Low Pay Commission: Minimum wage needs 'significant changes' to meet 2026 target

Last week, the Government increased the minimum wage by €1.40 to €12.70 an hour. 

The chair of the Low Pay Commission has said that “significant changes” will need to be made to the minimum wage before 2026 if the Government is to reach its target of benchmarking it to 60% of the hourly median wage.

In November last year, the Government agreed to a plan to replace the minimum wage with a national living wage by January 2026 and has asked the commission to make recommendations to achieve it.

It is to be set at 60% of the hourly median wage which in 2023 would be €13.10. The minimum wage of €11.30 an hour only represented 51.8% of the median hourly wage of €21.28.

In the budget last week, the Government announced that it was upping the minimum wage to €12.70 following recommendations from the commission - an increase of 12.4%. 

Speaking at the Oireachtas Enterprise Committee, Ultan Courtney, chair of the commission, said the minimum wage increase next year to €12.70 will now “represent 55.1% of median wages in 2024”.

"The gap from 51.8% of medium hourly earnings to 60% by 2026 in the space of three years, requires significant changes in the minimum wage.” 

Mr Courtney said that the commission has discretion to recommend the speeding up or slowing down of the transition to the 60% benchmark.

He added that Ireland’s strong economic growth and very low levels of unemployment meant that it could recommend such a large increase seen in the budget last week.

The commission estimates that the new minimum wage will see someone on that rate earn €54.60 more on a 39-hour week or more than €2,800 a year.

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The increase in the minimum wage was criticised by business groups whose members will see their wage bill increase next year as a result, with many claiming prices will have to be raised to account for this. There were also concerns that any increases may result in job losses.

Mr Courtney said that the commission is legislatively required to give consideration to whether a proposal will have an impact on unemployment.

However, he said that through research conducted with the Economic and Social Research Institute, the commission has found that the increase in national minimum wage has “little effect on employment”.

The commission estimates that there are approximately 140,000 people earning at or below the minimum wage.

The commission is currently conducting research into the sub-minimum wage which allows employers to pay those under a certain age less. Under the current system, people aged 19 can be paid at 90% of the minimum wage or €10.17, people aged 18 can be paid at 80% or €9.04 and all those under 18 can be paid at 70% or €7.91.