# Increase in minimum wage reduced inequality - ESRI



## Brendan Burgess (7 Mar 2019)

https://www.rte.ie/news/2019/0306/1034792-minimum-wage/


_Increasing the National Minimum Wage in 2016 reduced wage inequality between high and low earners, but had no significant impact on the income of households, according to new research by the Economic and Social Research Institute._


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## NoRegretsCoyote (7 Mar 2019)

That's because most minimum wage earners are the second or even third earner in a household.

Minimum wages do lots of things but they are not effective anti-poverty tools.


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## Folsom (7 Mar 2019)

Minimum wage is a blunt instrument for reducing inequality. I do support having a minimum wage but it by itself is inadequate tool.
The minimum wage should be set as band e.g. €7.84ph - €15.68ph.

With €7.84ph being a starting point at 18yrs of age. The minimum wage should increases by a sustainable 2.5% for each year a person remains employed, with the appropriate rate applicable if a person changes jobs.
This will offer some incentive and reward for those who turn up every morning, doing the tasks that most people do not want to remain in long-term.


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## NoRegretsCoyote (7 Mar 2019)

There was a big study of the minimum wage introduced in Seattle a few years ago.

It found that it did indeed increase hourly earnings for those at or slightly above the minimum wage. Unfortunately employers cut back total hours.

It also led to much more automation. Firms were less likely to hire completely unskilled people, usually at the start of their careers.


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## Purple (7 Mar 2019)

Folsom said:


> Minimum wage is a blunt instrument for reducing inequality. I do support having a minimum wage but it by itself is inadequate tool.
> The minimum wage should be set as band e.g. €7.84ph - €15.68ph.
> 
> With €7.84ph being a starting point at 18yrs of age. The minimum wage should increases by a sustainable 2.5% for each year a person remains employed, with the appropriate rate applicable if a person changes jobs.
> This will offer some incentive and reward for those who turn up every morning, doing the tasks that most people do not want to remain in long-term.


What happens when the person gets to €15.68 an hour but the job they do is worth less than that? Either they lose their job or the business closes because it runs out of money. 
People should get paid what they are worth. If you want to be paid more then make yourself more valuable by becoming more skilled (There is no direct link between skills and education but they often go hand in hand).
The rate of social welfare for people over 26 years old is €5.08 an hour. That will put a floor on wages even without a minimum wage; nobody is going to work for a differential rate of €2 or €3 an hour.

I'd rather see resources put into making people more skilled so that they can command a higher wage rate than putting in a high minimum wage that prices unskilled people out of the job market. We have enough poverty traps as it is.


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## Folsom (7 Mar 2019)

Purple said:


> What happens when the person gets to €15.68 an hour but the job they do is worth less than that? Either they lose their job or the business closes because it runs out of money.



You could say that about the minimum wage of €9.80ph? 
If a business cannot afford €9.80ph then it goes out of business, causing unemployment.


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## NoRegretsCoyote (7 Mar 2019)

Folsom said:


> You could say that about the minimum wage of €9.80ph?
> If a business cannot afford €9.80ph then it goes out of business, causing unemployment.



Not really, for low levels of the minimum wage firms do a variety of things: reduce profit margins, change business model, give workers less hours, increase automation, hire less unskilled workers.

A €15 minimum wage would indeed put companies out of business but we are a long way from that.


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## Purple (7 Mar 2019)

Folsom said:


> You could say that about the minimum wage of €9.80ph?
> If a business cannot afford €9.80ph then it goes out of business, causing unemployment.


Yep, it does. In effect what happens is that only people who can earn €9.80 an hour get hired so unskilled people stay unemployed and stay unskilled.


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## Purple (7 Mar 2019)

NoRegretsCoyote said:


> Not really, for low levels of the minimum wage firms do a variety of things: reduce profit margins, change business model, give workers less hours, increase automation, hire less unskilled workers.
> 
> A €15 minimum wage would indeed put companies out of business but we are a long way from that.


If they are a labour intensive, tight margin business then most of those aren't an option and it is businesses in those sectors who generally hire low skilled and low wage people.

Where I work we hire people at the minimum wage but they stay on it for  less than a year. After that they are getting paid more because they have the right attitude, aptitude and ability or they are gone.


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## Folsom (7 Mar 2019)

Purple said:


> Yep, it does. In effect what happens is that only people who can earn €9.80 an hour get hired so unskilled people stay unemployed and stay unskilled.



I dont get that, sorry. €9.80ph is the _minimum _a person can be paid under the law. That means unskilled workers are entitled to this from the get go. 
Skilled workers should be able to command a premium over and above the minimum to begin with, or at least very soon after hiring.


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## NoRegretsCoyote (7 Mar 2019)

Purple said:


> Yep, it does. In effect what happens is that only people who can earn €9.80 an hour get hired so unskilled people stay unemployed and stay unskilled.



This is the huge problem that minimum wage advocates don't understand.

Many people in low-skilled jobs are there to accumulate skills. They take low pay *today *in return for on-the-job training, and get higher pay *in future*.

High minimum wages mean that these people *can't accumulate skills*.

It's not so much of a problem given that the labour market is so hot in Ireland right now. But once you have a downturn the minimum wage could be really effective at keeping young people out of employment.


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## Folsom (7 Mar 2019)

Purple said:


> After that they are getting paid more because they have the right attitude, aptitude and ability or they are gone.



It would appear that aside from any skills, or none, that a worker holds, that your company places monetary value on right attitude, aptitude and ability?


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## Purple (7 Mar 2019)

Folsom said:


> I dont get that, sorry. €9.80ph is the _minimum _a person can be paid under the law. That means unskilled workers are entitled to this from the get go.
> Skilled workers should be able to command a premium over and above the minimum to begin with, or at least very soon after hiring.


Yes, but if a person's labour is not worth €9.80 then they never get a job in the first place and so never acquire the skills to command a higher wage.


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## Purple (7 Mar 2019)

Folsom said:


> It would appear that aside from any skills, or none, that a worker holds, that your company places monetary value on right attitude, aptitude and ability?


Yes, of course it does. Who doesn't (outside of the Unionised sector)?

When you hire an unskilled person you invest in them in two ways; you pay them for their time and you train them. 
Some people, idiots is a good description, say that lower wages for apprentices are exploitation of young people. The fact is that if an apprentice was being paid nothing they would still be costing us money because the cost of training them far exceeds the value of their labour.


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## Folsom (7 Mar 2019)

I should point out that the €15.68ph is only attainable for people who are working all their lives and are in effect near retirement. 
Starting with €7.84ph from age 18, increasing by 2.5% per year (or €0.24c ph), the €15.68ph would only apply to someone working 40yrs - such people, in general I figure, have a good attitude at least.


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## Folsom (7 Mar 2019)

Purple said:


> Yes, but if a person's labour is not worth €9.80 then they never get a job in the first place and so never acquire the skills to command a higher wage.



??? then its not a cost to business then?


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## Purple (7 Mar 2019)

Folsom said:


> ??? then its not a cost to business then?


No, it's a poverty trap. We are shifting the social cost of providing citizens with an income from the State to the employer.
Oh, and the lowest hourly rate we pay is €10.
Average shop floor earnings are more than twice that.


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## Folsom (7 Mar 2019)

Purple said:


> No, it's a poverty trap. We are shifting the social cost of providing citizens with an income from the State to the employer.



But if they are not employed, due to lack of skills, then the cost is not on the employer.


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## Purple (7 Mar 2019)

Folsom said:


> But if they are not employed, due to lack of skills, then the cost is not on the employer.


Yes. What's your point?
In trying to shift the financial burden of a social policy from the State to the Employer the State is creating and sustaining a poverty trap. That's the point I am making.


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## Folsom (7 Mar 2019)

Purple said:


> Yes. What's your point?
> In trying to shift the financial burden of a social policy from the State to the Employer the State is creating and sustaining a poverty trap. That's the point I am making.



Ok, you are talking about something else. I don't disagree that if the minimum wage is pitched higher than what employers value the labour then that is a cause for a poverty trap.
So im not arguing that €9.80ph is too high or too low, im saying a single figure rate is inadequate in itself for reducing inequality.

