As both Coalition parties draw their battle lines ahead of October’s budget, the social protection minister said the Government had reversed a minimum wage cut imposed by the previous administration but “we need to go further”.
The Coalition needs to move towards a “living wage” arrangement in the second half of its term in office, she said in a speech to Labour’s Tom Johnson Summer School on Saturday. She said the State is “effectively subsidising” low-paying employers by making welfare payments to low-paid households through the Family Income Supplement.
The department will pay an estimated €230m under the scheme this year to people who have full-time jobs but do not earn enough to support a family. “The low wages and zero-hour contracts of many employers are effectively being subsidised by social welfare.
“This presents a profound challenge to both the welfare system and to the wider economy,” Ms Burton said.
But Richard Bruton, the minister with responsibility for job creation, is firmly opposed to any moves to increase the minimum wage from its current rate of €8.65 per hour.
Sources said he believes that the Government should be very careful about any changes that would increase the cost of doing business and impede job creation.
The enterprise minister has pointed to a Forfás report which found labour costs remain an issue in job creation. And he has expressed the view that the Coalition should, as soon as possible, look at reducing the burden of income taxes — particularly for low- and middle-income earners.
Ms Burton took the opposite view, saying increasing the minimum wage would encourage people to spend more and boost economic growth.
“Of course some people will say that increasing the minimum wage will undermine competitiveness; there is clearly an issue there. Because some industries depend on low-waged work, such a programme would have to be introduced on a phased basis,” she said.
“But equally, our competitiveness is undermined by taxing people so we can keep paying ever higher income supplements to people in work — and effectively subsidise employers in continuing to pay low wages.”
In framing the next budget, she said, the Government needs to “think seriously” about the role of social welfare in “stabilising” the domestic economy by “putting money into the hands of consumers who need it and through these hands into the tills of business”.
“In particular it will be necessary to avoid a situation where the deflationary impact of spending reductions in terms of reduced economic growth outweighs the savings achieved.”