THE MINIMUM wage will be reduced by one euro to €7.65 per hour from February 1st in a move that could cut the salaries of almost 50,000 low-paid workers.
Minister for Enterprise Batt O’Keeffe signed a ministerial order yesterday authorising the reduction in the minimum wage in a move to increase “cost competitiveness” and create more jobs.
The memorandum of understanding on the €85 billion financial package agreed between the Government, the EU and the International Monetary Fund said the cut in the minimum wage would take place by May.
A spokesman for Mr O’Keeffe said it was the Government that decides when to sign the order to give effect to the minimum wage cut and it had decided it was important to address competitive cost issues as quickly as possible.
Siptu president Jack O’Connor said it was clear the Government wanted to introduce the cut to the minimum wage before its appointment with the electorate and a new government took charge.
“This has been slickly presented as a response to the EU-IMF negotiation when in fact it was already the objective of the Minister for Finance. It follows an established trend whereby the Government tries to correct the mess it caused at the expense of the most vulnerable workers,” said Mr O’Connor.
However, employers’ body Ibec, said the move was necessary to support economic recovery and create employment. It said regaining competitiveness and getting Irish labour costs back into line with similar economies was central to economic recovery.
“In the current difficult economic environment, the minimum wage has increasingly become an obstacle to hiring new employees,” said Ibec director Brendan McGinty. The reduction in the minimum wage applies automatically to the recruitment of new entrants by employers after February 1st.
The Government says existing employees should be protected from cuts to their wages if they are already working under a contract that sets wages at or above the national minimum wage. It also says an employer and employee must both agree to a change to the existing rate of pay.
Some workers on the minimum wage may be working on contracts stipulating they are paid at the prevailing national minimum wage hourly rate. Unions also warn workers on the minimum wage are among the most vulnerable workers.
The latest data from the Central Statistics Office shows that about 47,000 workers, or 3.1 per cent of the employed labour force, are paid at or below the current adult experienced worker rate of €8.65.
Mr O’Keeffe said the new minimum wage rate of €7.65 was still in the top tier of minimum wage rates in the EU and 12 per cent higher than the British rate.
“It is essential to strike the right balance between the minimum wage, labour legislation, social welfare rates, taxation and activation of the labour market to avoid disincentives to return to work.”
Meanwhile, the European Trade Union Confederation has strongly criticised the EC’s role in implementing the bailout packages to Ireland and Greece.
“Diktats are being issued from the commission which are designed to cut minimum wages and reduce wage “rigidities”, cut pension entitlements, make labour markets more flexible, and in Ireland’s case provide for wages to reflect “market conditions”, said John Monks, general secretary of the confederation, in a recent letter to commission president José Manuel Barroso.