Current and New Government Should Prioritise Wage-Led Consumption Growth

Monday 22 November 2010

Cutting the minimum wage is a political red herring and will not solve Ireland’s problems

In a unique development, MANDATE Trade Union and the Migrant Rights Centre Ireland (MRCI) have today joined forces to oppose any cuts to the National Minimum Wage. Both organisations argue that the current and new Governments should instead prioritise wage-led consumption growth.

According to MRCI Director, Siobhán O’Donoghue, “Cutting the wages of the lowest-paid workers will not generate real savings and will fail to solve Ireland’s economic problems. Such a move would degrade working conditions, lead to a decrease in productivity, damage consumer spending, and place those with the lowest incomes in an impossible situation. This is all the more pointless when we know that it is the lower-wage earners who spend proportionately more.”

According to John Douglas, MANDATE General Secretary, the minimum wage was introduced in recognition of the huge wage inequality that exists in this country.

“Now, more and more households are struggling to get out of debt. Every person in Ireland knows they will be punished for the greed of a few, and the mismanagement of our economic affairs. The time has come for this Government and its successor to implement an economic strategy that shares the pain proportionately and equally,” Mr Douglas said.

MRCI and MANDATE say that, in generating income, it is vital that the government does not target the most vulnerable. In this context, a critical look needs to be taken at the tax exemptions afforded to the wealthiest in society. Real options do exist, yet they are not being debated. These include:

• Reducing tax breaks for the wealthy to EU levels;
• Introducing a ‘Wealth Tax’ for high earners with assets worth more than €1 million;
• Applying PRSI and income levies to all income, regardless of source;
• Cutting the number of TDs as well as their pay.

Ms O’Donoghue said that Ireland’s minimum wage has been consistently misrepresented as disproportionately high when this is not the case.
“This rhetoric diverts from the real issue of wage disparity and social inequality. Other EU countries such as France, Belgium, and the Netherlands have similar minimum wages, yet their cost of living is considerably lower. In fact, other EU countries are also continuing to increase minimum wages in the recession, in order to encourage consumption.

“If we can’t imagine a different future, we will remain permanent hostages to the failures that got us here. It is time to stop listening to the flawed arguments of the economists and politicians who have consistently got it wrong, and to plan an alternative way forward,” Ms O’Donoghue stated.
MANDATE’s John Douglas concluded by saying that the Government does not have a mandate for cutting the minimum wage and that their actions in this regard are undemocratic.

“It is clear that this Government’s days are numbered and that they only enjoy minimal electoral support. Despite having no mandate left they seem determined to press ahead with making swingeing cuts to the minimum wage, which will devastate the lives of the people on the margins of our society. The people of this country need to show that they will not tolerate such undemocratic action – for example through taking part in next Saturday’s demonstration in Dublin – and insist that there is a General Election at the earliest possible date so that we can put in place a new Government that will look to address our problems through creating jobs and growing the economy,” John Douglas concluded.