Why the minimum wage needs to rise rapidly

The Government could take a leaf out of France's book in helping minimum wage workers to progress, writes Michael Dowling

"The clearest route for minimum wage workers to higher pay is to progress where they already work...There will, for sure, be some restaurant kitchen porters dreaming of life as a data scientist. But there will be far more who want to progress by managing their restaurant, by owning the restaurant. Ditto for shop workers, ditto for hotel workers."

Ireland’s minimum wage world is largely an international population, with very little power. They keep the nation’s hotels, restaurants, and shops, open and vibrant. But the lobbyists for those sectors fight every day to keep their wages low.

The next budget will probably see the minimum wage increase by somewhere between 50 cents an hour, up to a euro if the government is feeling generous. A euro an hour is the absolute bare minimum needed for the poorest workers in the country to not be poorer than last year. Needing generosity to not become poorer speaks to the power imbalance faced by the minimum wage worker.

There are some plans to move to a ‘living wage’, calculated in a recent report as €12.17. This rate is set as 60% of what an average worker earns. The current aim is for workers to move to the full living wage by only around 2026. It's a long time to wait for a basic minimum quality of life.

And what exactly is meant by a living wage? Will it deliver a genuine quality of living, as the name suggests?

Will living wage workers, for example, be able to claim their ‘week in the sun’ that most of the rest of us are enjoying at this time of year? That seems a reasonable living wage expectation from working hard all year. Well, the average cost of that week in the sun is about €2,500 - about six weeks of full-time living wage work. Is that realistic? 

What about the cost of going out for an evening every now and then and getting in a round or two - a day’s work? Then there’s the elephant in the room of astronomical accommodation costs. It's hard to see how the living wage really allows quality of living, as we now understand it. The name sounds good, but I wonder how much of it is a stylish rebranding of continued low pay.

Having said that, it's clear that the minimum wage needs to rapidly rise towards the living wage.

And it should do so in sharp upward movements, rather than drip-feeding. Sharp increases help workers to see a clear change in their quality of life. Anything less than €12 in the next budget will mean an abandonment of the long-standing practice of real gains for low-paid workers.

However, there is an even bigger issue, which is that we simply don’t think about the needs of minimum wage workers in the right way. The annual small pay raise discussion will never change the dial. It means always relying on the next paycheck. It means the worker and their family always have to make do with less. That's what we need to fix. We need to help people permanently escape the low-pay trap.

Upskilling

One of the key ways to lift wages for someone on minimum wage is to give them the ability to upskill. The main programme for this in the country is Springboard; government-funded courses offered by universities and colleges. 

Yet, on the Springboard website at the moment, there are a few hundred courses in all manner of tech, data, and business, but nothing in hospitality or retail management. The very sectors where minimum wage workers are employed have no direct route to improve. The only solution offered is to give up and start from scratch.

The clearest route for minimum wage workers to higher pay is to progress where they already work. Instead, we’ve taken some horrible economic view of a higher power reallocating people to whatever areas we’ve decided they need to work in. 

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There will, for sure, be some restaurant kitchen porters dreaming of life as a data scientist. But there will be far more who want to progress by managing their restaurant, by owning the restaurant. Ditto for shop workers, ditto for hotel workers.

So, what would we do then if we really cared about the people caught in the minimum wage trap?

There are a few approaches that have been shown to work in other countries. I’ll mainly draw on France here, having lived and worked there for many years. Part of that work involved helping these same workers to rise up and progress. The people who get permanently trapped at the bottom of the wage pile in Ireland.

First, a story. In the bicycle rental shop at our annual French campsite holiday, I was chatting to the person working there. He was 18, absolutely passionate about bikes, and wanted to continue working in bike shops. He was, therefore, about to enrol in a degree in bicycle shop management.

The degree would allow him to continue working in bike shops, and he would also take a degree part-time to allow him to eventually manage and own his own bike shop. He might be working initially at minimum wage, but he also had a clear upward career path.

This scheme, called ‘alternance’, is the fastest growing student enrollment across French business schools. You can be any age, and learning is flexible to your family situation. It’s upskilling tailored to the person. Would we have so many people stuck on long-term low wages, if we gave Irish workers the same personalised paths to success?

Supports

That’s just one part of the puzzle though. You can give people all the education they might need, but if the opportunities aren’t there, then how are they to achieve their ambitions? For this, we need supports that encourage small business ownership in the sectors where we are most likely to find minimum wage workers. This is another core focus of the French approach to minimum wage sector wage progression - protecting and encouraging their ‘micro-entrepreneurs’.

In Ireland, it is essentially impossible for a minimum wage worker in retail, restaurants, hotels to imagine ever owning the business they work in. Planning encourages developers to target every retail unit at the unholy trinity of Costa, Centra, and chain fast food. Another issue is that banks simply won’t lend to small business candidates without assets, even if they demonstrably have the expertise. 

How do we fix this?

A good start would be government grants and loans that are exclusively for single small business owners who currently work as employees in their sector. This would replace bank lending that is irrevocably focused on assets. 

Planning can also help - designing smaller units into new developments. Or designing market squares where potential restauranteurs could start with something smaller like a food truck to build up resources. There’s also loads that can be done around rental protection for retail firms, so that success is not met with an immediate rent hike.

If our education plan is that the only route to escape low wages is to give up and start over, then we’ll always have low upskilling. If we only design the retail and other service sectors for chains and wealthy investors, nobody will be able to progress from the till to the top. 

We need to set out a practical path to success for minimum wage workers. Then, maybe, the annual scramble for a few cents added to the minimum wage can become less of a crisis event.