New ESRI research examining the impact of recent minimum wage increases finds that while some minimum wage employees experienced a reduction in hours, average take-home pay increased
Following recommendations from the Low Pay Commission, the Irish minimum wage has increased on a yearly basis from 2016 onwards. A new ESRI study, funded by the Low Pay Commission, examines the cumulative effect of three recent minimum wage increases on the hours worked of minimum wage employees. A research strategy is used to ensure that any detected impact on hours is due to minimum wage changes, as opposed to trends in hours worked that may have taken place even if the minimum wage had not increased.
From 2016 to 2018, the minimum wage increased on three occasions, rising from €8.65 to €9.55 per hour. The findings of this study show that, over the same period, the hours worked of minimum wage employees fell by almost one hour per week. However, the minimum wage increases were large enough to offset any earnings loss due to reduced hours, leaving the average minimum wage worker financially better off.
The effect on hours worked was greater for employees in certain sectors. Minimum wage employees in the “industry” sector, which consists mainly of manufacturing workers, saw a reduction of three hours per week over the 2016 to 2018 period. Likewise, those working in accommodation and food saw a reduction of 2.5 hours per week. Again, for the average minimum wage worker in these sectors, the minimum wage increases were large enough to offset any earnings loss due to working fewer hours.
For many minimum wage employees, such as young part-time workers, the minimum wage is a temporary stepping-stone to higher pay. However, for some employees, minimum-wage employment may represent a longer-term arrangement. Minimum wage workers in manufacturing are older and more likely to work full-time compared to other minimum wage workers. Therefore, declines in hours worked among this group may be of some concern as they may be more dependent on minimum wage employment to meet financial commitments. More research is needed to identify the precise reasons behind the observed reductions in hours worked among this group.
Dr Paul Redmond, an author of the report said,
“As the minimum wage increases, it is important that we monitor the impacts on employment. Our research has found a small reduction in hours worked among all minimum wage employees following three recent minimum wage increases. However, those working in manufacturing and in accommodation and food experienced a larger reduction in hours. Despite this, the minimum wage increases appear to be large enough to offset any decline in earnings due to working fewer hours.”
Ultan Courtney, Chairperson of the Low Pay Commission, commented:
"The Low Pay Commission has an evidence-based approach to making its recommendations. The report published today increases our knowledge and understanding of the impact and effects of increases in the National Minimum Wage. I am pleased to note that the report finds that the average minimum wage worker was financially better off as a result of increases in the National Minimum Wage, with the increases recommended by the Low Pay Commission large enough to offset any effects of reduced hours. "