Government approves plan for new national living wage

The new living wage will be phased in over a four-year period starting next year and will be set at 60% of the hourly median wage.

A new national living wage has been agreed and will replace the minimum wage by 2026, it has been announced.

The new living wage will be phased in over a four-year period starting next year and will be set at 60% of the hourly median wage. In 2023, it is estimated that 60% of median earnings would equate to approximately €13.10 per hour.

The Government’s Low Pay Commission will have discretion to use adjustment mechanisms to speed up or slow down progress towards 60% of the hourly median wage in response to any specific circumstances that have had a significant impact on economic conditions.

The Government has given approval to the plan brought forward by Tánaiste Leo Varadkar despite concerns among the business sector about rising energy costs and a raft of job losses in recent days.

“Fundamentally, it's all about good jobs, secure jobs, better pay terms and conditions, and access to a pension for everyone. It's about making work pay, putting more money in people's pockets, and in the round will be good for the economy and our society as well,” he said.

Mr Varadkar said in the round in Ireland, there are more people at work than ever before. 

“We haven't seen any fall off in total employment. And we haven't seen any rise in unemployment yet. The flexibility is there for the Low Pay Commission to slow down the phasing and have a living wage, if we end up in a situation whereby employment starts falling,” he said.

Minimum wage increase

The minimum wage will increase by 80c from 1 January 2023 to €11.30 per hour.

This will be followed by gradual increases until the minimum wage reaches 60% of hourly median earnings.

In 2021, there were 164,000 people earning the National Minimum Wage.

Once the living wage has come into effect in 2026, subject to an assessment of the impact of the change, the Low Pay Commission will advise on the practicalities of gradually increasing the targeted threshold rate towards 66% of the hourly median wage.

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"Extensive research and consultation took place, including with employer and worker representative groups, unions and the public, in order to ensure we introduce the living wage in a way which will benefit workers whilst also being manageable for businesses," said Mr Varadkar.

"It's important to get the balance right," he added.

The living wage is defined as the minimum amount people need to live and take part in Irish society.

The Living Wage Technical Group, which is supported by trade unions and charities, said last month that the hourly living wage rate should increase to €13.85 per hour to reflect the rising cost of living.