2018 minimum wage increase led to some temporary reductions in hours worked
A new ESRI study, funded by the Low Pay Commission, found that the 2018 increase in the Irish minimum wage did lead to some immediate reductions in the hours worked by minimum wage employees but only in particular segments of the economy.
The reduced hours were found in the Dublin and West regions and in the manufacturing sector nationally. However, the changes did not persist into the second half of 2018, suggesting that any impacts were likely to have been temporary.
In January 2018, the Irish minimum wage increased from €9.25 per hour to €9.55 per hour, an increase of approximately three percent.
During quarters 1 and 2 of 2018 the hours worked of minimum wage employees fell by an average of 1.6 hours per week in Dublin and 1.7 hours per week in the West region, compared to those of non-minimum wage employees. During the same period, the hours worked by minimum wage workers employed in the manufacturing sector also fell by an average of 1.6 hours per week compared to their non-minimum wage counterparts. However, by the final two quarters of 2018, these impacts were no longer present. This indicated that the decline in hours worked was temporary.
“It is important to recognise that minimum wage changes can affect particular areas of the labour market differently and studies focusing only on national data risk missing important impacts. While in this instance we found that any regional and sectoral changes were short-lived, it is important that we continue to monitor this, as impacts could become more persistent during periods of lower economic growth”, said Professor Seamus McGuinness, an author of the report.
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. He commented, “This report makes a very valuable addition to our understanding of the effects of changes in the minimum wage.”