Im suggesting that minimum wage be placed in a band ranging from one starting point to an end point. As an example I am using the current minimum wage of €9.80ph.
Minimum wage for an 18yr old is set at €7.84 (or thereabouts).
Im suggesting an incremental increase of 2.5% pa as a sustainable increase in wages for workers in unskilled or low skilled employment _on condition that they continue in employment._
People who remain in continuous employment would suggest they have at least the right attitude, which I think you agreed does has a monetary value.

While the immediate focus appears to be on the €15.68ph figure, that is only applicable if a person continues working over 40yrs.

It should be noted that at a starting point of €7.84ph at 18, rising at 2.5% pa, it would take someone until they are 27yrs old before they reach the current €9.80ph.
Unless of course they acquire new skills for themselves, and/or have the right attitude, aptitude and ability to negotiate a premium higher than that rate.


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## NoRegretsCoyote (7 Mar 2019)

@Folsom 

The problem with your idea is that your skill level is not a function of your age. It also varies from field to field.

I have a friend with two master's degrees who ditched in a well-paid office job at 33 to become a chef.

To get started she had to take minimum wage work as KP and took it from there. No one would have taken her on at whatever high minimum wage you have in mind for someone with 12 years' work experience in an office job.


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## Folsom (7 Mar 2019)

@NoRegretsCoyote I would respectfully beg to differ. At 33, assuming a starting point of 18yrs and continuous employment, your friend with two masters degrees would be able to command a minimum wage of €11.44ph - (15yrs in workforce @ €0.24c increase pa) as a chef. 
The problem of course is why would an employer take him on over say, a 18yr for €7.84ph? 
Attitude - I would suggest that a 33yr old in this situation should be able to demonstrate superior attitude?
Aptitude - two masters degrees?
Ability - your friend sounds like an intelligent person. Im guessing he has weighed up his ability to be a chef? And can present that ability to any prospective employer? 

As for the 18yr old, who knows? 

Certainly if I was an employer of a restaurant, and presented with the scenario above, for €11.44ph I would be inclined to plump for your friend. I can place value on his experience, skills, attitude, ability far easier than an 18yr old out of school.


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## RETIRED2017 (7 Mar 2019)

NoRegretsCoyote said:


> There was a big study of the minimum wage introduced in Seattle a few years ago.
> 
> It found that it did indeed increase hourly earnings for those at or slightly above the minimum wage. Unfortunately employers cut back total hours.
> 
> It also led to much more automation. Firms were less likely to hire completely unskilled people, usually at the start of their careers.



I worked for an engineering  company which by its very nature needed and hired low skilled people , retention of people in jobs which required low skill  long term with as little as possible people turnover, led the company to pay the low skilled worker the same wage as there more skilled brothers and sisters,

What We found was There more skilled brothers and sisters kind of held a watching brief to ensure they did not fall through the system,which created a great work ethic,
motivating all co-workers to get the job  done, and also made the job place more pleasant and fun place to work in,

Over time the higher wages  low skilled workers found ways to lowering the cost of operations , higher up people would miss,

I  just  finishing  work for another engineering company which started around two years ago, the had lots of different  pay scales in the workplace, what a mess, you had people in low skilled jobs  paid Minimum wages with very high turnover, most of it caused by people further up the food chain not having the skill set to do there own job resulting in large turnover of low skilled workers with positive work place attitudes slipping through there system,

I suspect higher wages Will Mean,less latte coffee for  Retired , The byproduct will mean less housing   needed for the staff who used  to make my latte ,hopefully more money in retires pocket ,when he starts to make his own,no tax required to support and pay state pensions to the  low paid people who used to make his latte coffee ,


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## Purple (7 Mar 2019)

RETIRED2017 said:


> I worked for an engineering company which by its very nature needed and hired low skilled people , retention of people in jobs which required low skill long term with as little as possible people turnover, led the company to pay the low skilled worker the same wage as there more skilled brothers and sisters,


That's interesting. I work in a manufacturing precision machining company and we don't want low skilled people. We have robots to do that work.


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## RETIRED2017 (8 Mar 2019)

Purple said:


> That's interesting. I work in a manufacturing precision machining company and we don't want low skilled people. We have robots to do that work.


That is very very interesting and I will tell you why, Some time ago you were on hear ,I will let you find your one post and have a look at it your self,

 I think the subject was The amount of tax high earners were paying, You Quoted  the % of sales to labour cost and how high Income tax affected this, the one thing that stuck out a mile was how low your sales were to they amount produced,or better again the cost of labour to sales, I would pick up on this kind of thing ,Working in costings involved figuring out what your opposition was up to,if the undercut you and the had high labour / overhead cost you left it to them ,to go broke ,

many a time I had the displeasure of walking through Robot graveyards, when they were clearing  Machinery out after Companies  going bust/closing down or moving out of Ireland ,seeing former so called top Employees who spent there time looking down there noses at work/workers the considered considered beneath them,Taking photographs before the machinery gets moved on , telling you how much it cost and it being sold for almost nothing now,when you ask them what the robots were used for if you hear they words used to replace low skill work ,you know in most cases why they are closing,

I have seen it and there is nothing better to watch , seeing co-workers helping low skilled youngsters who had being left sitting in front of a computer by companies who were well paid to deliver Employability ,

 there real money is made by getting placements for people out of work with skills, leaving the people on low skill to drift along into long term unemployment,  pushing up long term unemployment households ,

The mistake some companies make ,the only have so much money to invest in robots, Part of the mess I posted about above your post was highly paid people in charge of putting in Robots  took the safe option and installed them in low skilled work stations with little overheads,

There overheads to labour was high running at  four hundred and fifty % the calculated the ROI on the robots to overheads, roll on end of year overheads went up and wages had not moved,These people were very well paid and thought they were underpaid seeing all the money they were after saving the company ,They thought they could run  Ireland and save the taxpayer a packet,

Anyhow the robots got reconfigerated to the higher skilled workstations for the want of a better word one year later there overheads are down somewhere between three and four hundred % of labour ,new recruits  low skilled workers now being paid a higher wage and overheads away down,


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## Purple (8 Mar 2019)

Sorry RETIRED2017, but I really don't understand your post.

All I can say is that we are making double digit net profits in a manufacturing company and have no intention of making anyone redundant as a result of introducing more automation. What we will do is
increase turnover without increasing headcount. We will be increasing wages though, paid for by training people and improving processes in order to be more productive.


I don’t want to hire an 18 year old to load a machine when he or she has no real prospect of ever becoming more than a machine loader. The only thing restricting that 18 year old should be their ability and attitude, not crappy structures and dead-end roles within their place of employment.


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## Philip S (24 Apr 2019)

The assumption of a fixed increase in minimum wage is assuming the person is doing the same job the whole time. Take for example a tax trainee they will start on 25k per year or 12.82 per hour. There is two paths we will take they pass the exams and after 4 years are a senior and get promoted every 2 years until they make senior manager. After 10 years they are on 70k per year roughly. They skill level as increased and as result their pay as increased. If somehow they instead stay as a trainee for the 10 years and get the 2.5% increase each year they are on 31,222 after 10 years. But we assume the skills level has not increased otherwise they would have been promoted along the way. 
But looking at someone stacking shelves in Tesco the same career prospects are not there. They might have fixed raises set in contract but staying in the same job might only lead to an increase of €2 per hour and it generally stops at that. With someone stacking shelves an increase in skill is unlikely to be the same as above example. If a skill increase does happen they could  progress to cashier, shift supervisor right up to store manager. The increase is linked with the skill and new role and not simply a time factor.


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## Firefly (24 Apr 2019)

Folsom said:


> @NoRegretsCoyote I would respectfully beg to differ. At 33, assuming a starting point of 18yrs and continuous employment, your friend with two masters degrees would be able to command a minimum wage of €11.44ph - (15yrs in workforce @ €0.24c increase pa) as a chef.
> The problem of course is why would an employer take him on over say, a 18yr for €7.84ph?
> Attitude - I would suggest that a 33yr old in this situation should be able to demonstrate superior attitude?
> Aptitude - two masters degrees?
> ...



Another employer, who may be just breaking even, may see the 18 year old as cheaper. Also, as neither candidates have any prior experience, both will need training, further adding to costs. What's more, it is more likely that an 18 year old will have more flexibility when it comes to days / hours of work than someone older, so it could easily be argued that in the above scenario, the 33 year old is now going to find it even more difficult to find employment.

