Why a "living wage" of €11.50 an hour should be introduced

Dr Nat O'Connor of the Living Wage Technical Group issues the call to Irish businesses for the third year in a row...

The Living Wage Technical Group has announced that it believes an hourly rate of €11.50 for Irish workers is a fair "living wage" that businesses should adopt.

This is the third year the independent group has suggested the wage, using detailed calculations of budget standards to reach a figure that would provide for a "decent life". 

A number of companies have taken on board the recommendation, most notably shopping chain Lidl, which has increased its workers wages from €9.15 – the legally required minimum – to €11.50 an hour.

Dr Nat O'Connor of the Living Wage Technical Group said:

"When you look at the numbers of what someone can afford, €9.15 an hour is simply not enough for someone working full-time. Never mind those who are working part-time."

Dr O'Connor said the living wage only represents a rate of pay that would grant a "frugal standard of living", but that there could be benefits to employers as well as staff.

Citing lower staff turnover as living wage benefit, O'Connor said that with the current minimum wage, an employer is "not going to keep skills... not going to build up expertise."

A living wage means a "motivated staff who are going to be more productive."

Dr O'Connor also dismissed concerns that higher pay would lead to higher inflation.

"We're really looking at the low-wage sectors of the economy," he argued. "There's very little evidence of that. It's unlikely to have huge inflationary pressure."

Labour Senator Ged Nash held the first ever Government forum on a living wage.

Speaking to Newstalk's Lunchtime, Senator Nash said a new study revealed that when employees are paid the appropriate wage, they are more likely to stay on.

Last month, Dalata chief Pat McCann warned against an increase in the Irish minimum wage.

Pat McCann told the Irish Independent that a proposed 25% increase could divert investment to the UK.

The head of Ireland's biggest hotel group said:

"Everyone would love to pay more, but that becomes very difficult when you consider that it would come on top of all the other costs...

"The reality is that you have a responsibility when you have to invest other people’s money."

McCann's comments followed a report suggesting the Low Pay Commission could back raising the current minimum wage of €9.15 per hour to €11.50.

The UK introduced a compulsory national living wage for workers aged over 25 in April.

The rate of £7.20 (€9.07) per hour was an increase of 50p per hour on the previous minimum wage in the UK.

However, the new wage attracted criticism with unions saying it was not fair for those under 25 and business groups saying it could hit productivity.

TUC general secretary Frances O'Grady said: "Britain desperately needs a pay rise, and this increase is good news for those aged 25 or older.

"But the Government must ensure that younger workers are not left behind – 21 to 24-year-olds will not be seeing an increase.

"This is not fair. Future wage increases must narrow the pay gap between old and young."

Meanwhile Dr Adam Marshall, the acting director-general of the British Chambers of Commerce, said:

"The Government's new living wage will apply a ratchet effect to all companies' pay bills, and sits alongside a raft of other high employment-related costs.

"While many companies have the ability to increase pay, others will struggle to do so alongside pensions auto-enrolment, the apprenticeship levy, employer National Insurance contributions, and other up-front costs.

"Some will have to divert money from training and investment to increase pay, which could hurt their productivity. Others may stop hiring altogether."