The 2016 minimum wage increase led to a reduction in wage inequality
A new ESRI study, funded by the Low Pay Commission, found that the 2016 increase in the Irish minimum wage reduced hourly wage inequality between high and low earners by up to 8 per cent. However, there was no strong impact on the income of households.
In January 2016, the Irish minimum wage was increased from €8.65 to €9.15 per hour, an increase of approximately six percent. Without the minimum wage change, approximately 10% of workers in 2016 would have earned €9.15 per hour or below. However, following the increase in the minimum wage, just over 6% of workers had an hourly wage in this range. Therefore, the evidence suggests that the minimum wage change was associated with a 4 percentage point reduction in the number of workers earning €9.15 per hour or below.
Other results in the study suggest that minimum wage changes had knock-on effects on the wages of higher paid workers. Wage increases are detected for workers earning up to €11.50 per hour.
“By boosting the hourly wage of low earners, the 2016 minimum wage increase led to a reduction in hourly wage inequality. However, household incomes were not strongly impacted. This is consistent with previous work which shows that minimum wage workers are often located in households at the higher end of the income distribution and are typically not primary earners within households”, said Dr Redmond, 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, “The Low Pay Commission has a responsibility in legislation to ensure that any recommendations it makes do not have a significant adverse impact on employment and the low paid. This report provides valuable data on the impact of the National Minimum Wage on the distribution of income in Ireland”.