The Economic and Social Research Institute’s latest publication, Minimum Wage Policy in Ireland, paints a picture of how Ireland’s economic response to COVID-19 has affected lower-income workers in society. The results are counter-intuitive and paradoxical, and suggest that the real economic pain for lower income workers and their families are going to be felt down the road.
In analysing the labour market, the report states that “while just 8 percent of all employees in Ireland are minimum wage workers… two sectors alone, retail and accommodation and food, account for more than half of all minimum wage employees”. Twenty percent of those employed in retail are on the minimum wage or less, whilst this figure rises to 30% when considering those in employed in the accommodation and food, as the table from the report illustrates below. The percentage of firms in these respective sectors who have at least one minimum wage employee are 50% in accommodation, 44% in food and beverage, and 43% in retail; the corresponding figures in sectors such as finance and insurance, construction and information technology are roughly 10%.
These figures are important because some groups in Irish society are overrepresented in minimum wage figures, suggestive of an inequity in Irish society based on gender, age, and nationality respectively. The ESRI report states that 55% of those in minimum wage employment are female – 8.3% of all female employees. The corresponding figure for male employees is 6.8%. A consideration of the number of females employed in those sectors where minimum wage employment is least prevalent (finance and insurance, construction, and information technology) paints a grim picture. According to Central Statistics Office figures, 56500 (49% of total sectoral employment), 12500 (8.5%) and 38100 (30%) of women are employed in these respective sectors. Further analysis of CSO figures suggest that a greater number of females are in a position of underemployment, i.e. working part time but would ideally like more hours. 63100 females consider themselves to be in this position, compared to 45200 males (although proportionally speaking the number is greater for males at 23% vs. 29%). Furthermore, two female-dominated sectors are explicitly mentioned in the report to be more likely to illegally pay below the minimum age – personal care services and childcare. This suggests that even before COVID-19 women were more likely to be in a less advantageous economic position than men. Separately, young people aged between fifteen and twenty-four make up half of all minimum wage employees, despite only 10% of all workers being in this demographic. Non-Irish nationals are also overrepresented amongst this part of the workforce; accounting for 23% of minimum wage employees despite only making up 18% of all workers.
To condense all this data down to a single sentence: You are more likely to be on minimum age if you are female, aged under 25, or a non-Irish national. But being on minimum wage exposes individuals does not just mean you earn less, it exposes you to further social issues – the ESRI report states that 17% of minimum wage workers belong to a household at risk of poverty, compared to 3.3% of non-minimum wage workers – five times more likely. Furthermore, non-Irish nationals who are in minimum wage employment are 13% more likely to not transition to a higher pay grade than their Irish national counterparts, potentially leaving them at greater risk of poverty long-term and at the very least hampering their purchasing power.
The paradox mentioned in the opening paragraph relates to the COVID-19 Pandemic Unemployment Payment (hereon PUP) of €350 a week. The report states that the average minimum wage employee in the retail and accommodation and food sectors works 23 hours per week and earns a gross weekly wage of €232.30. The average minimum wage worker in one of these sectors is therefore getting 50% more income per week under the current system, leaving an estimated 120,000 low-income families in a better financial position than they were pre-COVID-19.
It should be obvious, as the report suggests, that the COVID-19 PUP was an emergency, temporary measure that was introduced for a specific purpose – to see families and individuals through the “lockdown” from a financial perspective until they can return to work, with the €350 figure likely chosen as a reasonable figure to make this period of inactivity somewhat more comfortable. However, there has been a considerable level of discomfort in the Irish media with this paradoxical element. Some examples, off the top of my head, are: The 11th May edition of Lunchtime Live with Ciara Kelly pondering whether the generosity of PUP was making people workshy, suggesting that people were choosing to go to the beach instead of going to work, with a remarkably small proportion of the population providing the evidence for this (400 beachgoers); Leo Varadkar stating on April 2nd that he has “heard stories of people who have asked their employers to lay them off, because they would be better off on a €350 payment than working 20 hours a week for €11 an hour”; and criticism of the fact that students could avail of PUP on the Pat Kenny Show.
These incidences are important because they are directly targeting low-income workers, many of which are on the minimum wage, and ignore the fact that low income workers in the retail, accommodation and food and beverage sectors are most likely to feel the long-term economic impacts of the COVID-19 Pandemic, as the ESRI report suggested. And what are the demographics these people are most likely to be in? You guessed it – women, non-Irish nationals and young people. The implicit suggestion in the examples outlined above, which presumably mirror the views of at least a considerable minority of the population, is that these low-income workers are unfairly benefitting from the COVID-19 pandemic – that they’re, at the risk of sounding facetious, a bunch of wasters. The suggestion is that these people are not deserving of a welfare entitlement which can offer them comfort and a sense of dignity during an enforced period of mass unemployment because they were originally on lower incomes. All the while ignoring that they are the most likely to experience permanent layoffs, and thus suffer the most economic hardship, during this slowdown. The criticism of students in employment is especially pernicious – they have no welfare entitlement should they be laid off permanently, potentially depriving them of an education and all the opportunities this can afford them in the future.
The media has presented this, admittedly strange, situation in a profoundly negative light. Instead of focussing on the fact that the level of PUP implicitly suggests that 120,000 were previously earning below what could be considered a reasonable wage, it focusses on the short-term surplus income that minimum wage and other low wage workers are expected to receive and presents it as an injustice afflicted on higher earners (or the middle class, if you’ve a propensity for the inflammatory). Is the more pertinent question not why these people are getting more than they were when they were working, but why they were previously earning less? Instead of using this as an excuse to continue a race to the bottom by cutting welfare and exacerbating inequality, it could instead be used to initiate a battle for social justice and to create a more equitable society.
Furthermore, the media’s view exhibits that which seems to be ever present in anti-welfare state rhetoric – that any redistribution of wealth is a zero-sum game, i.e. whatever those on welfare gain, those in employment lose through taxation. Of course, not everything is black or white; welfare payments can be too low, and indeed they can be too high, but the argument for PUP being the latter is not strong, especially in these extraordinary circumstances.
John Fitzgerald’s recent article in the Irish Times provides a reasoned and well-balanced antidote to this rhetoric, where he presents his interpretation of what the effect of PUP will be in the future. He argues that the fall in consumption due to the “lockdown” and the generosity of the welfare payment should lead to an increase in household savings – which will be spent in the medium-term future. This in turn will essentially act as the Keynesian style stimulus package that many are calling for, in contrast to the much-feared austerity packages of the last financial crisis (albeit these may still be down the road). This eventuality would be the direct antithesis of what anti-welfare statists believe – in this case it could save the economy.
Let us be under no illusions that Ireland is facing a difficult economic situation. Indeed, it is unlikely that PUP can be maintained in its current form for anything beyond the short-term future. However, it is imperative that the wellbeing and dignity of all workers facing unemployment, and indeed everyone otherwise reliant on the State, are protected in the coming months – something which was so lacking during the last economic crisis. Best efforts should also be made to ensure that all workers have the ability earn a decent living wage in the future. Yes, difficult choices will have to be made, but these principles should guide the decision-making process, in turn ensuring the creation of a more socially just and equitable society going forward. In the end, difficult choices, are still just that – choices. We can still make the best of them.