The Restaurants Association of Ireland Submit Detailed Report on the Minimum Wage to the Low Pay Commission

The Restaurants Association of Ireland (RAI) have made a submission to the Low Pay Commission in relation to the implications of the proposed raise of the minimum wage in Ireland.  The national Minimum Wage in Ireland was introduced under the National Minimum Wage Act 2000. It currently stands at €8.65 per hour. In January 2015, Ireland had the fifth highest minimum wage of the EU.

The RAI are concerned about the need to create more jobs in the restaurant industry and the economy.  An increase in the minimum wage will stifle job creation and have a destabilising effect on the restaurant and hospitality industry.

The report examines the current status of the Irish economy and the challenges it faces as it seeks to revert back to normality, Ireland’s competitive position, the issues and challenges facing the restaurant sector and the issue of the minimum wage.  The report found that the economy has entered 2015 with reasonably strong momentum.  The main caveat is that consumer spending is still fragile and that the recovery has been concentrated in the greater Dublin area.  Key risk factors facing the Irish economy include the high level of sovereign debt, SME and personal debt, in particular mortgage arrears, the ongoing pressure on personal disposable and discretionary incomes.  Political uncertainty is also a challenge that faces the Irish economy in light of the growing proliferation of Independents and a looming general election.

The restaurant sector is categorised as part of the SME sector. The SME sector accounts for around 54% of total employment in the Irish economy, and 70% of total private sector employment.  Given the importance of employment creation in the economy, it is essential that policy towards the sector remain as favourable to job creation and activity within the sector as possible.  The ability to increase prices is still very limited in the sector and with many of the costs of doing business under pressure, the sector continues to be characterised by tight margins and challenging trading conditions.

The lack of demand in the economy over the past few years has been the biggest issue for the restaurant sector. While some recovery in domestic demand is being experienced, those businesses that interface with the consumer are still operating in a challenging environment.  The underlying picture is still extremely challenging. The personal tax burden has been increased in dramatic fashion; the price of many items of essential expenditure such as car insurance, education and health insurance have increased sharply in recent years; the labour market is still challenging; and many in the personal sector are more interested in paying off debt than spending at the moment. This creates a challenging environment for consumer facing businesses and the ability to protect or grow margins through price increases, is very limited.

Given the still fragile nature of Ireland’s economic recovery and the still very difficult environment for the restaurant sector, the notion of increasing the National Minimum Wage, which would have a push through effect on wages up the line, does not make any sense. It would increase the cost base for business and would undermine the cost competitiveness of the economy. It would fly in the face of the aspiration to make Ireland the ‘best small country in the world in which to do business’ and the aspiration to preserve and improve the competitiveness of the economy.

The tax and welfare system should be used to put money into people’s pockets, rather than facilitating and encouraging an economically damaging upwards spiral in wages. The notion of pushing up wage costs at this juncture fails to recognise the business realities in what is still a very challenging economic environment.

The restaurant sector is highly labour intensive and so wage costs account for a significant part of total operating costs. It is estimated that in the Hotel & Restaurant Sector labour costs account for 50% of total input costs and around 11% of workers in the sector are on the minimum wage. An increase in the minimum wage would add to wage demands up the line and add significantly to total input costs. For a sector that is starting to experience a gradual recovery in business performance and which plays such an important role in national and regional employment, adding to operating costs at this juncture would be premature and potentially damaging.

Download a copy of the RAI submission here

Ends

Notes to the Editor:

The Low Pay Commission is set up on a statutory basis and will advise the Government on an annual basis on the appropriate level for the National Minimum. Specifically, the key issues that it has been asked to examine in formulating its advice to Government in relation to the National Minimum Wage are:

•  The change in earnings since the national minimum wage was last increased in 2011;
• The unemployment and employment rates generally;
• The expected impact of a change to the minimum wage on employment, the cost of living, and national competitiveness;
• Changes in income distribution; and
• Currency exchange rates.

The commitment to form the Low Pay Commission was included in the Statement of Government Priorities 2014-2016 agreed by the Tanaiste and the Taoiseach in July 2014. The Minister with responsibility for small business, Mr Ged Nash, has stated that he ‘wants to see the minimum wage increased progressively in the coming years as the economy improves’ and that there is ‘an inevitability about pay increase demands as the economy improves’. However, he also stated that the National Minimum Wage should only be increased ‘where circumstances allow’.

For further information contact:

Adrian Cummins,

Restaurants Association of Ireland

11 Bridge Court, Citygate,

St. Augustine Street, Dublin 8.

Mobile: +353 86 8263311

Telephone: +353 1 6779901

Fax: +353 1 6718414

Email:

Website: www.rai.ie

Twitter: @rai_ie