Living wage and refundable tax credits are key to tackling ‘working poor’ issue

The Government’s Low Pay Commission should agree to raise the minimum wage towards the living wage level and should also make the two basic income tax credits refundable if they are to really address the ‘working poor’ issue.

Two business groups voiced strong views on the minimum wage (‘NMW’) issue on the eve of the first meeting of the Government’s Low Pay Commission.

Ibec, which represents business interests in Ireland, told an Oireachtas Committee on Jobs, Enterprise and Innovation that Ireland’s NMW - currently €8.65 per hour - remains high by international standards. It warned that a premature increase will affect low-skilled workers and could condemn them to extended long-term unemployment.

Isme, which represents smaller Irish firms, told the Committee that the NMW should be scrapped as it had failed to address the issue of poverty.  It urged the Low Pay Commission to concentrate on job creation, instead of finding so-called ‘excuses’ to increase the NMW.
The Low Pay Commission, which was established in December 2014, will report to Government by summer on an appropriate level for the NMW.

Addressing Tuesday’s Oireachtas Jobs Committee meeting, Isme’s chief executive Mark Fielding urged Government to use the tax and welfare system to put money in people’s pockets instead of facilitating what he termed as a damaging, upward spiral in wages. He suggested an earned income tax credit which would permit individuals to earn up to €20,000 p.a. before being taxed.
Social Justice Ireland agrees with the concept of a fairer tax system to help the ‘working poor’. But it argues that a refundable tax credit system would benefit low-paid workers most, as raising tax thresholds would also increase net pay for higher earners, see Social Justice Ireland’s   tax proposal summary here

Social Justice Ireland also urges the Low Pay Commission to consider research by the Living Wage Technical Group in 2014. This group calculated that an individual in Ireland would need an hourly income of €11.45 to provide a ‘socially acceptable minimum standard of living’  see Living Wage research here.

Government should also note the February 2015 report by the Dublin-based EU agency, Eurofound.  This agency found that Ireland was one of five EU member states that experienced a fall in the real value of its minimum wage in 2014.

Ireland should prioritise the elimination of the category of ‘working poor’ – people with job who are living in poverty. The most effective way of doing this would be to raise the minimum wage to the level of the living wage and to make the two main income tax credits refundable so that low-paid workers would benefit from the full value of these tax credits.