This Week’s Minimum Wage Debate
This post was written by Karl Whelan
I’m just back from spending a few days at the McGill Summer School in Donegal. Joe Mulholland is to be commended for having put together a very interesting line-up of speakers and I very much enjoyed my couple of days there.
One strange aspect of the McGill event, however, has been the media coverage. Judging from newspaper front pages, one would conclude that the sessions involved heated discussions about proposals to cut the minimum wage. In fact, this was not the case.
To the best of my recollection, none of the speakers on Monday or Tuesday mentioned the minimum wage during their talks. Peter Bacon’s talk had focused on the idea of regaining competitiveness and, in response to a question about cutting the minimum wage, he said that he wouldn’t rule it out (video here – these comments about 33.50in). Minister Lenihan’s talk did not discuss the minimum wage nor was he asked a question about it by the audience.
I chaired the session featuring the Minister along with George Lee and Eamon Gilmore. The next morning, I was asked by a radio station would I go on to talk about the session. I said ok but asked which issues they wanted to focus on. I was told “oh, you know, the Minister’s comments on the minimum wage.” When I told them that, as best I could remember, the Minister didn’t discuss the minimum wage at all, so I couldn’t in all fairness pretend that he did, they lost interest in having me on.
What appears to have happened is that after Peter Bacon’s comments, the media decided that the possibility of a cut in the minimum wage was the big story of the week, so away from his appearance at the Summer School, Minister Lenihan responded to questions from reporters by stating that a cut in the minimum wage may have to be looked at. Despite the huge response to these comments, this is by no means the first time a minister has suggested this as a possibility. Here’s an Irish Times story from February featuring Mary Harney saying exactly this.
Now today we have headlines in which ICTU leader David Begg is condemning “a toxic plan to cut minimum wage level” though in fact no such plan has actually been put forward (Note again that the text of Begg’s talk does not mention the minimum wage and the report makes it clear that these are comments to reporters.)
On the substance of this issue, here are the facts as I understand them. The minimum wage is reviewed every year by the Labour Court who then make a recommendation to the Minister for Enterprise, Trade and Employment, currently the Tanaiste, Mary Coughlan, which she can then implement or not as she sees fit. There was a discussion during the most recent inconclusive social partnership talks of suspending these reviews until 2011 but this was not agreed. Some in government appear to want to cut the minimum wage, some appear not to, most admit that it has to be looked at.
So that’s where we stand and despite the media-lead scrum, nothing happened this week to move it on.
Update: I had missed when writing this yesterday that the lead story in yesterday’s Irish Times, written by Deaglan de Breadun and Paul Cullen, had said:
Mr Lenihan told the MacGill school on Tuesday night that if the minimum wage in a particular sector became an impediment to job-creation, the Government would have to address it in that context.
Now I’m fairly sure that Lenihan did not mention the minimum wage during his address to the McGill Summer School (audio here). I suppose I’m being pedantic here but to my mind, “told reporters at the McGill Summer School” is not the same thing as “told the McGill Summer School.” (Morning Ireland’s audio of Lenihan discussing the minimum wage has significant audience noise in the background, indicating that it was an answer to a question either before or after the address.)
Tags: Minimum Wage
July 23rd, 2009 at 1:25 pm
ALL fee/salary/bonus/wage etc levels should be up
for review not just the minimum wage and if downward movements are deemed necessary to restore national competitiveness start at the highest remuneration levels and address any other levels on a pro-rata basis.
The so-called ‘cuts’ taken by govt ministers etc are not meaningful and certainly do not set any type of example worth mentioning - indeed they infuriate when taken in a context of some tweny plus upward movements over the last ten years.And the same can be said for senior execs in the private sector.
July 23rd, 2009 at 1:30 pm
Karl, interesting indeed that the media seems to have just invented this political storm in a teacup! Personally i don’t think anything should be beyond discussion, or be too sacred to countenance. We’re at the point where everything needs to be up for debate. Using a “the most vulnerable in society” type-excuse is a lazy and illconsidered argument.