Better to leave the market determine the fair rate in my opinion, otherwise we are just guessing on an appropriate minimum wage.


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## NoRegretsCoyote (24 Apr 2019)

Firefly said:


> Better to leave the market determine the fair rate in my opinion, otherwise we are just guessing on an appropriate minimum wage.



Exactly. Civil servants in office in Dublin don't, and can't, know the market conditions in every sector at every time. 

It is much better left to individuals on the ground to work out what wage is feasible and what wage isn't.


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## Early Riser (24 Apr 2019)

NoRegretsCoyote said:


> It is much better left to individuals on the ground to work out what wage is feasible and what wage isn't.



Possibly at the level of basic economic supply and demand. But I am not so sure if this is desirable at the broader societal (human) level and especially as regards social cohesion. I suggest we all have an investment in this, not just the minimum wage worker.

As I understand it, the evidence for the impact of the minimum wage on employment relates largely to the unskilled sector and, more specifically, to youth employment within the unskilled sector.  Certainly it is desirable that youth are given a chance to get started. But this sector is already very heavily populated by immigrant workers, some transient, some not. I suggest that the lower the minimum wage (or with the elimination of the minimum wage) the more employment in this sector would become almost exclusively immigrants. When saying this, I am not at all opposed to immigration in general, or to immigrants, but I wonder what creating a whole sector of the economy (low paid) almost fully populated by immigrants might do in terms of social cohesion. This is playing out more in other Western countries than ours but we shouldn’t think we are immune from it.

A couple of further points.

 Low skills posts have the least likelihood of significant wage progression. A low wage entrant in a skilled sector can expect ongoing promotion and pay/salary rises. If the unskilled are going to be left behind with no minimum wage safety net, we risk perpetuation of a permanent underclass that will be disaffected and disconnected from society and its norms. This is a recipe for social disharmony at least – and quite probably conflict of one form or another (organised or unorganised).

Also, a permanently low skilled, low wage sector will mean a significant number of people increasingly dependent on state supports to meet basic living costs. This is hardly desirable socially (or economically?). Also, it means ongoing state subsidy (albeit indirect) for an employment sector which has access to a large immigrant pool of people to keep its labour supply constantly replenished without the normal pressures for wage rises (possibly even creating wage depression).

What an appropriate minimum wage level might be is a separate matter.


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## NoRegretsCoyote (24 Apr 2019)

Early Riser said:


> Possibly at the level of basic economic supply and demand. But I am not so sure if this is desirable at the broader societal (human) level and especially as regards social cohesion. I suggest we all have an investment in this, not just the minimum wage worker.
> 
> As I understand it, the evidence for the impact of the minimum wage on employment relates largely to the unskilled sector and, more specifically, to youth employment within the unskilled sector.  Certainly it is desirable that youth are given a chance to get started. But this sector is already very heavily populated by immigrant workers, some transient, some not. *I suggest that the lower the minimum wage (or with the elimination of the minimum wage) the more employment in this sector would become almost exclusively immigrants.*



So you think that no Irish 18-year old would work for less than a 25-year old Bulgarian immigrant?




Early Riser said:


> Low skills posts have the least likelihood of significant wage progression. A low wage entrant in a skilled sector can expect ongoing promotion and pay/salary rises. If the unskilled are going to be left behind with no minimum wage safety net, *we risk perpetuation of a permanent underclass that will be disaffected and disconnected from society and its norms.* This is a recipe for social disharmony at least – and quite probably conflict of one form or another (organised or unorganised).



I am at a loss to how people turning up for paid employment creates disconnection from societal norms. If it's a choice between that or unemployment I know what I'd pick.........



Early Riser said:


> Also, a permanently low skilled, low wage sector will mean* a significant number of people increasingly dependent on state supports to meet basic living costs.*



The alternative is unemployment. What would it cost the taxpayer?




People with zero knowledge of economics generally acknowledge that when the price of something goes up, people look for less of it. It's common sense.

Common sense gets suspended, and people jump through huge intellectual hoops however, to claim that minimum wages have no impact on how much employers choose to employ people!


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## Early Riser (24 Apr 2019)

NoRegretsCoyote said:


> So you think that no Irish 18-year old would work for less than a 25-year old Bulgarian immigrant?



I do think that immigrants will work for less than locals. I am not sure why this is contentious - it is long recognised.For example, Irish immigrants in 19th century America. In the absence of a minimum wage, and with a huge potential supply of immigrants, the effect is likely to be downward on wage levels in the unskilled sector. This might be good for anyone looking at the price of pizza. But increasingly large scale immigration does have societal consequences. We should, at least, also consider those. It is one factor in the Brexit effect, for example. Saying that the Irish 18 years old should just suck it up and take whatever is on offer does not change this.



NoRegretsCoyote said:


> I am at a loss to how people turning up for paid employment creates disconnection from societal norms. If it's a choice between that or unemployment I know what I'd pick.........



Increasingly large discrepancies between the highly paid and the lower paid does impact on the "social contract". At the very least, it creates a sector increasingly open to populist agitation. Whether you would choose to take the minimally paid job or not is hardly relevant. (Anyway, what people say they would do in a hypothetical situation has been shown to have only a very weak link to what they do when actually in the sutuation).



NoRegretsCoyote said:


> The alternative is unemployment. What would it cost the taxpayer?




But is not an either/or - that is the point. You can have an increasing very low paid sector  (with state subsidies) and still have unemployment.



NoRegretsCoyote said:


> People with zero knowledge of economics generally acknowledge that when the price of something goes up, people look for less of it. It's common sense.
> 
> Common sense gets suspended, and people jump through huge intellectual hoops however, to claim that minimum wages have no impact on how much employers choose to employ people!



Hands up - I do have zero knowledge of economics and little of any common sense (whatever that is!). However, I am speaking as a member of society in which I have, like others, an investment. The economy is one important aspect of society, but far from the only one.

Even as an economic ignoramus I am aware of the potential impact of costs. However, I confess I am largely unread in terms of the empirical evidence of the impact of the minimum wage on employment rates. I have read a few reports which, if somewhat contradictory, were at least not as dramatic as economic theory (in my v. limited understanding of it) might suggest. Perhaps, you have looked at the available evidence more comprehensively and could give an objective summary?


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## Folsom (24 Apr 2019)

Firefly said:


> Another employer, who may be just breaking even, may see the 18 year old as cheaper.



That is a possibility, but not a problem. If the only criteria an employer takes into account when hiring staff is the labour cost, then its not hard to see why some businesses thrive and profit, and others are only breaking even and going under.



Firefly said:


> Also, as neither candidates have any prior experience, both will need training, further adding to costs.



Neither have prior experience at being a chef, but as already demonstrated, the 33yr old already has a proven track record at work, has ability, high intelligence, and a clear aptitude to want to be a chef.

We dont know anything about the 18yr old. 

So the employer has a choice. Based on information provided I would plump for the 33yr old.



Firefly said:


> What's more, it is more likely that an 18 year old will have more flexibility when it comes to days / hours of work than someone older,



There is no basis to this. If anything, Saturday nights are traditionally the busiest trade times for restaurants. 
Do I want a 33yr old committed to being a chef? Perhaps saving to buy a home, start a family? Or an 18yr old gagging to be with his/her mates for a party every second weekend? 



Firefly said:


> Better to leave the market determine the fair rate in my opinion, otherwise we are just guessing on an appropriate minimum wage.



That would involve abolishing the minimum wage altogether?


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## Folsom (24 Apr 2019)

Philip Slattery said:


> The increase is linked with the skill and new role and not simply a time factor.



Yes, this is true. But inherent in my point about a banded minimum wage is that qualified skills are not the only factor in determining a wage rate.
The application of any set of skills is variable from one worker to another.
Other factors such as loyalty, punctuality, reliability, trust, etc are also characteristics that also hold value and should carry an increasing premium over time that is greater than minimum wage. What that premium is valued at is subjective, but as a _minimum _a 2.5% increase or, €0.24c per hour by todays minimum wage, is, in my opinion, not an unreasonable task.

For anyone concerned about the cost to employers, there could be an easy workaround with employers prsi. As wage rates increase, employers prsi could reduce accordingly.


