At their monthly meeting, and ahead of a Dáil discussion on the latest business supports package (today, May 23), the Executive Council of the Irish Congress of Trade Unions roundly condemned the three-party coalition cabinet for approving a series of anti-worker measures which they say cannot be justified in a booming economy and if pursued will leave the lowest-paid, sick, migrant and retired workers paying the price for Government bowing to business lobbyists.
The economy as a whole is performing very well. In particular, the labour market has performed exceptionally strong since the post-Covid reopening. There are a record 2.7 million people at work with employment growing at an extremely robust 3.4% in the year to the final quarter of 2023 (90,000 net new jobs) and with further growth so far in 2024. Jobless numbers are low and largely unchanged over 24 months (124,200 persons or 4.4%). The Department of Finance is projecting solid growth in personal consumption of 2.4% in 2024 and 3.1% in 2025. VAT receipts in the first four months of 2024 are up 6.3% year-on-year while retail sales grew by a respectable 2.6% year-on-year in the first quarter. Price inflation continues to diminish. Aggregate demand and the business sector will also benefit from at least three cuts to interest rates this year.
The number of business failures in 2023 was 27 per 10,000. This compares to a rate of 36 per 10,000 in pre-Covid 2019 and the average over the last 19 years was nearly two times that at 50 per 10,000 and this includes the global economic crash of 2008/9. The liquidation rate in the UK is twice the prevailing rate in Ireland. At the same time, the number of new businesses starting up is very high. In Minister Burke’s own words - “It is 10:1 the ratio of businesses opening comparing to those closing” (May 01, Morning Ireland RTÉ).
The two sectors most affected by the increase in payroll costs arising from the gradual rollout of modest improvements to working conditions, the hospitality (+11,900 net new jobs year-on-year in Q4 or 7%) and retail (+19,600 jobs or 6%) sectors have seen employment growth in excess of the economy-wide average (3.4%) and combined they accounted for one third of all employment growth over the year (+90,000 jobs). These sectors are, on the whole, performing extremely well. There are restaurant closures. But in good time and bad hospitality tends to have high rates of churn. There is a consistent historical trend of above average deaths and births in the sector, indicating a sector with a naturally high degree of churn. It is important to bear this in mind when discussing individual cases of business closure.
Trade unions have never denied sector specific challenges and that some businesses will have to travel more distance than others in the transition to workers’ rights in line with the norm across Europe. Vulnerable but viable businesses should be supported. But those business supports should be targeted, time-limited and agreed through dialogue with trade unions and business representatives. Workers cannot be left to pick up the tab. Instead, the package signed-off by the three-party coalition government to reduce the rising costs of doing business includes measures that seek to undo multi-year commitments to improve wage floors and income protection which if pursued will disproportionally hurt vulnerable workers and benefit all businesses, not just those struggling. This package of supports is designed with one overarching aim - to win over business groups ahead of elections. Workers and unions won’t easily forgive or forget broken promises.
Pausing increases to statutory sick pay
The minimum number of paid sick days is to rise to 7 in 2025 and to 10 from 2026. Up until January 2023, Ireland was one of only three EU27 member states in which employers were not required to pay a worker’s wage when too sick to work. There is an in-ability to pay clause in the Sick Leave Act. Stopping or slowing the roll-out of sick pay would benefit every employer in the country, profitable and struggling, while penalising half the private sector workforce - over 1 million employees - who have no sick pay in their terms and conditions.
Slowing increases to the minimum wage
A minimum wage valued at 60% of the median hourly wage is to be in place by 2026. This year, influenced by the Adequate Minimum Wage Directive and high inflation, most EU member states substantially increased their statutory minimum wage, with increases of 10% and upwards in 10 countries. In seven of those, larger increases took place than in Ireland (12.4%). Meanwhile in the UK, the increase was just under 10% to €13.38 (£11.44) an hour equivalent to 67% their median hourly wage (73% of median in Northern Ireland) compared to €12.70 an hour here equivalent to 55% our median hourly wage. Similar to sick pay, there is an inability to pay clause in the Act and slowing progress to an adequate minimum wage will benefit profitable as well as struggling employers while penalising low paid workers.
Reviewing increases to employment permit wage requirements
The minimum wage for migrant workers on general employment permits is to increase to €39,000 by 2025. Prior to the increase from €30,000 to €34,000 this year, the wage requirements for the majority of general employment permit holders had not increased in almost a decade. In the context of a tight labour market, Ireland must offer decent jobs to remain competitive for migrant workers who bring much needed skills to our essential services and economy. In the past two years alone, migrant workers accounted for almost two-thirds of total employment growth (+119,000 jobs).
Increasing the employer PRSI threshold for the lower 8.8% rate
When it comes to taxes on labour, employers in Ireland pay about half of what their peers in other wealthy European countries pay. The business support package commits to increasing the threshold for the lower employer PRSI rate to €441 to €494. This will cost the Social Insurance Fund €60 million a year. This is the same amount which will be raised from the 0.1% increase on employee, employer and self-employed PRSI rates coming into force from October, intended to fund the future sustainability of the State pension. A review of the lower employer PRSI rate by the Government’s own advisory body – the Tax Strategy Group – last year pointed out that the lower employer PRSI rate is out-dated, badly targeted and costly. The Commission on Taxation and Welfare has also recommended phasing it out.