July 23rd, 2009 at 1:31 pm
Micheal Martin on Morning Ireland indicated that the Minister was referring to the statutory pay rates for specific sectors (rather than the “minimum wage” as imposed by th Minimum Wage Act) but agreed that everything had to be considered with the aim of preserving jobs.
July 23rd, 2009 at 2:02 pm
Terry McDonough has a post titled “Why Wage Cuts are not a good thing” on the Progressvie Economy blog.
http://www.progressive-economy.ie/2009/05/why-wage-custs-are-not-good-thing.html
This post and related comments should be of interest to so-called ‘orthodox economists’.
July 23rd, 2009 at 2:14 pm
Karl,
How disappointing! You mean to tell me these people were NOT knocking seven bells out of one another in a field in front of the hotel? As Begg lunged at Lenihan, shouting “I’ll give you the minimum wage” and Lenihan retaliated by pulling Begg’s beard and Colm McCarthy’s massive spectacles got knocked off his nose and stamped on in the ensuing melee when he intervened to try to stop them killing each other?
There’s no story unless there’s an ‘event’ at the end of it and if there’s no event to report, then the media simply create one, personalise the issue and then hey presto, front page news and headlines to run all day long and the next day, for as long as they can entice the great and the good to join in the affray.
While nothing may have happened to the minimum wage, something significant has happened in the sense that the terms of any debate on this issue have now been defined. Labour’s Willie Penrose rushed in to reject the ‘clamour of calls’ for a cut in the minimum wage and FG’s Leo Varadkar was quick off the mark to say he didn’t believe a cut was necessary either. So now we know how this one will be played out politically even if the strong recommendation to the Minister in due course is to cut the minimum wage.
Great story all the same, shame about the facts though.
July 23rd, 2009 at 2:37 pm
Conspiracy Theory Anyone?
One could be cynical about the leanings of the media on this issue. Perhaps the Media led scrum is not as disorganised as it first appears.
Just take a look at this disgracefully biased headline from todays independent.
“€12-a-hour wage gap blamed for job losses” refering to the Element 6 Job losses
Somewhere near the end of the article it mentions that the Irish workers were paid on average €15.80 and hour. The South African wages are therfore about €3.80 an hour. We would never compete with that regardless of wage gap or if the Minimum wage was reduced.
It is currently their third most popular story.
The Hawks may not just be in the Dept of finance. They may be in the media too.
I find it hard to make further analysis without refering to Chomskys “Manufacturing Consent”
July 23rd, 2009 at 4:06 pm
@Eamon,
There’s nothing new about campaigning news outlets or newspapers having an agenda on any particular issue. The fact that one might not agree with their perspective on any particular social or economic issue doesn’t make them ‘hawks’ or ‘doves’ or ‘nasties’ out to do good men down, or in league with other ‘hawks’ behind the scene string-pullers within the ranks of the permanent government. It’s just the way the media works - and has always worked, since news was disseminated on woodcuts. As for front page headlines in the Irish or Sunday Independent, or some of the other so-called ‘Irish’ newspapers, I gave up reading comics years ago!
As Zhou refers to above, there is a very serious issue underlying the media generated froth on the minimum wage - the whole edifice of REAs and JLCs that set wages and terms and conditions across services and industries, many of which were traditionally low-paid, exploitative of their workforce who, because of the nature of their employment and numbers etc, were difficult for trade unions to organise; like office contract cleaners for example. REAs are an anachronism from Lemass’s 1946 IR Act which have never worked as it was originally envisaged they would, i.e. determining pay and maintaining industrial peace throughout the entire private sector. Some of the old JLCs are arguably well beyond their sell-by date too and the entire system could do with a shake up, as partly adressed in the McCarthy report. But times being what they are, any moves to alter these pay-setting structures will inevitably become a battleground between employer groups, the unions and the government.
July 23rd, 2009 at 4:19 pm
@ Veronica
Well what I think makes them Hawks is that they have an extreeme rightwing viewpoint and they weild a lot of undemocratic power.
You and Karl, I think, and sorry if I am mistaken would see it as just a mindless media dash for headlines.
I see ‘Wag the Dog’ and much more calculation.