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## NoRegretsCoyote (25 Apr 2019)

@Early Riser 

Standard economic theory suggests that an increase in the price of something means less of it will be demanded. Also common sense!

So theory suggests that minimum wages will decrease employment, especially of the lower-skilled. This has been studied statistically for thirty years and the results don't chime entirely with the theory. Many studies find no impact of the minimum wage on employment levels.

The problem is that it is extremely difficult to control for everything else that is going on in an economy (employment may be growing or shrinking). There are all sorts of different employer responses too if the cost of labour goes up: you can reduce fringe benefits and training, you can reduce bonus pay for overtime, you can reduce hours for part-time workers, etc. These won't be captured in a standard study that just looks at raw numbers in employment.

There is a very sophisticated recent study from Seattle where they have been putting in a pretty substantial minimum wage in recent years. It shows that firms don't actually fire workers they already have, they just pay them the higher hourly minimum wage. At the same time they don't take on as many new workers, and they reduce the hours of the workers that they have.

I think this discriminates against "outsiders", specifically, denying young people the chance to accumulate skills which can lead to better pay later on.


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## Purple (25 Apr 2019)

Most minimum wage employees are from middle income households. They include students and women who have worked exclusively in the home and are now returning to part time work.


I agree with Folsom’s point that if the wage level someone will work for is the main consideration when hiring then a business cannot thrive.

I have mixed feelings about a minimum wage. In reality our high levels of social welfare set a floor at which people are willing to work. That said I don’t like it when employers exploit people and without some safeguards exploitation would be more common. I have a bigger problem with collective sectoral wage agreements which rewards lower skilled slackers and punish higher skilled harder working people who happen to have the same job title.


Another thing to bear in mind is that higher wages encourage process efficiency, more training and skills development and better deployment of capital within business. In other words higher wages make businesses solve problems rather than just throwing more cheap labour at the problem.


The big downside of a high minimum wage is that it is harder for low skilled people to gain employment at all as their labour is simply not worth the wage that the employer is mandated to pay. This, along with high welfare rates, is the ultimate poverty trap.


How do we find a balance between the two? It strikes me that much of our social policy in this area is misguided in that we treat poverty as an economic problem whereas it is in fact a symptom of a social problem. In treating the symptom without treating the root cause we are simply administering a form of social live support, keeping people in a perpetual state of often intergenerational dependence. If we want a high minimum wage then we need a high level of minimum educational attainment.


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## Early Riser (25 Apr 2019)

NoRegretsCoyote said:


> So theory suggests that minimum wages will decrease employment, especially of the lower-skilled. This has been studied statistically for thirty years and the results don't chime entirely with the theory. Many studies find no impact of the minimum wage on employment levels..........
> 
> .......There is a very sophisticated recent study from Seattle where they have been putting in a pretty substantial minimum wage in recent years.



I agree - the results are inconsistent with classic economic theory. Such theory tends to be based on assumptions of human beings acting on a fairly consistent logical manner - somewhat as automatons. Behavioural economics suggests that they don't. 
Classis theory also tends to assume an even an unchanging contextual baseline. But social contexts vary, societal norms vary, migration patterns vary, attitudes towards migration vary, social welfare and healthcare systems vary, educational systems vary, house ownership and rent costs vary, etc. 

I assume that (as with most things) the effects of the minimum wage may be both positive and negative. The downside employment effects have not, so far, been as negative as some have predicted. But this may change - who knows? In measuring effects we need to consider wider measures than narrowly economic ones, eg, mental and physical health,  family stability, impacts on children ,etc. Also, does it lead to employers investing more in their employees in terms of training, etc. to improve productivity, rather than treat them as cheap disposable commodities?



Purple said:


> How do we find a balance between the two? It strikes me that much of our social policy in this area is misguided in that we treat poverty as an economic problem whereas it is in fact a symptom of a social problem. In treating the symptom without treating the root cause we are simply administering a form of social live support, keeping people in a perpetual state of often intergenerational dependence. If we want a high minimum wage then we need a high level of minimum educational attainment.



Agreed - broadly! But we should also view the minimum wage as a social policy rather than just an economic policy, and evaluate it in this broader context.


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## Purple (25 Apr 2019)

Early Riser said:


> Agreed - broadly! But we should also view the minimum wage as a social policy rather than just an economic policy, and evaluate it in this broader context.


If so then can we acknowledge that we are placing a social burden on employers in asking them to pay wages which are higher than the economic value of their employees?


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## Early Riser (25 Apr 2019)

Purple said:


> If so then can we acknowledge that we are placing a social burden on employers in asking them to pay wages which are higher than the economic value of their employees?



We might narrowly agree on that - provided we also agree that an employee is of a different status, morally and socially, as any other input cost, such as software, and that employers and employees exist and act in a social, cultural and political context to which they are responsible, and which is responsible to them.


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## Purple (25 Apr 2019)

Early Riser said:


> We might narrowly agree on that - provided we also agree that an employee is of a different status, morally and socially, as any other input cost, such as software, and that employers and employees exist and act in a social, cultural and political context to which they are responsible, and which is responsible to them.


I agree with that. One of the factors at the forefront of our decision making process where I work is the fact that so many people rely on this place to pay their mortgage or rent. People are not a commodity.


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## Folsom (26 Apr 2019)

Purple said:


> How do we find a balance between the two?



That is why I suggest a banded minimum wage. One that increases over time as a worker applies him/herself. 
One problem as I see it, is the NMW has become a set bar in wage payment rather than what it is supposed to be - _the bare minimum. _
Rather than having a blanket increase in minimum wage each year (its incredible that we need Commission to do this now!), other factors should apply and be considered. 
So the minimum wage can stay as is, but apply other factors such as time spent in the workforce can attract a higher rate of pay for the low-skilled but diligent worker. 
Employers prsi contributions could correspondingly reduce as the wage in this banded minimum wage increases. So no extra cost for employers, and workers (albeit low skilled ones) can at least look forward to some reward for their efforts, providing the incentive to remain in the workforce.
If said workers can train, learn etc then even better they can pull themselves out of the minimum wage band. But in the meantime, their dedication to turn up for work, on time, everyday, and apply themselves to whatever tasks are involved is leading to modest increases in their hourly rate every year.


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## Purple (26 Apr 2019)

It is important to remember a few things about the minimum wage;

It is one of the highest in Europe and so it is reasonable to expect that a higher proportion of the workforce will be earning it than in countries with a lower minimum wage.
Even taking the above into account only somewhere around 10% of employees are on (or around) the minimum wage.
The majority of people on the minimum wage are from middle income households.
The majority of people earning the minimum wage are new entrants to the workforce.
Three quarters of people who start work on the minimum wage are on a higher wage within 4 years.
Nobody is running a household or raising a family on the minimum wage (there are significant social welfare supports for people in that position).


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## Purple (26 Apr 2019)

Folsom said:


> That is why I suggest a banded minimum wage. One that increases over time as a worker applies him/herself.
> One problem as I see it, is the NMW has become a set bar in wage payment rather than what it is supposed to be - _the bare minimum. _
> Rather than having a blanket increase in minimum wage each year (its incredible that we need Commission to do this now!), other factors should apply and be considered.
> So the minimum wage can stay as is, but apply other factors such as time spent in the workforce can attract a higher rate of pay for the low-skilled but diligent worker.
> ...


If you are on the minimum wage for years then you are either thick or lazy or both. No amount of legislation will change that; you can't polish a turd.


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## Folsom (26 Apr 2019)

There could be many reasons aside from the reasons given as to why someone stays on minimum wage. Nevertheless, if thick and lazy people are prepared to continue to work, and employers are prepared to employ them, then so be it. 

In any case, as you have pointed out, around 10% of workforce are on, or around minimum wage, suggesting that few actually do stay on minimum wage long-term. In which case, a banded minimum wage for the few (regardless of the reasons why they stay on minimum wage, which would be a multitude of variable factors) would not be an undue burden on employers.


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## Folsom (26 Apr 2019)

Thats handy 

https://www.rte.ie/news/business/2019/0426/1045823-minimum-wage/


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## Purple (26 Apr 2019)

Folsom said:


> In which case, a banded minimum wage for the few (regardless of the reasons why they stay on minimum wage, which would be a multitude of variable factors) would not be an undue burden on employers.


