their first job

A higher minimum wage will only price these young people out of work because employers will find it too expensive to give them their first job. Companies won’t want to employ any inexperienced workers, so it will become impossible to climb onto the career ladder at all. Raise the minimum wage and you raise the risk for employers when they take on a new employee. And this will only reduce their motivation to take a chance on a younger worker with few skills and little experience.

Besides, an unskilled or inexperienced unemployed individual doesn’t need a massively higher wage than is on offer now; they need to get to the first rung on the ladder that will eventually lead to a skilled job. A minimum wage is a stepping stone into the world of work. It offers people a path to progress in a career and earn higher wages in the future.

A potentially hollow victory 

Then what about the honest, small companies eager to create jobs, but who may very well be put out of business by a higher minimum wage? We need to be creating jobs right now and supporting our slow and infant recovery. Growth must happen first and a substantial minimum wage rise right now would be a very hollow victory if it meant that businesses couldn’t remain competitive and collapsed. There’s also the very real danger of jobs going abroad.

Hike up wages, and our workers will be undercut by foreign rivals, or else the jobs might very likely move into the grey and black markets. It will also raise prices in general and this will affect the unemployed detrimentally. Boosting business investment should be our only priority at the moment. Then as our economy strengthens, our business community will be able to increase wages.

Raising the minimum wage will only hurt the job prospects for the unemployed. We simply can’t afford to price people out of work. We need to find the right balance and have restraint in tough times like these. 

Lorraine Courtney is a freelance journalist. Follow her on Twitter @lorrainecath.

Siptu wants the minimum wage to be €11.45 an hour

What can the minimum wage buy you in Ireland?

About the author:

Lorraine Courtney  / Freelance journalist

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