July 23rd, 2009 at 4:43 pm
Veronica - which particular JLC is beyond its sell-by date?
July 23rd, 2009 at 4:55 pm
Eamon,
I can’t speak for Karl, but I’m certain there is a big fight coming down the line about REAs and other wage setting mechanisms across various service industry sectors that should, logically, have been dismantled when the minimum wage was set in place, but weren’t. And I think that some of the commentary relates to that underlying issue - there’s a problem that goes well beyond the minimum wage and a lot of shadowboxing going on around it between those whose feel their economic interests are threatened and those on the other side who perceive an opportunity to right the balance, as they would see it anyway.
We could be here all day discussing the media’s role and function in this, but I don’t think Karl would appreciate such a distraction on his economics forum! Generally speaking though, I don’t like attaching labels to people, partly because it’s lazy and impedes clear thinking about any issue, mainly because I don’t much like it when people do it to me.
July 23rd, 2009 at 5:09 pm
@ Michael Taft,
I think the good old ‘Brush and Broom’ is still alive, even though nobody’s gone near it for a decade and a half!
July 23rd, 2009 at 6:09 pm
Ah, yes, the good o’ ‘Brush and Broom’ - the minimum wage operates in the sector, if there is a sector. The others, though, still seem to operate. Thousands of the lowest-paid work in these sectors. The main issue is not how many we can get rid of - but rather, how many more we can create to continually lift the floor for thousands more. Good for the workers, good for the economy.
July 23rd, 2009 at 6:13 pm
Here in Toronto (Province of Ontario) minimum wage was set at C$9.50 in March - in Euro that’s 6.12. The US Federal minimum goes up to US$7.25 tomorrow, that’s EUR 5.08.
July 23rd, 2009 at 6:39 pm
Eh, folks, you’ve heard of a kite, yes?
No one ever - ever - comes out and says I believe we should screw this sector or that sector.
The kite is floated - usually with the help of a pet hack. The response is assessed.
Everyone can deny that anyone in particular said anything in particular.
If the response goes one way someone in power will run with it. If the reaction is too hostile - mind you, I’ve said nothing.
July 23rd, 2009 at 7:31 pm
The NYT has a feature on employers who support increasing the minimum wage.
http://economix.blogs.nytimes.com/
July 23rd, 2009 at 9:49 pm
@Pete Maguire
Sad but true - I’m sure that’s the primary function of the IT online polls, which have majored the past few days on unemployment benefit cuts, cutting the minimum wage and ‘do you believe grocery prices have come down as the Consumer Association say they have’ (’so if they have and the minimum wage and benefit payments are cut they won’t starve then’ being the gruesome subtext).
Looking at some of the replies on that BB, I never knew there were that many rabid right-wingers in Ireland….. but I guess if your own patch is being threatened you’re going to want to pass the parcel somewhere else.
I’ve been looking at the minimum wage more from the point of ‘differentials’.
If private sector wages are coming down as we are led to believe they are (anyone got any hard evidence/quantification?) then they are bound to start pushing at the wage ‘floor’. Skilled/semi-skilled workers don’t want to believe they are only getting a Euro or two more per hour than ’shelf stackers’ on minimum wage. Politicians will of course turn that on it’s head with something along the lines of ‘minimum wage is so high here that shelf-stackers are earning almost as much as electricians’. OK, electricians might not be the best example but you get my drift.
There’s an awful lot of misinformation going on out there about it all e.g. the number of people actually earning minimum wage, the amount it actually is, how the unemployed are rolling in clover and living the high life, etc……. and a lot of denial.
The worst I’ve seen though is a common assumption that all the people on the dole are obviously only qualified to take on minimum wage jobs (qualified people don’t lose their jobs do they?) and they won’t because they would only end up with an extra 5 Euros a week so why bother (and there are loads of vacant minimum wage jobs out there aren’t there?). I was explaining this to two unemployed friends of mine this evening - a highly skilled architect and 6-figure p.a. (was anyway) IT guy. They didn’t think it was funny.
