2016 minimum wage hike did not lead to higher labour costs

Study finds no evidence that firms reduced employees numbers

For around 90 per cent of firms with minimum wage employees, average labour costs increased by approximately the same amount as firms with no minimum wage workers. Picture: iStock

Raising the minimum wage in 2016 did not lead to higher labour costs for the vast majority of Irish companies a new study has found.

The ESRI was commissioned by the Low Pay Commission to assess the impact of the minimum wage rise from €8.65 to €9.15. The increase was the first rise in the minimum wage since 2007.

The study found that a firm which paid all of their workers the minimum wage experienced a 5 per cent increase in their average weekly labour costs compared to a company with no minimum wage employees. However, firms with more than half of workers on the minimum wage account for just 3 per cent of companies.

For around 90 per cent of firms with minimum wage employees, average labour costs increased by approximately the same amount as firms with no minimum wage workers.

The study also found that while there was some reduction in over-time hours among firms with a high number of minimum wage workers, there was no evidence of reduced employment within these firms.

Author of the report Dr Paul Redmond said: “Our research shows that the 2016 changes to the minimum wage had no significant impact on the labour costs of the vast majority of Irish firms that employ minimum wage workers."

Donal de Buitleir, Chairperson of the Low Pay Commission said the study shows it is possible during periods of strong economic growth to make meaningful increases in the minimum wage without creating significant adverse consequences for employment or competitiveness.