What is a Living Wage and how is it calculated?
The Living Wage in Ireland is an evidence based wage which is deemed to be the minimum hourly income necessary for a single employee working full-time to meet their basic needs to ensure a minimum acceptable standard of living. It is based on the changes in the minimum cost of living and income taxes where it demonstrates that work should provide adequate income to enable employees to afford a socially acceptable standard of living. In 2020 some of the costs required for this acceptable minimum standard reduced on average by 4%, such as energy, food and household goods. However, this saving was negated by the increase in the rental market of an average of 7.5%. If the cost of renting a home in Ireland had not increased, the Living Wage would have stood at €11.90 and not the current rate of €12.30 per hour. Continued rising rents have increased the Living Wage rate, where rental now accounts for over half of a single person’s minimum living costs in Dublin and over one third outside of the capital.
What is a Living Wage based on?
It is based on needs, not wants or desires and is an average gross salary which provides adequate income to allow employees to afford a socially acceptable standard of living. The Living Wage is evidence based derived from social consensus from consensual Budget Standards research.
The National Minimum Wage does not reflect the cost of a standard of living as opposed to a living wage which is benchmarked against the cost of a minimum standard of living. The National Minimum Wage is set by policy makers whereas the Living Wage is based on evidence and research.
The Living Wage is reviewed each year to take into consideration any changes to the cost of a minimum essential standard of living in Ireland. The National Minimum Wage does not vary as living costs change.
What is the likely impact of a Living Wage as opposed to a Minimum Wage?
The greatest impact of the introduction of the Living Wage amount will be on lower paid workers where they may see a pay increase of up to 25%. The pandemic has redefined frontline and essential workers and causing a reconsideration of the value we place on the work and the reward an essential worker should receive.
Potential Increase of Minimum Wage?
The Low Pay Commission is to investigate a potential move to an increased Living Wage, currently estimated at €12.30 per hour. The Living Wage is deemed to be the minimum hourly income necessary for a single employee working full-time to meet their basic needs to achieve an acceptable standard of living. The National Minimum Wage as it stands is €10.20 per hour but this is different to a Living Wage. Tanaiste Leo Varadkar has said that the commission would “carry out research and advise us on fair wages in an independent and evidence based way moving towards a lving wage over the period of this Government.”
On April 14th, further examination has been approved by Cabinet on foot of the commission’s report which was requested earlier in the year. The commission will examine the impact on health, education, social welfare, housing and labour costs if there is a move to a higher living wage.
Leo Varadkar has also suggested that following the Minimum Wage increase in 2020 there may also be an increase this year. It is expected that the report will be finalised in the second half of the year and will examine the implications of this policy on taxes, social insurance rates, health, education, housing and social policy.