According to research published by the Living Wage Technical Group, the actual living wage in 2022/23 was €13.85 per hour, an increase of 7 per cent on the previous year. In January 2023, the National Minimum Wage (NMW) increased to €11.30 per hour, an increase of just 7.6 per cent against a cost of living increase of 8.2 per cent in the year to December 2022, and almost €100 per week less than the living wage.
Social Justice Ireland tentatively welcomed the Government’s stated intention to introduce a living wage in 2022 and, in our submission to the Low Pay Commission, called for a time-limited subsidy to allow small businesses to accelerate its introduction. We reiterate this proposal for Budget 2024.
While low paid employees are waiting for the introduction of the Living Wage, there are other measures Government could take in Budget 2023.
Supporting Low Paid Workers through Refundable Tax Credits
Many people assume that a job is an automatic poverty reliever, and this has been a key driver of Government policy, but this is clearly not the case. The job must also be well-paid with decent conditions. Recent trends of precarious working practices must surely contribute to a situation where 5.8 per cent of those in employment are still experiencing poverty.
Specific interventions are required to tackle the problem of the ‘Working Poor’. Introducing a system of Refundable Tax Credits, at a cost of €140 million in 2024 would allow low income workers who do not earn enough to use their full credit to have the unused portion “refunded”, and support their ability to deal with increasing living costs. Making tax credits refundable would make Ireland’s tax system fairer, address part of the working poor problem, and improve the living standards of a substantial number of people in Ireland.
Supporting Low Paid Workers through the Tax Credits System
Social Justice Ireland calls on Government to develop employment-friendly income tax policies which ensure that no unemployment traps exist. Policies should also ease the transition from unemployment to employment.
In Budget 2024, Government should increase the PAYE credit and Earned Income credit by €5 per week at a first year cost of €670.8 million in 2024.
Wages and Inflation
The recent rapid increase in prices has posed particular challenges for low-income households throughout Ireland. New data from the CSO has provided a welcome estimate of the experience of these price increases across the income distribution. Using detailed expenditure data from both the Household Budget Survey and the Consumer Price Index, the CSO show that the impact of inflation is greatest for those households in the bottom twenty percent (bottom quintile) of the income distribution.
While the study finds that all households are experiencing significant price increases (7.8 per cent over the period), the effect of this inflation impacts the living standards of those on the lowest incomes the hardest.
Given that these lower income households spend a greater proportion of their income, compared to better off households, they have been more exposed to price increases; and they also spend a greater proportion of their income on areas that experienced significant price increases such as food and energy. As inflation persists, policy will need to more impactfully target these low income households and assist with the growing living cost challenges they face.
Elsewhere, CSO SILC data highlights the concentration of individuals who are unemployed, long-term ill or disabled, living alone, and single parents in the bottom two deciles (quintile) of the income distribution. Targeted measures to support these welfare dependent households needs to be an essential part of the evolving policy response to the ongoing experience of inflation and should form a core part of the policy measures adopted as part of, Budget 2024.
Paying a Living Wage
Over the past decade Social Justice Ireland and a number of other organisations have come together to form a technical group which researched and developed a Living Wage for Ireland. In July 2014 the group launched a website (www.livingwage.ie) and a technical paper outlining how the concept is calculated. The latest update to the figure was published in October 2022 and reported a Living Wage rate of €13.85 per hour for 2022/23.
Over the past year the Government have proposed an alternative Living Wage, calculated as a proportion of average hourly earnings. We welcome this proposal, which sets the threshold at 60 per cent of median hourly earnings; for 2022 this figure is €13.10. While this is below the living costs based estimate, it is a welcome step forward. The new hourly payment will be phased in between now and 2026.
Social Justice Ireland believes that the Living Wage has an important role to play in addressing the persistent income inequality and poverty levels in our society. Budget 2024 should endorse this initiative and underscore Governments commitment to introducing it including in all public sector supplier contracts.
Budget Choices 2024 is available to download here.