SFA condemns proposed 6% increase in the minimum wage

Tuesday, 21 July 2015

  • SFA condemns 6% increase in National Minimum Wage (NMW)
  • Competitive labour market critical to small business growth and job creation

Responding to the publication of the Low Pay Commission report today by the Government, which recommends a 6% increase in the National Minimum Wage, the Small Firms Association (SFA) called on the Government to reject the findings of the Commission and to freeze the National Minimum Wage (NMW) at its current rate for 3 years.

Patricia Callan, Director of the Small Firms Association, said “Small businesses truly are the engines of our economic recovery. We have a vital role to play in terms of employment generation, especially in regional towns and villages and rural Ireland. Artificially increasing labour costs will not only dampen this recovery, but will ultimately lead to both the prevention of job growth and to job losses.”

“Whilst it is true that our economy is recovering, this recovery is still fragile for many small businesses and there are clear urban/rural divides in how well businesses are doing. Looking at the profitability of small businesses, it is clear that they will have grave difficulty absorbing labour cost increases without productivity gain. From an examination of the 2012 average gross (pre-tax) profits in small businesses in the sectors with the majority of National Minimum Wage (NMW) workers, it is clear that they would not be able to offset NMW increases against profits, as in micro firms (1-10 employees) which are 84% of all businesses in Ireland, average pre-tax profits in Accommodation and Food businesses were €14,549; in Retail were €21,470 and Other Services were €16,582. This means that they will have no choice but to offset NMW increases against reductions in hours or jobs, job growth or capital or skills investment. A higher minimum wage will have a disproportionate impact on small businesses outside Dublin, where the NMW represents a higher proportion of the average wage. Given the urban/rural imbalance already being experienced in the recovery, this is of particular importance.”

The SFA had welcomed the establishment of the Low Pay Commission and its mandate to make independent, evidence-based recommendations on the National Minimum Wage. "However, there is no evidence to support a 6% rise in the NMW, at a time when just 40% of small businesses are in a position to give any pay rises and where they are, it is in the order of 2%. There is no doubt that a 6% increase in the NMW will result in knock-on relativity pay claims throughout the economy, regardless of the fact that this is specifically prohibited in the NMW Act", commented Callan.

Callan concluded, “It is the SFA’s firm conviction that it is imperative for the competitive position of Ireland that wage levels are decided in a competitive labour market and are not constrained by an artificial legal instrument such as the minimum wage. This ill-considered review of the National Minimum Wage will cost jobs. Small businesses are taking tentative steps to recovery and in many cases growth. The job of Government is to make sure these steps can be taken with confidence and with the necessary supports in place. It is vital that we do not become complacent in our economic recovery and that job creation efforts are realisable for the low-skilled workers and young people still on the live register who need an entry point into work and upskilling from where they can develop their skills and increase their wages relative to their productivity levels.”

Ends

For further information, please contact:
Patricia Callan, Director, Small Firms Association, at Tel: 01-6051602 or 087-6999345, e-mail: patricia.callan@sfa.ie or Tweet: @SFA_Irl
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