Why should this social burden be placed on employers?


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## Folsom (26 Apr 2019)

Purple said:


> Why should this social burden be placed on employers?



Its not a social burden. It is a financial burden, but only in the context that all wages are a burden.
There is an easy workaround here. If, for example, increases in a banded minimum wage were offset against decreases in employer prsi contributions, then there would be no additional burden, social or financial, on the employer. And low skilled minimum wage workers who work hard and diligently (even the thick and lazy ones) are rewarded for their application, punctuality and attitude to work.


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## Purple (26 Apr 2019)

People who are diligent, punctual and hard working don't stay on the minimum wage. 
We'd be legislating for something that doesn't happen.


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## Folsom (26 Apr 2019)

Oh c'mon, they might not stay exactly on minimum wage, but there are plenty of people who are a long time in the work force who cannot command an income much above minimum wage. 
Not because they are lazy or thick, but simply the Industry they are engaged in is not highly skilled and there is ample workers willing to do the work in. 
But you are correct in identifying that most people dont stay on minimum wage. So this legislation would only be there for the few that cannot work their way out of it. 
Incidentally, if a business hires someone on minimum wage (or any wage for that matter) then it stands to reason that an employer sees the value of that labour as being greater than the rate paid - otherwise why hire? 
So as minimum wage workers are only about 8% of workforce, and in general dont stay there, then there is scope to ensuring that the few who do remain in or close to minimum wage get reasonable sustainable increases each year they work. 
If a business cannot afford reasonable increases for the few minimum wage workers that there are, then such a business is simply not sustainable long-term.


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## Purple (29 Apr 2019)

Folsom said:


> Oh c'mon, they might not stay exactly on minimum wage, but there are plenty of people who are a long time in the work force who cannot command an income much above minimum wage.
> Not because they are lazy or thick, but simply the Industry they are engaged in is not highly skilled and there is ample workers willing to do the work in.


 If you don't want to be low paid then don't spend your working life working in a low skilled, low wage sector.



Folsom said:


> Incidentally, if a business hires someone on minimum wage (or any wage for that matter) then it stands to reason that an employer sees the value of that labour as being greater than the rate paid - otherwise why hire?


If a business needs someone but the State has mandated that they must pay them more than their economic value then it will damage the business or the unskilled person simply won't be employed. 



Folsom said:


> If a business cannot afford reasonable increases for the few minimum wage workers that there are, then such a business is simply not sustainable long-term.


 Or costs increase and prices go up and then people moan about the cost of living.


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## Folsom (29 Apr 2019)

Purple said:


> If you don't want to be low paid then don't spend your working life working in a low skilled, low wage sector.



Not wanting to be low paid, and spending your working life in low paid sectors by virtue of any amount of factors relating to education, upbringing and family circumstances, industry trends, economic conditions, social conditions etc...etc...are two completely different things.



Purple said:


> If a business needs someone but the State has mandated that they must pay them more than their economic value then it will damage the business or the unskilled person simply won't be employed.



Yes, but has that happened? Increases in national minimum wage since its introduction have coincided with increases in employment - suggesting that the economic value of low paid workers is worth far more than the prescribed minimum wage.




Purple said:


> Or costs increase and prices go up and then people moan about the cost of living.



The minimum wage has increased by 28.10% since it was cut to €7.65ph. As it began to increase, unemployment has fallen. Indicating the economic value of one hours work is more than what is attributed to it under minimum wage legislation.


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## NoRegretsCoyote (29 Apr 2019)

Folsom said:


> Employers prsi contributions could correspondingly reduce as the wage in this banded minimum wage increases. So no extra cost for employers, and workers (albeit low skilled ones) can at least look forward to some reward for their efforts, providing the incentive to remain in the workforce.



This is daft. This is essentially a tax break to employees for being older.

Why should the government subsidise seniority in the private sector workforce?


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## Folsom (29 Apr 2019)

NoRegretsCoyote said:


> This is essentially a tax break to employees for being older.



How do you figure its a tax break to employees???




NoRegretsCoyote said:


> Why should the government subsidise seniority in the private sector workforce?





Folsom said:


> and workers (albeit low skilled ones) can at least look forward to some reward for their efforts, providing the incentive to remain in the workforce.


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## Purple (29 Apr 2019)

Folsom said:


> The minimum wage has increased by 28.10% since it was cut to €7.65ph. As it began to increase, unemployment has fallen. Indicating the economic value of one hours work is more than what is attributed to it under minimum wage legislation.


 I don't think you've established cause and effect there. You may as well say that increases in the minimum wage improved the weather because the weather has improved as the minimum wage increased (and no, I don't know if this is the case, it's just an example to make a point)


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## Purple (29 Apr 2019)

Folsom said:


> Not wanting to be low paid, and spending your working life in low paid sectors by virtue of any amount of factors relating to education, upbringing and family circumstances, industry trends, economic conditions, social conditions etc...etc...are two completely different things


Yep, and at some point people need to take responsibility for their own lives. The State is not your Mammy.


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## Folsom (29 Apr 2019)

Purple said:


> I don't think you've established cause and effect there. You may as well say that increases in the minimum wage improved the weather because the weather has improved as the minimum wage increased (and no, I don't know if this is the case, it's just an example to make a point)



I never suggested that I had established cause and effect. The detail of increasing employment alongside an increasing minimum wage is merely an indicator.
It is useful in the sense that if you are proposing that an increasing minimum wage set by the State is mandating employers to pay wages above the economic value, thus damaging the business or leaving the unskilled person unemployed.
The indicators suggest, since the inception of the minimum wage, that as the minimum wage increases participation in employment also increases. There are obviously other factors to consider for increasing employment, but this is one of them.


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## NoRegretsCoyote (29 Apr 2019)

Folsom said:


> How do you figure its a tax break to employees???



Because the state would provide a reduced employee PRSI bill, so that employers could pass on the saving to employees. That's a tax break to employees. I mean that's what you wrote.

Your point about increasing increasing minimum wage and increasing employment is specious. The NMW was increased to €8.65 in July 2007 before it fell (briefly) to €7.65 in February 2011. Over that period employment fell 306,000 or 14%! Did the minimum wage have nothing to do with this either?


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## Folsom (29 Apr 2019)

NoRegretsCoyote said:


> I mean that's what you wrote



No its not what I wrote. I wrote that corresponding increases in a banded minimum wage could be offset against _employers PRSI _contributions, not the employees contributions.



NoRegretsCoyote said:


> The NMW was increased to €8.65 in July 2007 before it fell (briefly) to €7.65 in February 2011. Over that period employment fell 306,000 or 14%! Did the minimum wage have nothing to do with this either?



I dont know what impact the increase or decrease of the minimum wage has on employment. I merely suggested that, as an indicator, that increases in minimum wage have corresponded with increases in employment since its inception, notwithstanding a number of other factors.

You have correctly pointed out a period, following the increase to €8.65ph, that shortly afterwards employment numbers began to decrease. Was this because of the increase in minimum wage? Or was it because of other factors, such as the collapse in the property market following a global credit crunch? 
I would suggest the latter, as it is widely known that the biggest impact on job losses was felt in the construction industry, an industry that commands pay rates well over and above the minimum wage. 
The restoration of the minimum wage to €8.65ph and beyond has coincided with increasing numbers entering the workforce.
Is this down to the minimum wage or other factors? I would suggest it is primarily down to other factors as investment sentiment has improved since 2012. 
That said, as an indicator, it can be shown that increases in the minimum wage have not adversely impacted on employment opportunities since its inception. 
Suggesting that the economic value of an hour worked for €9.80ph is worth more than the €9.80ph in general. 
As such, in terms of reducing inequality, I think a banded approach to the minimum wage - for those few workers who end up in a lifetime of low paid work - is a better way to reduce inequality rather than a blanket single point minimum wage.


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## Purple (29 Apr 2019)

Folsom said:


> As such, in terms of reducing inequality, I think a banded approach to the minimum wage - for those few workers who end up in a lifetime of low paid work - is a better way to reduce inequality rather than a blanket single point minimum wage


Increasing handouts to people who spend their entire working life on the minimum wage happens now anyway. If they have families they get FIS. If they don't have their own home they get given one. They will get a medical card. They will be given a pension they have never contributed to. What you are suggesting is a shift or increase in these handouts, paid by the employer who in turn is refunded by the State in the form of a cut in the rate in PRSI the employer pays for that employee.

