Small Business Column: The minimum wage

In this week’s column, Kehlan examines the minimum wage and why raising it will not lead to vast unemployment. 

Living in Ireland is expensive. From bills to rent, a decent standard of living is increasingly difficult. Taxes, universal social charge and personal finances are ever only upwards. In one of the worst economic periods in our history, a basket of food, electricity, insurance, and even the price of a stamp increased.

Ireland might have a high minimum wage compared to our European neighbours, but we have a high price to pay for ordinary costs. The minimum wage is a controversial subject from the outside. Employers say that it will lead to job losses when things are turning for the better. Employees will say that it will provide them with more money to spend in the economy, boosting the finances of businesses.

Employer groups have, more often than not, cited job losses as the result of increasing wages, even slightly. It’s a fear not rooted in logic. If you read press releases and articles released by the business representative bodies, a word that connects all of them is ‘could’. This ‘could’ lead to job losses. ‘Could’ is a vague word that intimates possibility rather than certainty.

Study after study has shown that raising the minimum wage does not bring about the unemployment Armageddon which is being touted. The OECD and bodies like the IMF have said there are far more economic benefits to raising the minimum wage. Many studies in the US show that raising the minimum wage increased sales and pumped more money into local economies.

In fact, in some cases the costs for businesses come down, as employee turnover is reduced and employee satisfaction rises, therefore productivity increases and business growth goes up. Economies are complex and interconnected. We only have to look at the ripple effect of the building bust in Ireland to see that. So arguing that a higher wage means less money for business is simplistic and lazy.

Numerous studies show that when they have more money, they spend more money. Perhaps the challenge now is ensuring that they spend that money with you, rather than in some other business.

The study ‘Poor Sales, Not High Wages, Worry Small Businesses’ concluded that “the real concern among small businesses is not that their low-wage workers earn too much, but that their customers earn too little”.

The introduction of a new minimum wage wouldn’t (and shouldn’t) come in overnight. Phasing it in over a number of years is the easiest way to introduce it, and will perhaps appease employers. The Living Wage Technical Group recently announced that Ireland needed a minimum wage of €11.50, a third of an increase on the current rate of €8.65. If you live in Dublin, that probably needs to be increased.

The minimum wage is not simply about giving workers more money. It’s about ensuring that the people who work for you have a decent standard of living. Opposing the minimum as an argument about money disregards the fact it’s about people.

Evidence suggests that raising it is actually good for business and good for the economy, both locally and nationally. We have to keep raising it because Ireland continues to be an expensive place to live. It’ll only get increasingly so in the coming years.