The Impact of the Minimum Wage on Irish Firms

The Impact of the Minimum Wage on Irish Firms

Policy Research Series (PRS) No. 44, May 2002, by Brian Nolan, Donal O'Neill and James Williams



The Purpose of the Study

The National Minimum Wage was introduced in Ireland in April 2000. This study is based on a survey carried out in late 2000/early 2001, commissioned by the Department of Enterprise, Trade and Employment, which re-interviewed firms which had been surveyed before the introduction of the minimum wage. The results are used to assess the impact of the minimum wage on employment, wage levels and other aspects of work organization among Irish firms.



The Impact of the Minimum Wage

The percentage of workers earning around or below the level paid by the minimum wage fell sharply between end-1999 and end-2001, from about 20% to 5%. As seen in other countries and in previous surveys for Ireland, younger workers and women were most likely to be at those wage levels, and low pay was most prevalent in sectors such as textiles, retailing, hotels, restaurants and bars, and personal services. The main concentrations of workers paid sub-minimum rates (which is permitted for young or trainee workers) were in sales and personal services. About 5% of employees were said by their employer to have received an increase in pay as a direct result of the minimum wage. About 13% of firms said that they had to increase pay for employees above the minimum wage to restore differentials. However, most of these firms said that, in the light of the tightness of the labour market and the difficulty of recruiting and keeping staff, they would have had to increase wage rates anyway during this period.

Only a small proportion of respondents said they would be employing more people in the absence of the minimum wage, representing an extra 5,000 employees across all firms in the country. However, almost half of this total was in firms which did not actually employ anyone at the minimum wage, suggesting that this figure was if anything an over-estimate. In addition, employment growth among firms which had low-wage workers in the first survey was not significantly different to firms which had no such workers.