IMF eyes minimum wage as part of €3.5bn cut

Cutting the minimum wage is back on the agenda of the IMF together with a raft of measures to cut at least €3.5bn off the budget for next year.

But Tánaiste Eamon Gilmore was adamant that the Government would not concede on reducing the minimum wage despite it being among the highest in the EU.

“There will be no change in that, we are not changing it, it stays,” he said.

Most of the cutbacks, around €2.25bn worth, will have to come from a cut in social expenditure, in total public pay and pensions, and reductions in capital expenditure, according to the programme agreed with the troika.

At least €1.25bn must be raised through broadening the personal income tax base, a value-based property tax, restructuring motor tax, increase in excise duty and other indirect taxes and a cut in general tax spending.

While all these measures are written into the targets set out by the EU-IMF to be achieved next year, the return to cutting the minimum wage was included in an IMF report, Fostering Growth in Europe Now.

The minimum wage was cut by €1 an hour by the Fianna Fáil government but this was reversed by the Fine Gael-Labour coalition to €8.65 an hour or €1,461 a month.

The troika have emphasised the need to cut wages for the lower-paid to encourage employers to create jobs, especially work for the big number of non- or low-skilled people laid off from the construction sector.

But tied to this is the push to lower social welfare benefits as they claim that they are too good and are a disincentive to people to take up low-paid jobs.

Most studies illustrate that single-parent families in particular are already caught in a poverty trap with not enough money to pay someone to look after children and allow them to work, and not enough state, childcare facilities.

The number of working poor has also increased during the past four years, as wages have been cut and many families are trying to get by on just one salary as the second earner has either been laid off or had their hours reduced.

The latest figures show that without social transfers, Ireland would have one of the highest rates of working poor in the EU.

The Government is committed under the EU-IMF programme to provide an evaluation of progress in relation to labour market activation measures to enable the unemployed to return to active employment against the targets set out in the Pathways to Work plan.

This aims to provide training to those signing on and will penalise those who refuse to take training or jobs offered to them.

The IMF have warned growth of only 0.5% of GDP a year will not be enough to allow Ireland to start cutting its dependency on borrowing and reducing its enormous debt, and say it would increase to 133% within five years from 120% next year.