I've no real problem with the idea but it would probably cost far more to administer than the direct cost of the PRSI refund. I'll say again though that anyone who spends their entire working life on the minimum wage either has serious intellectual or psychological issues or is totally disinterested in providing for themselves.


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## Folsom (29 Apr 2019)

Firstly, it is not a handout, it a wage paid for labour served. By using reductions in employer prsi to offset against increases, it merely facilitates a transfer of income from state coffers to the person who actually earns the income - all at no additional cost to the employer. 

People with serious intellectual or psychological issues are worthy of some protection and reward. Particularly if they are prepared to do the low-paid work that others aspire too, and do, leave behind. 

My local supermarket employs two disabled people. One with Downs Syndrome. He has been working there for four years. I dont know what rate of pay he is on, but as a shelf-stacker I would imagine it is, or close to minimum wage. 
Its possible he may be on a wage considerably higher, perhaps €11 or €12 an hour. Which after four years service is reasonable in my opinion and, if he has only ever worked four years, is already earning outside a banded minimum wage.
But if he is not, then the point of a banded minimum wage is to afford rights to such employees that would otherwise not be in a position to effectively extract a reasonable reward for service, loyalty, attitude, to their work. 
I pitched a band of €7.84ph - €15.68ph. It should be noted that the €15.68ph will only ever be reached after 40yrs in employment. So all things remaining equal, an 18yr old who starts work today stacking shelves all their life (due to intellectual issues) can look forward to an income of €15.68ph in the year 2059. 
It really is about reducing inequality for those who remain in low paid income (for whatever reason).


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## Purple (29 Apr 2019)

Folsom said:


> Firstly, it is not a handout, it a wage paid for labour served. By using reductions in employer prsi to offset against increases, it merely facilitates a transfer of income from state coffers to the person who actually earns the income - all at no additional cost to the employer.


 If they are being paid above the economic value of the work they are doing and the gap between the economic value of their labour and the wage they receive is funded by a tax reduction for the employer then it is a handout. I've no problem with handouts persay (the non contributory pension and the majority of the pensions that public servants receive are handouts in that the people who receive them don't pay for them) but call it what it is. 



Folsom said:


> People with serious intellectual or psychological issues are worthy of some protection and reward. Particularly if they are prepared to do the low-paid work that others aspire too, and do, leave behind.


 I agree. Is this the best way of doing it?



Folsom said:


> My local supermarket employs two disabled people. One with Downs Syndrome. He has been working there for four years. I dont know what rate of pay he is on, but as a shelf-stacker I would imagine it is, or close to minimum wage.
> Its possible he may be on a wage considerably higher, perhaps €11 or €12 an hour. Which after four years service is reasonable in my opinion and, if he has only ever worked four years, is already earning outside a banded minimum wage.
> But if he is not, then the point of a banded minimum wage is to afford rights to such employees that would otherwise not be in a position to effectively extract a reasonable reward for service, loyalty, attitude, to their work.
> I pitched a band of €7.84ph - €15.68ph. It should be noted that the €15.68ph will only ever be reached after 40yrs in employment. So all things remaining equal, an 18yr old who starts work today stacking shelves all their life (due to intellectual issues) can look forward to an income of €15.68ph in the year 2059.


 What I like about your proposal is that the employer has to apply for it so it is less open to abuse than other forms of welfare... but it is still welfare.


Folsom said:


> It really is about reducing inequality for those who remain in low paid income (for whatever reason).


That I have a problem with. If someone can't earn more than the minimum wage then by all means help them. If you won't earn more than the minimum wage because you are lazy or whatever then you should get nothing. The same applies to welfare in general though; help those who can't help themselves but if someone just chooses not to work and uses our social safety net as a hammock then give them nothing. I would have no problem with them literally starving to death.


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## Folsom (29 Apr 2019)

Purple said:


> If they are being paid above the economic value of the work they are doing



Im not sure how you have deduced that. Currently, if I employ someone I have to pay, a minimum of €9.80ph. Im not going to do that if the economic value of their labour is less or equal to that. In fact, for it to be worth my while, the economic value of the work performed would want to be double what I pay.
The mere fact that I can get someone to do the work below its economic value is my reaon for hiring.



Purple said:


> is funded by a tax reduction for the employer then it is a handout.



By that reasoning any tax deduction, tax credit, etc is a handout. 
To mean, a handout is receiving something for doing nothing. 
Working and receiving a pay rise by virtue of the State not imposing a tax on it is not a handout. The money belongs to the employee and the employer. It is the State that extracts the 'handout' otherwise known as tax.



Purple said:


> I agree. Is this the best way of doing it?



I dont think it is the best way, but I think it is a better way than a blanket single point minimum wage.




Purple said:


> but if someone just chooses not to work



I am talking about people who choose to work, not those who choose not to. They dont get a wage.


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## Purple (29 Apr 2019)

Folsom said:


> Im not sure how you have deduced that. Currently, if I employ someone I have to pay, a minimum of €9.80ph. Im not going to do that if the economic value of their labour is less or equal to that. In fact, for it to be worth my while, the economic value of the work performed would want to be double what I pay.
> The mere fact that I can get someone to do the work below its economic value is my reaon for hiring.


Okay, so you agree that a high minimum wage can create an underclass which is unemployable?
The minimum wage is €9.80. I can hire an unskilled person for €9.80. Under your system if I hire an equally unskilled person who happens to be older then I will still have a new wage cost of €9.80 but the State will top up their wage by means of a tax deduction elsewhere in my business. I call that a handout. It also means that as a person becomes more experienced and better at their job I don't have to give them a real pay rise; I can just get a bigger handout/ tax break which I use to top up their wages. Now that I think about it I don't like your idea at all; it is a poverty trap and way too open to abuse by employers. 



Folsom said:


> By that reasoning any tax deduction, tax credit, etc is a handout.
> To mean, a handout is receiving something for doing nothing.
> Working and receiving a pay rise by virtue of the State not imposing a tax on it is not a handout. The money belongs to the employee and the employer. It is the State that extracts the 'handout' otherwise known as tax.


 The economic value of their labour is €9.80 as that is the cost to hire a different person of equal skill (or lack of skill). Everything after that is a handout.



Folsom said:


> I dont think it is the best way, but I think it is a better way than a blanket single point minimum wage.


 In that scenario I agree. 



Folsom said:


> I am talking about people who choose to work, not those who choose not to. They dont get a wage.


 No, they get a handout. Your guys get a wage and a handout.


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## Folsom (29 Apr 2019)

Purple said:


> Okay, so you agree that a high minimum wage can create an underclass which is unemployable?



From page 1.

QUOTE="Folsom, post: 1603984, member: 107325"]I don't disagree that if the minimum wage is pitched higher than what employers value the labour then that is a cause for a poverty trap.
So im not arguing that €9.80ph is too high or too low, im saying a single figure rate is inadequate in itself for reducing inequality.[/QUOTE]



Purple said:


> The minimum wage is €9.80. I can hire an unskilled person for €9.80. Under your system if I hire an equally unskilled person who happens to be older then I will still have a new wage cost of €9.80 but the State will top up their wage by means of a tax deduction elsewhere in my business. I call that a handout



You call paid labour a 'handout' all you want. But the reality is is that the wealth is generated by the employer and employee, not the State. 
The State is a third actor imposing its taxation upon that wealth. It does so by whatever means it wants to. It could be a reduction in employer prsi contributions as mentioned, or it could be by way of tax credits - which every employee gets. Or it could increase the marginal taxation band every year for next five years, meaning those workers who pay 40% are also going to get 'handouts' by your reasoning. 
Or, in practical terms, it can be understood that the wealth created is created by the employee and employer in co-operation with one another. The State does not create the wealth.



Purple said:


> It also means that as a person becomes more experienced and better at their job I don't have to give them a real pay rise; I can just get a bigger handout/ tax break which I use to top up their wages.



