Increase in minimum wage reduced inequality - ESRI

Folsom

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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.
 

Purple

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It is important to remember a few things about the minimum wage;
  1. 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.
  2. Even taking the above into account only somewhere around 10% of employees are on (or around) the minimum wage.
  3. The majority of people on the minimum wage are from middle income households.
  4. The majority of people earning the minimum wage are new entrants to the workforce.
  5. Three quarters of people who start work on the minimum wage are on a higher wage within 4 years.
  6. Nobody is running a household or raising a family on the minimum wage (there are significant social welfare supports for people in that position).
 

Purple

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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.
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.
 

Folsom

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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.
 

Purple

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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?
 

Folsom

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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.
 

Purple

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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.
 

Folsom

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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.
 

Purple

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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.

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.

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.
 

Folsom

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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.

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.


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.
 

NoRegretsCoyote

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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?
 

Folsom

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Purple

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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)
 

Purple

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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.
 

Folsom

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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.
 

NoRegretsCoyote

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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?
 

Folsom

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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.

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.
 

Purple

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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.
 

Folsom

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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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