The Living Wage Technical Group has announced that a single full-time employee would need to earn €12.90 per hour to achieve a minimal and socially acceptable standard of living.
This is grim. It’s a 60 cent rise – from €12.30 last year. It is the biggest single year increase since the Living Wage was first launched in 2014. And there’s one reason for the increase: housing costs; namely, rents.
The Living Wage is based on the price of necessary goods and services, everything from food, utilities, transport, communications, clothing and other items. The price of this total basket rose by €15 per week. Rents accounted for nearly €12 of that price increase.
Indeed, when we go all the way back to 2014, housing costs have accounted for all the increase in the Living Wage.
When you remove housing costs from the basket of goods and services that make up the Living Wage, we find that prices actually fell. As the Technical Group states:
‘If rents had moved in line with other prices, the reference Living Wage rate would now be €10.70.’
The Living Wage would be much lower, and far fewer people would be earning below a Living Wage if rents increased at the same pace as prices in the economy.
This is a key insight. Many have proposed that to bring everyone up to the Living Wage, we just increase the National Minimum Wage. However, this could exacerbate the situation whereby wages are chasing rents. In a market where demand exceeds supply, more money in workers’ hands will disappear as rents rise further. And in Dublin, rents make up nearly two-thirds of the net Living Wage.
If we don’t bring housing costs under control it will be extremely difficult to bring everyone up to the Living Wage. And in attempting to do so in a regime of high rents, wage increases will essentially be subsidising rents. That would be extremely damaging to the productive economy.
We need a sophisticated multi-prong strategy to ensure that the Living Wage becomes the wage floor. Here are three areas.
(a) Living Costs
Reduce high living costs which would reduce the Living Wage. We have seen the impact of housing costs on the Living but there are other areas:
- Public transport fares: we have one of the least subsidised public transport systems in Europe, resulting in high fares. Increased subventions would mean lower fares.
- Healthcare: reduce insurance, GP and prescription medicine costs – through a free, universal health service (i.e. Sláintecare)
- Communications: Ireland is a high-cost country. Consumer prices are 40 percent higher than the EU average. Why? It would be helpful if the Government commissioned a study into all prices to get a real handle on the reason for our high living costs – rather than assume that current market pricing is somehow ‘natural’.
(b) Collective Bargaining
Second, provide for collective bargaining at company and sectoral level. The Irish private sector is generally low-paid compared to our EU peer-group. It also has much lower collective bargaining coverage. This is especially so in the traditional low-paid sectors – retail and hospitality.
In our peer EU peer group Ireland is at the bottom of the table bar Austria and is below the overall EU average. It should also be noted that in Denmark, Sweden and Finland there is no statutory minimum wage, yet their wages are significantly higher. How do they achieve this? Through collective bargaining.
By providing workers with the tools to bargain together, they can drive up wages consistent with economic capacity and, so, bring workers closer to the Living Wage. Further, workers can better protect themselves collectively if employers try to claw back wage increases by degrading working conditions.
(c) The Minimum Wage
The minimum wage has an important role in reducing low pay. For example, minimum wage increases could be linked to overall wage increases in the private sector but instead of expressing them in percentage terms, they could be expressed in terms of a flat-rate pay increase or a combination of the two. This would use general wage increases as parameters but express the increase in terms of an egalitarian calculation. In this way (and in other ways), the minimum wage would rise as a proportion of the average or median wage. This is only one of many ways to link minimum wage increases to transparent and verifiable benchmarks.
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This three-pronged approach would help bring workers above the Living Wage while reducing living costs, which would be a benefit to all workers and the productive economy.
In short, the drive to achieve the Living Wage for all workers must take place at a social level (living costs), in the workplace (stronger workers’ rights) and in law with a solidarity minimum wage strategy.
This can help the Irish economy to live up to the Living Wage.
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