Why would you think that the case? We have already established that most people will work their way out of minimum wage, be it through education, training, experience, better performance. 
Why do you assume that good workers will settle for minimum wage?
I am talking about a fringe element of workers, who for whatever reason, have found themselves in low paid minimum wage employment on a long-term basis. 
Further to that, im only interested in workers who, for whatever reason, have not been able to command a wage rate outside of a banded minimum wage, but still turn up for work, still perform, still do the job. 



Purple said:


> Now that I think about it I don't like your idea at all; it is a poverty trap and way too open to abuse by employers.



Thats unfortunate, as you appear not to have understood the concept.



Purple said:


> The economic value of their labour is €9.80 as that is the cost to hire a different person of equal skill (or lack of skill). Everything after that is a handout.



Its not. The €9.80ph is the price you pay for the labour. The economic value is the value of the end product. 
If I buy a set of products for €30 and turn them into 100 units of tasty apple tarts, chocolate buns and crispy biscuits and sell them all at €3 a piece, what is the economic value of my labour?


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## Purple (29 Apr 2019)

Folsom said:


> You call paid labour a 'handout' all you want. But the reality is is that the wealth is generated by the employer and employee, not the State.


 Okay, so should any of us pay taxes so? Giving someone money back/ not taking money that would be taken from anyone else is a handout. The labour would be paid at €9.80 if not for a tax break therefore anything above €9.80 is a handout and is not paid labour.

By the way, wealth is generated by those engaged in internationally traded good and services. There is a massive social benefit from what doctors and teachers an police and public servants do, as well as an indirect economic benefit, but no direct wealth creation.  



Folsom said:


> Why would you think that the case? We have already established that most people will work their way out of minimum wage, be it through education, training, experience, better performance.
> Why do you assume that good workers will settle for minimum wage?


 If they will get up to €15 by virtue of just turning up each year then they are getting their pay rise funded by tax breaks for the employer. That doesn't seem right to me but I'm a bit of a socialist.



Folsom said:


> Thats unfortunate, as you appear not to have understood the concept.


 No, I understood it alright.



Folsom said:


> Its not. The €9.80ph is the price you pay for the labour. The economic value is the value of the end product.


 You are right; €9.80 is the real economic cost. The cost beyond that is borne by other tax payers rather than the employer.


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## Folsom (29 Apr 2019)

Purple said:


> Okay, so should any of us pay taxes so?



Whether we pay taxes or not, how much, on what, is down to the legislature. In general taxation is desirable. What is not often desirable is the manner upon which it is imposed.
But its a first for me to hear anyone claim that a reduction in tax on labour is a 'handout'.



Purple said:


> By the way, wealth is generated by those engaged in internationally traded good and services. There is a massive social benefit from what doctors and teachers an police and public servants do, as well as an indirect economic benefit, but no direct wealth creation.



That is a very simplified interpretation of wealth creation.
Wealth is created in many forms. In monetary terms its convenient to use the point of sale as the determining factor.
However, the creation of new wealth is the indirect result of previously created wealth through the generations, as well as innovation applied today.



Purple said:


> If they will get up to €15 by virtue of just turning up each year then they are getting their pay rise funded by tax breaks for the employer. That doesn't seem right to me but I'm a bit of a socialist.



Ok, I think the €15 is causing too much rankle with you. The €7 - €15 was a pitch based on todays €9.80. It was only an example based over 40yrs - it is not set in stone.
The core point is that the minimum wage be adopted over a band and not a single point.
The actual band can be determined later.

Using real PRSI contributions, it transpires that there is already appears to be a plethora of what you call 'handouts' in the PRSI system.

www.welfare.ie/en/downloads/sw14_19.pdf

But without wanting to get bogged down, sticking to employers prsi today, an employer contributes 8.7% prsi on weekly earnings up to €386 or €9.89ph for 39 hours. In total costing €10.75 an hour for minimum wage workers.
An 18yr old can be paid €7.84ph under the NMW.
So it probably doesn't take a scientist to figure out that this could act as a banded minimum wage (im not endorsing the amounts, merely the concept of a banded minimum wage), whereby an employee, for whatever reason, finds themselves in a lifetime of low paid minimum wage worker can, for every year of employment from age of 18, can expect an incremental wage increase between €7.84ph and €10.75, all other remaining even.
The cost of this to employers can be offset against employers prsi contributions within this band - just as other tax benefits, credits, rates and 'handouts' are applied under the numerous circumstances attached.




Purple said:


> You are right; €9.80 is the real economic cost. The cost beyond that is borne by other tax payers rather than the employer.



I think you are getting mixed up between 'market value' and 'economic value'.


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## Purple (30 Apr 2019)

Folsom said:


> However, the creation of new wealth is the indirect result of previously created wealth through the generations, as well as innovation applied today.


 That's what I said; other factors have an indirect impact by creating the environment for wealth creation. The wealth itself is only created through internationally traded goods and services.



Folsom said:


> The cost of this to employers can be offset against employers prsi contributions within this band - just as other tax benefits, credits, rates and 'handouts' are applied under the numerous circumstances attached.


You use the word "offset", I use "handout". It's the same thing. There is a net cost to the State and no net cost to the employer. In normal circumstances nine times out of ten that minimum wage employee would get a pay increase anyway, the cost of which would be borne by the employer. Under your proposal in every case that cost would be borne by the State.



Folsom said:


> I think you are getting mixed up between 'market value' and 'economic value'.


 I just clarified that I was talking about market value. Are you one post behind all the time?
The economic value will change by the day. The market value is more constant.


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## NoRegretsCoyote (30 Apr 2019)

Folsom said:


> No its not what I wrote. I wrote that corresponding increases in a banded minimum wage could be offset against _employers PRSI _contributions, not the employees contributions.



It doesn't matter whether it's labelled employee or employer PRSI. If the government said that employers PRSI was being abolished and employee PRSI was going up by the same amount, nothing would happen. Your employer would just increase your gross pay by the same amount and your net pay would not change. Google the term 'tax incidence'.




Folsom said:


> I would suggest it is primarily down to other factors as investment sentiment has improved since 2012.
> That said, as an indicator, it can be shown that increases in the minimum wage have not adversely impacted on employment opportunities since its inception.



The cognitive dissonance here is massive. Yes, the macroeconomy drives employment growth, but you cannot claim that microeconomic factors like the NMW play no part. Indeed both things can be true.

So I ask - if the NMW has no impact on employment, can't we all get rich by raising it to €100 an hour?


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## Folsom (30 Apr 2019)

Purple said:


> In normal circumstances nine times out of ten that minimum wage employee would get a pay increase anyway, the cost of which would be borne by the employer. Under your proposal in every case that cost would be borne by the State.



We are going around in circles.
 We have already established that most people work their way past minimum wage rates of pay. 7.8% of workforce find themselves in that bracket. Even within that bracket 50% are under age 25, suggesting only 4% of workforce remain long-term on minimum wage rates. 

What I proposed is a reform of the national minimum wage as it is currently structured. 
The ESRI claim increases in the minimum wage reduced income inequality. I agree it does, a minimum wage goes someway to reducing income inequality. I do think a blanket single point is however, by itself insufficient and that a banded minimum wage would be more effective. 

Currently the minimum wage of €9.80ph does two things. Firstly, it prevents employment opportunities for low skilled workers where employers deem it not worthwhile, or loss making to pay €9.80ph for labour in exchange for the return on capital. 
 Instead, through social transfers the State picks up the tab, a cost on the State. 

Secondly, where an employer does deem it worthwhile and profitable to employ someones labour, the minimum wage sets a bar upon which the labour extracts a minimum portion of the capital generated, regardless of how much capital is generated. 
This is a cost for employers where there is available labour willing to work for less than €9.80ph.

If you want to reduce income inequality further then it will involve a transfer of income from one source (tax payers and or employers) to another source (minimum wage and low income earners). 
If there is another of doing it, im all ears. But other than that, the only other option is that some prefer not to reduce income inequality.

So any talk of 'the cost to the State' or 'why should employers have shoulder the cost' is redundant. 

Having said all of that I proposed a banded minimum wage over the a typical lifetime of employment rather than the current single point (I should correct myself here, there are two points below the €9.80 for 18 and 19yr olds - in effect, the banded minimum wage already exists, but it somewhat cosmetic).

