Cutting minimum wage will not save jobs or boost economy, committee hears

THERE is no evidence to suggest that cutting the minimum wage will either save jobs or boost the economy, a cross-party group of politicians has been told.

Speaking at the Oireachtas Enterprise, Trade and Employment committee yesterday, the director of independent economics and social group TASC insisted that any cuts to the basement payment level would not improve Ireland’s financial situation.

During the meeting representatives of business group IBEC said reducing the minimum wage below the current €8.65 level would keep some firms open and allow others to be available to customers for longer periods of time.

However, describing the suggestion as inaccurate, TASC director Paula Clancy said reducing the lowest wage level would force thousands to cut back on their expenses even further and act as a “double strike” against the economy. “Any cut would take more money out of people’s pockets, thus directly impacting on small businesses and their ability to maintain or create jobs.

“Lowering these rates would reduce income tax, income levy, PRSI and VAT... and would have a negative impact on the public finances.” Ms Clancy said the best way to create jobs was to boost demand in the economy. “In addition, since low income workers tend to be ‘spenders’ rather than ‘savers’, almost all the wages lost would normally have been recycled as consumption spending, thus generating VAT receipts.”

Responding to the comment, IBEC representative Brendan McGinty questioned why it appeared to be Ireland’s “ambition to be top of the league” for minimum wage levels.

He added the best way to protect jobs is to ensure that keeping people in employment is affordable for business owners whose firms are at risk of closure, partly due to labour costs. However, the claim that this should involve reducing the minimum wage was described as a “pointless debate” by Fine Gael TD Damien English, who said “nobody has put any evidence in front of me of why we should do it”.

Speaking after the meeting, the Mandate trade union said IBEC’s claims were a “further attack on low-paid workers” as comparing the minimum wage here with that of other European countries is like comparing “apples with oranges”.

“We have very different economic and social systems in Ireland. Our VAT rate is higher, our cost of living is higher and our income tax is lower,” the union’s general secretary John Douglas said.

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