Who puts all this misinformation around? Like the two year old story about ‘Poles flying in once a month so they could get their dole paid into their bank account’ is being peddled around again.
July 24th, 2009 at 12:28 am
@Joseph…Thank you….
July 24th, 2009 at 4:50 am
The medium wage was first tried in Rome: bread and circuses. But occasionally the mob despite its Tribune, decided matters on the close, foetid, narrow streets of Rome. The Parisians were assured of brioche or bread all at the same low price, but when harvests failed, it proved to be the last straw and they decided on a messy regime change.
You may be familiar with these examples but you turkeys should not vote for Christmas just because you hope to get a better job in economics by espousing a cut in the dole. The Chief thief, BIFFO be his name o!, has already wondered aloud at how docile are the mob. Softly people! Inflation is the best way to steal from those who have not!
@ Joseph and jim
Rebel or emigrate! You who soon will have nothing have nothing to lose but your chains.
I have a new economic theory from a ptrotestant churchamn called Swift: burn everything is how it starts. Don’t just talk amongst yourselves, organize! The death of the middle classes needs a suitable celebration! I hope you don’t think that those who own you, sorry the results of your labour! haha!, like you? At least they can fear you! Grow a spine….?
July 24th, 2009 at 6:18 am
The media in Ireland are very right wing as is the case world wide. The knowledge of the depression was an open secret among media owners but did not infiltrate their editorial policy for obvious reasons.
The MSM are not news vendors! They promote consumerism to benefit from advertizing revenue. Complete capital capture! It is not as if this has not happened before!!!! Educate yourselves on what was written after the 1930’s depression. Weimar taught the Germans that the currency is paramount, a lesson that Thomas Jefferson preached a long time ago. Bankls are the way to destroy an economy. Regulatory capture is almost inevitable.
July 24th, 2009 at 7:43 am
@Michael Taft
So you are in favour of creating more JLCs rather than reforming the existing system? I find that surprising. Looking at the list of operating JLCs it’s obvious that most are a throwback to the age of a pre-industrial Irish economy. Moreover, most of the wage rates set by these committees appear to be only barely above what the workers covered would earn on the minimum wage. There is also the question of just how many parallel mechanisms are required to set wages for workers in this country and how retention and even expansion of anachronistic REAs and JLCs square with stated commitments by leading trade unionists to public service reform?
The UK equivalent of our JLCs were the Wage Councils of which there were 66 in operation when they were finally abolished by the Tories in 1993. The ciriticisms levelled at the Wage Councils by progressives, if I may call them that, was that they were not universal, in that too many low paid workers fell outside their scope and thus the introduction of a minimum wage to create a universal floor for wages was the obvious solution. Besides, it was impossible to effectively police /inspect the system.
The free-marketeers, who had the ear of the government, argued that the Councils created inflexibility in wage setting and should be abolished in favour of a free market in wage determination, which they insisted would lead to employment expansion in the sectors previously covered. They won. The Conservative government opted for abolition of the Wage Councils, but without introduction of an minimum wage. As various studies subsequent showed, this was the worst possible outcome - wages fell for the low-paid but the much-touted expansion in employment in previously covered sectors failed to manifest itself. Labour introduced the minimum wage in 1999, but did not reconstitute the Wage Councils to sit alongside it as a ’super-national minimum wage’ tier. In fact, as far as I remember, nobody even suggested such a move.
In times of economic expansion and near to full employment the minimum wage acts as a floor on wages for workers in vulnerable sectors. In times of recession, there may well be employers for whom the minimum wage imposes a burden - which will be reflected in lost jobs - but there is also a golden opportunity for the free marketeers to come out of the woodwork and dance a jig across the national stage on the themes of much needed labour market flexibility and the NMW acting as a brake on employment expansion etc. The co-existence of JLCs and REAs alongside the minimum wage mechanism arguably strengthens their case that the system is weighted against the broader interests of the economy, as they would define them anyway. It’s simple enough, in my view, to demolish their arguments on the NMW impeding employment creation since all the available evidence suggests this is self-serving nonsense which can be easily exposed as such; but clinging on to outdated parallel mechanisms like the JLCs, as presently constituted, and even talk of expanding them doesn’t help.