Under such a banded scheme that I proposed, it would take someone until they are 27yrs of age to reach €9.80ph. This would be a benefit to employers engaged in employing cheap labour - the quid pro quo however, is that the minimum wage would continue to rise, entitling a low paid worker an incremental bigger slice of the capital pie that they help generate. This is the reward for loyalty, continued employment, punctuality, etc,etc. 

_In reality, _most 27yr olds have already worked their way out of minimum wage rates of pay through, educational qualifications, experience, application etc as already shown in the earlier RTE link - so NONE of this would apply to them. 

Instead, it will only apply to the 4% of workforce who remain for whatever reason, in low paid employment, be it psychological or intellectual disabilities, be it middle class students or housewives returning to the workforce. 

If I employ someone today for €5 to carry out a task that generates €15 return for me , €5 is the market value of their labour, €15 the economic value - labour plus capital investment. The State intervenes and obliges me to pay €9.80ph - that is an additional cost borne by the employer. If I decide it is no longer worthwhile, the job is lost and the State bears the cost.


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## Folsom (30 Apr 2019)

NoRegretsCoyote said:


> So I ask - if the NMW has no impact on employment, can't we all get rich by raising it to €100 an hour?



I never said it has no impact. I said the minimum wage has had no _adverse _impact on employment since its inception. 
Google 'adverse' and then start over.


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## Purple (30 Apr 2019)

You are right, we are going around in circles.


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## Firefly (30 Apr 2019)

Purple said:


> You are right, we are going around in circles.



Looks like a rabbit hole to me


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## NoRegretsCoyote (2 May 2019)

Folsom said:


> I never said it has no impact. I said the minimum wage has had no _adverse _impact on employment since its inception.
> Google 'adverse' and then start over.



No serious economist has ever suggested that it has a positive effect on employment. The question is whether it has an adverse effect, or none at all.

Therefore the term 'adverse' is generally considered redundant when talking about the impact.

It would be great if you could answer my question though


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## Folsom (2 May 2019)

NoRegretsCoyote said:


> So theory suggests that minimum wages will decrease employment, especially of the lower-skilled. This has been studied statistically for thirty years and the results don't chime entirely with the theory.



So there is no real concrete evidence that states that minimum wage will negatively impact on employment levels, positively impact on employment levels or have no impact on employment levels at all. 
There are however studies that suggest and/or indicate that minimum wage levels, if pitched too high, can negatively impact on employment levels.

In Ireland's case, there are indicators that suggest, since its inception, that the hourly rate of the minimum wage has not impacted negatively on employment levels. 
This can be seen from, other than a brief period that you identified earlier, the increasing employment levels in Ireland over the prevailing period. It is arguable that employment levels could have been even greater had there been no minimum wage imposed. Equally it can be argued that the minimum wage impacted positively in attracting thousands of workers into the economy, particular from abroad. 

So I dont know, like the other economists, what impact, positive, negative or neutral, the minimum wage has on employment. 
What I do know is, that if it is pitched _too high_ (eg €100 to answer your question) that it will have a negative impact. But I also consider that Ireland's minimum wage rate has never been pitched too high as the corresponding employment levels show increasing levels of employment over the period since its introduction, _indicating _either a positive or neutral impact, but not a negative impact.
We dont know what the optimum minimum wage rate is. Even if we did know, it could change tomorrow. 
So the minimum wage band that I suggested, was merely a suggestion. It was a suggestion that facilitates employers to pay a _lower _minimum wage for inexperienced low skilled workers for a longer period until such time that their participation in the workforce (albeit low skilled participation) is eventually rewarded with a _higher_ minimum wage or until such time as they train, educate, etc themselves into positions that command higher rates of pay - which most people do.


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## NoRegretsCoyote (2 May 2019)

Folsom said:


> So there is *no real concrete evidence* that states *that minimum wage will negatively impact on employment levels*






Folsom said:


> There are however studies that *suggest *and/or indicate *that minimum wage levels,* if pitched too high, *can negatively impact on employment levels.*



You've contradicted yourself in successive sentences.

I'm out.


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## Folsom (2 May 2019)

NoRegretsCoyote said:


> You've contradicted yourself in successive sentences.
> 
> I'm out.



Good, because if you cant tell the difference between _concrete evidence _and evidence that _suggests or indicates, _or if you cant make a distinction between a minimum wage and a minimum wage _that is pitched TOO HIGH, _then its pointless carrying on.


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## Purple (3 May 2019)

Folsom said:


> I pitched a band of €7.84ph - €15.68ph. It should be noted that the €15.68ph will only ever be reached after 40yrs in employment. So all things remaining equal, an 18yr old who starts work today stacking shelves all their life (due to intellectual issues) can look forward to an income of €15.68ph in the year 2059.


Okay, last try; If I employ someone on the minimum wage and want to keep them they will, inevitably, get a pay increase. Your proposal means that I never have to fund that pay increase. It also means that an older person on the minimum wage is trapped working with their current employer because a different employer looking for low skilled minimum wage employees will just hire a younger, lower paid, "minimum wage" person.


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## Folsom (3 May 2019)

Purple said:


> Your proposal means that I never have to fund that pay increase.



Not at all. Firstly, my proposal is merely a suggestion proposing a concept of a banded minimum wage, instead of a single point minimum wage. The purposes being to assist with reducing income inequality - which I think it would assist in doing, albeit open to valid criticism on the points made, not on assumed points made.
Some leeway should be afforded insofar that it is not practical to detail every aspect within the pages of this forum. But I will endeavour to offer more detail of this concept.

I pitched a band of €7.84-€15.58ph. I have already acknowledged that if minimum wage is pitched too high that that would impede negatively on employment levels. However, I think it has been established that we dont know what level the minimum wage would have to be at for it to be 'too high' and impact negatively on employment. I think it can be reasonably argued that Ireland's minimum wage rate has not  impacted negatively on employment levels, therefore not at the 'too high' point?
If that much is agreeable then we can carry on. If not, you can stop reading now.

So taking some realtime figures (which I  only using for example, I am not advocating these figures).
The current minimum wage is €9.80ph. Employers prsi liability, on €386 weekly earnings is 8.7% on top of that, bring the hourly cost for an employer to €10.75ph for 39hrs.
So, for ease of reference, lets adjust the banded rate from €7.84 (being the starting point for an 18yr old) to €10.75ph. A difference of €2.91ph. Divide that over a 40yr working life and it amounts to €0.07c increase every year.

An employer takes on an 18yr old for low skilled work, say shelf-stacking in a supermarket. The employer pays €7.84ph plus 8.7% prsi, €0.68c or €8.52ph in total. The employee continues working and by law will now be entitled to a minimum of €7.91ph in her second year of employment, third year €7.98ph and so on, as long as the employee is stacking shelves in agreement with the employer. All the way up to €10.75ph.
(After higher rates than €9.80ph, the State will fix the employers prsi so that the overall cost is no greater than €10.75ph for employing a shelf-stacker, meaning as the employees hourly rate increases €0.07c a year beyond €9.80ph, the employers prsi liability will be reduce by €0.07c).

However, the employee may, from 2nd yr in employment, show aptitude, application, initiative to learn, train, educate etc in which case s/he is now moving beyond mere shelf-stacking and is able to command, or market, a higher hourly rate of pay beyond the minimum in their own right. Meaning by year two the employer may need to pay, say, €9.00ph to retain the services of this young prospect.
This means the employee is _out _of the minimum wage band by virtue of them being only in their _second year _of employment. _Within _this minimum wage band it would take a minimum wage worker 16yrs at €0.07c annual increases to reach €9ph - this employee has reached that wage in two years, so is not considered to be a minimum wage worker. By third, fourth and subsequent years the employee is earning beyond levels attributable to those years on a minimum wage band.
This is the reality for 92% of workers currently, and long-term, some 96% of the workforce.
We are left with 4% of the workforce, for whatever reason, intellectual, psychological, housewives returning to labour market, students who spent excessive years at college and not in workforce, etc who find themselves only able to command a minimum wage - that wage being set on a band over 40yrs which they will be entitled to receive in pay as long as they are employed, and unless they train, educate, apply themselves to market themselves for an hourly rate of pay beyond the minimum wage band.
I hope that explains better the concept. If so, I will deal with your second point, if not, best to leave it here.


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