The 2016 increase in the national minimum wage (NMW) rate did not lead to greater unemployment among minimum wage workers, according to a new study published by the ESRI and the Low Pay Commission. While the research did find that there was a reduction in the average number of hours worked by minimum wage employees, the evidence suggests this was driven by an increase in part-time workers joining the labour market following the wage increase.
The study examines if the increased cost of wages led employers to reduce their number of employees or the number of hours worked, following the NMW increase from €8.65 to €9.15 per hour on 1 January 2016.
The research finds that the average number of hours fell by 0.7 hours per week. Among minimum wage workers on temporary contracts, there was a more pronounced reduction of 3.3 hours per week. Such falls are generally attributed to employers reducing the hours of existing employees because of higher labour costs. However, further analysis revealed a rise in part-time minimum wage employment, including a rise in the incidence of voluntary part-time work.
Seamus McGuinness, Research Professor at the ESRI, commented, “The results indicate that at least some of the reduction in the average hours of minimum wage workers may be due to more part-time workers being drawn into the labour market by the higher minimum wage. Our analysis revealed no negative employment effects because of the 2016 increase. There is little evidence that the 2016 increase in the national minimum wage rate had any immediate adverse impacts on low-paid Irish workers.”
Dr Donal de Buitléir, Chairman of the Low Pay Commission welcomed the publication of the research paper, which was produced under a research partnership agreement between the Low Pay Commission and the ESRI: “The Low Pay Commission has a responsibility in legislation to ensure that any recommended increase in the national hourly minimum wage does not have a significant adverse impact on employment. This report provides much needed evidence of the impact of the 2016 increase in the national minimum wage on both hours worked and overall employment trends of minimum wage workers.”
The ESRI works towards a national vision of ‘Informed policy for a better Ireland’. This means producing high-quality analysis to provide robust evidence for policymaking, with the goals of research excellence and policy impact.
The ESRI produces research that contributes to understanding economic and social change in the new international context and that informs public policymaking and civil society in Ireland.