July 24th, 2009 at 8:12 pm
Reading some of the above stuff would make me wonder whether some of you guys are actually paying heed to what is actually occurring in our economy. You seem intelligent - but are your Grounding Straps actually connected to Ground?
You know what the FIRE economy is. Now since you do, you also know that the main raw material input of this economy is credit, and the principle product is debt. Now debt is a ‘living’ thing. It GROWS - exponentially. Like Dry Rot.
So, how are we (Those Who are About to be Demonied!), to be able to exist in any meaningful and dignified manner? - if we cannot pay-down our debts?
If you cannot explain this - then please depart the scene. But before you do, have a thought about the current problem with liquid fossil fuel production rates. Better still, inform yourself. Its a very unpleasant situation.
If you believe that there is no causal relationship between liquid fossil fuels and our ‘business-as-usual’ way of life - think again!
Each citizen of this state needs a minimum income to purchase the necessaries of life. It is our duty, and social responsibility, to ensure that they are not drven into destitution by irresponsible claptrap.
Brian P
July 25th, 2009 at 10:23 am
Veronica - no one would oppose re-arranging the JLCs into a more modern framework that reflects working life today (one reason why they should be expanded). But I would point out that JLCs deal with more than just a sectoral ‘minimum wage’. Within some JLCs there are detailed breakdowns based on occupations, training levels, experience, overtime and responsibility – even setting board and lodging rates where appropriate.
This protection in these and other sectors are all the more important since most workers do not have the protection of trade union organisation. Union density is low for a variety of reasons (small workplaces, high turnover and, of course, the denial here of that basic of labour rights – the right of workers to bargain collectively). Therefore, this allows a space for such protection (and representation) to take place – to the benefit of the workers involved. Indeed, JLCs – since they are sectoral specific and are part of a consultation basis between the social partners – can be more efficient and forensic in providing support and protection for the low-paid than legislation and statutory instruments.
The enhancement of incomes, working conditions and workplace right of the low-paid is not an obstacle to economic recovery. Rather, it is part of the solution, part of the ‘broader interests of the economy. There are some employers who, thankfully, get it (http://www.progressive-economy.ie/2009/07/business-take-on-minimum-wages.html ). We need more. And we need them here.
July 27th, 2009 at 6:18 pm
Michael,
The first question that came to mind when I read your latest post was if the trade union movement is so convinced that the number of JLCs should be expanded then why have we not seen an array of new JLCs established in the past twenty five years? The Contract Cleaning JLCs, the last to be established as far as I know, date from the mid-1980s.
Second, there may still be a consensus on the trade union side of social partnership when it comes to setting rates for individual JLCs or, indeed, REAs; it’s clear that it has long since broken down on the employers’ side, as witnessed by the formation of breakaway employer groups in hotels, catering, contract cleaning and electrical contractors and the plethora of legal actions taken to try and overturn employment regulation orders on constitutional or other grounds.
From the weekend papers and other media coverage, it’s obvious that some journalists haven’t yet got their heads around the difference between the national minimum wage and sectoral minimum rates set by JLCs and there’s a lot of confusion going on in the presentation of the issues.
One thing that is clear though is that the main problem some employers have with EROs is that they are legally bindiing and, unlike national wage agreements or the NMW, there is no provision whereby an employer can plead inability to pay. Further, the suggestion is made that some EROs provide for increases 10-20% in excess of the NMW rates and wage increases are pending in some of the covered sectors for later in 2009, in the retail sector, for example, in which a major economic shakeout is happening due to the recession. As I understand it, the issue of EROs and what should be done with them is up for discussion between the trade unions and the DET&E in the autumn, so your views on expanding the system are of interest in that context.
JLCs and REAs are undoubtedly anachronistic - JLCs were set up by Sean Lemass in 1935 within a protectionist economic framework and the rules governing their operation have hardly changed in the meantime. Curiously, the then Secretary of the Irish Trade Union Congress was opposed to their establishment! I wonder what he would make of the divisions that they provoke almost 75 years on?