Ireland to replace minimum wage with a ‘living wage’

The new pay floor the government is proposing would be 60% of the median wage

Yesterday, Irish Tánaiste (Deputy Prime Minister) Leo Varadkar outlined his plan to replace Ireland’s minimum wage with a living wage. In practical terms, this means two crucial things for low-paid employees: first, the government will define the mandated wage floor in terms of standards of living and second – an increase in income.

In the draft plan, Leo Varadkar outlines that a living wage would be based on 60% of the median wage with an assumed growth rate of 3% per year. Furthermore, if adopted by Parliament, the new wage would be introduced by a gradual increase in the minimum wage until it reaches that threshold by 2026.

This measure is aimed at cushioning businesses from a sharp increase in labour costs, as they are still reeling from the woes of the pandemic and the energy crises. A large portion of the Irish economy is in the service sector, which can be particularly affected by the new regulations.

Increasing living standards for low-wage workers

Although both terms seem quite similar, there is actually a very fine line between what is considered a living wage and a minimum wage. A living wage refers to the income level required to sustain a decent standard of living, while a minimum wage means a mandated minimum that ensures employees are not pushed into poverty.

As Varadkar put it, increasing living standards through wages must be one of the enduring legacies of the pandemic and will be one of many labour laws the government plans to introduce such as mandatory sick pay.

The living wage draft proposal was developed with research by the Low Pay Commission. It will now enter a consultation period with unions, employer and worker representative groups, as well as the general public.

Gradual progress would be more beneficial to workers

The proposal itself contains four main points, one of which is setting the living wage at 60% of the median income. In 2022, that would mean 12.17 euros an hour, as opposed to the current 10.50. The minimum wage will also remain in place until the new one is phased in by 2026, but it will gradually increase and close the gap between the two.

Furthermore, in 2026, Ireland will no longer have a minimum wage and the living wage will be the new pay floor for all employers. Depending on economic conditions, however, the Low Pay Commission could have the authority to introduce the new regulation sooner or delay it.

Leo Varadkar said in an official statement that improving working conditions is a focus of the government. He also said that despite the fact that currently there are more people employed in Ireland than ever before in the history of the state, employers have had a difficult couple of years and many are still getting back on their feet.

This is why the living wage bill has to, according to him, be introduced gradually, as this would protect another fundamental right of workers – the right to have a job.