Minimum wage increase ‘had no real impact on household incomes’
Raising the minimum wage closed the hourly pay gap between high and low earners, but had no strong impact on household incomes, according to a new report. One of the report’s authors said the finding is consistent with previous studies which show that lower paid workers are not typically the main breadwinners in a household.
The study from the Economic and Social Research Institute (ESRI), funded by the Low Pay Commission, found that while the minimum wage increased by around 6% in January 2016, it reduced hourly wage inequality between high and low earners by up to 8%.
The approved increase saw the minimum wage rise from €8.65 to €9.15 per hour, and the ESRI said that without the change, roughly one in 10 workers in 2016 would have earned €9.15 per hour or below.
The institute found that just over 6% of workers had an hourly wage in this range after the minimum wage increase which, it suggests, means change was associated with a reduction of four percentage points in the proportion of workers earning €9.15 per hour or below.
It said other results from the study suggest that minimum wage changes also had knock-on effects on the wages of some higher-paid workers, with increases detected for workers earning up to €11.50 per hour.
Dr Paul Redmond, one of the authors of the report said boosting pay for low earners led to a reduction in hourly wage inequality.
“However, household incomes were not strongly impacted,” he said.
“This is consistent with previous work which shows that minimum wage workers are often located in households at the higher end of the income distribution and are typically not primary earners within households,” he said.
Dr Donal De Buitléir, chairman of the Low Pay Commission welcomed the publication of the research paper, which is entitled ‘The Impact of a Change in the National Minimum Wage on the Distribution of Hourly Wages and Household Income in Ireland’.
“The Low Pay Commission has a responsibility in legislation to ensure that any recommendations it makes do not have a significant adverse impact on employment and the low paid. This report provides valuable data on the impact of the national minimum wage on the distribution of income in Ireland,” he said.
The minimum wage has increased three times since the period under study in this research paper. In January 2017, the hourly minimum wage went up 10c to €9.25, and rose to €9.55 a year later. This year, the minimum wage is €9.80 per hour.
