The introduction of a National Minimum Wage (NMW) next April should benefit 163,000 workers, according to a specially commissioned report presented to the Cabinet by the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, yesterday. Nearly half of these workers will receive increases of at least £1 an hour.
The report's findings, released by Ms Harney immediately after the Cabinet meeting, show that earlier predictions that the introduction of the NMW would increase the national wage bill by 4 per cent were unduly pessimistic. It puts the cost of implementation at 1.6 per cent.
It also predicts that by April 2000 only 13.5 per cent of the workforce will be earning less than the proposed NMW of £4.40 an hour. The figures show that wage drift caused by a tightening labour market is already driving up wages, even in traditional low pay areas such as catering.
Further good news is that the impact on employment growth of introducing an NMW will be less than 1 per cent over the next decade. While the report's findings amount to a rejection of the argument that the proposed rate of £4.40 per hour will undermine competitiveness, it also increases the likelihood of a clash between the Government and the Irish Congress of Trade Unions over whether it should be higher.
Yesterday Ms Harney said: "The £4.40 proposed strikes a fair balance between the expectations of employees and the demands of business." She pointed out that it would help significant elements of the workforce, half of whom were women and 40 per cent of whom were under 25.
In a further move to assuage the unions she said she was not accepting the proposal in the report that long-term unemployed recruited by firms should only be paid 80 per cent of the NMW initially.
However, several unions representing low paid workers have made it clear they will not enter another national agreement to succeed Partnership 2000 unless the £4.40 rate recommended by the National Minimum Wage Commission in April 1998 is adjusted upwards to take account of inflation and national pay increases since. This would set the new rate at around £4.80 an hour by next April.
Last night the deputy general secretary of the ICTU, Ms Patricia O'Donovan, called on the Government to publish the legislation before the summer recess of the Oireachtas, so the social partners could discuss it. She said the rate "must be updated in line with increases in earnings".
The report received a very different response from the Small Firms Association, which represents the majority of employers who will be affected by the legislation. Its director, Mr Pat Delaney, said the rate was being set too high and would reduce job opportunities for those most in need, the unemployed and unskilled.
Tax reforms were a better way of tackling low pay, he said. "But pay increases without productivity makes no sense at all. This is a political decision." Ms Harney pointed out that the report, prepared by the Economic and Social Research Institute, predicted the NMW would increase productivity and reduce staff turnover. On the issue of how the NMW should be reviewed, she said that ideally this should be done in the context of national agreements.