New living wage means we can kiss goodbye to the minimum wage, but not for a while 2 weeks ago

New living wage means we can kiss goodbye to the minimum wage, but not for a while

Tánaiste Leo Varadkar has announced an expiration date for the minimum wage in Ireland.

The minimum wage in Ireland is set to be formally phased out and replaced by a new living wage – though it will take some time for the change to come into play.

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Officially announcing the switch at Dublin Castle on Tuesday afternoon (14 June), Tánaiste Leo Varadkar outlined the proposal to introduce a living wage for all employees, commencing from 2023.

However, the living wage won't replace the minimum wage until 2026. The new proposals follow a consultation between the Tánaiste and the Low Pay Commission that took place over the past year.

The living wage will be set at 60% of the median wage in any given year, which in 2022 would be €12.17 per hour. The national minimum wage is currently set at €10.50 per hour.

The national minimum wage will remain in place until the 60% living wage is fully phased into society by 2026, though it is expected to increase over the years in a bid to close the gap between it and the new living wage.

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From 2026, the living wage will fully replace the minimum wage and will be regarded as the mandatory base pay rate for all employers to adhere to.

Depending on "prevailing circumstances", it has been recommended to give the Low Pay Commission discretion to introduce the full living wage faster or slower than the proposed four-year timeline.

"Better terms and conditions for employees must be one of the legacies of the pandemic," said Varadkar.

"The living wage will build on the programme of improvements we are making, from introducing mandatory sick pay, to auto enrolment for pensions, to putting in place the laws, regulations and infrastructure to give people more flexibility over how and where they work."

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"We’re making a huge amount of improvements to workers’ rights and terms and conditions this year and I’m really conscious that, although we have more people working than ever before in the history of the state, employers have had a turbulent and difficult couple of years and many are still just getting back on their feet," Varadkar added.

"I’m also aware that we have a really uncertain period ahead. The most important workers’ right is their right to work, to have a job. That is why I am proposing we phase this in and I will be listening to employers’ views on these draft proposals."

The Low Pay Commission made 18 recommendations on the progression to a living wage. The main recommendations are as follows:

  • Adopting a fixed threshold approach for the calculation of a living wage (as opposed to a Minimum Essential Standard of Living / “basket of goods” approach) and setting the fixed threshold at 60% of the median wage in the economy, under the assumption of a 3% rate of growth in the median wage.
  • Progressing to a living wage of 60% of the economy-wide median wage through a gradual adjustment to the minimum wage over a period of no more than five years.
  • After the 60% of the median wage target has been reached, subject to an assessment of the impact of the progression to the 60%, the Commission should assess the economic practicality of gradually increasing the targeted threshold rate towards 66% of the median wage.
  • Consideration is given to how employers with a substantial proportion of minimum wage employees can be supported during the progression to a living wage.
  • Consideration of the impact of a move to a living wage rate on the take home pay of different categories of workers to ensure that low wage workers receive a reasonable increase in take home pay.
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Featured Image of Leo Varadkar via Sam Boal / RollingNews.ie