€500m subsidy to accommodation sector not justifiable

Government should stop subsidising the Accommodation and Food Services sector and instead should incentivise the kind of jobs that allow workers to achieve a decent standard of living, according to Social Justice Ireland’s quarterly Employment Monitor. 

The Accommodation and Food Services industry, where so many workers earn below the Living Wage, is subsidised to the tune of about €500 million every year, thanks to the special lower VAT rate of 9%. The argument that this sector still needs fiscal support is fairly limited, according to the Monitor.

Tax-based policy measures are often used to incentivise employment creation. However Social Justice Ireland questions the wisdom of directing such incentives at an industry where so many employees are not paid an amount sufficient to live life with dignity.

One third of all workers within the Accommodation and Food Services sector earn the National Minimum Wage, according to the most recent CSO estimates. This is easily the highest concentration of minimum wage employment in the economy, and around half of all employees in the sector earned less than the Living Wage in 2017”.

The Average Hourly Earnings of hospitality workers has increased by just 5.8 per cent over the last 10 years, well below the national average of 8.1 per cent. That leaves it not just the lowest paid sector in the entire economy, but it’s also the sector with the second lowest number of paid hours per worker, at just under 25 hours per week. This heightens concerns about the ability of these workers to achieve a socially acceptable standard of living.

Given that such a huge portion of this VAT-based subsidy is accruing to large hotel chains in Ireland’s bigger towns and cities, who are least in need of it, we believe Budget 2019 should begin to phase-out this special rate over the next two years.

We also call on Government to take action to ensure that its policy goals in areas like housing and health are not constrained by capacity issues. Ireland’s impending demographic changes mean that the need for additional employees in areas like health, social work and social care will increase significantly. We don’t believe Government is doing enough to make careers in this area appealing, or to facilitate a society where caring work is properly valued.

A system of Basic Income would create an income floor under which no citizen could fall, while at the same time affording people the flexibility to leave their careers for a period to care for sick or elderly relatives, or to turn down work that is precarious, low paid or undignified in nature.

Social Justice Ireland’s quarterly Employment Monitor may be accessed here.