Chairman and members of the Joint Committee, I would like to thank you for giving me the opportunity to talk to you about low pay, the living wage and the minimum wage.
As an association, the RAI are happy to engage with your committee on these and other matters of mutual interest.
From the outset, we are concerned about the need to create more jobs in our industry and more jobs in our economy. We will be talking about the cost of employment for businesses and it must be viewed in tandem with any discussion about the minimum wage.
If the desire of the Government and the Oireachtas is to ensure that people have more disposable income in their pocket at the end of the week, that they are able to support themselves and their families, then I suggest we look at what emanates from elsewhere in the Oireachtas. The most direct way to increase take home pay is to reduce the excessive burden of taxation and the controversial Universal Social Charge (USC) on employees.
In advance of this presentation, I have consulted with hundreds of restaurant owners who are members of the Restaurant Association of Ireland. The majority are small, family owned and family run businesses in every corner of Ireland.
Many of them are in a state of disbelief that there is even a talk about increasing wages, when they have been struggling to keep their doors open. Many of them will have had little or no wages paid to themselves over the last 5 years as they struggled to keep their businesses alive, keep salaries paid to staff, pay rates to the Local Authorities and meet the ever increasing cost of business, be it energy, insurance and in many cases rent. This is not about helping create employment – it appears to be about creating an environment where it is hard to do business.
The survey of income and living conditions produced by the CSO in 2012 shows that the level of poverty has drastically increased since 2004.If we are to address this issue, we need to get people working. There is no greater dignity that can be found with having a job, a reason to get up in the morning and to be able to provide for yourself and your family. Over the last 18 months,through a pilot initiative, the RAI have taken 140 long term unemployed people, put them through a structured training programme for chefing, and I am delighted to say that over 50% are now in full time employment. This shows that there are jobs in our industry, especially in the area of chefing.
An increase in the minimum wage is not the answer. It will only stifle job creation.As of February 2015, there are 355,124 people on the live register. Each person that finds employment results in a saving of up to €20,000 and the Government will benefit from tax revenue, employers PRSI and USC.
The last increase of minimum was in 2007, Celtic Tiger Era, pre 2008 recession. Youth unemployment currently stands at 21.6%. That is where the problem lies. Since the inception of the minimum wage, it has increased by 55%.
Competitiveness has slowly returned but we are again losing it and now there is a proposal for an increase in the minimum wage. Have we already forgotten what we have gone through in the last 7 years?
Considering inflation figures over the last 12 years, the minimum wage should actually be €7.40 as opposed to €8.65. The poverty rate is highest amongst the unemployed; a shocking 19.2% compared to 1% of those employed.
When there is a rise in minimum wage, it hits small businesses such as hospitality and restaurants 6 times harder than other businesses. A rise in the minimum wage will definitely deter small businesses from taking on staff.
To get a job is a starting point for employees, a foot in the door. It provides opportunities and career progression, which in turn comes with pay rises. Profitable businesses are giving pay increases. However, they are doing so on that person’s contribution to the business, rather than across the board pay increases.
Ireland has a high minimum wage by international standards, taking into account that we have not had an increase during the recession. Our minimum wage is the 4th highest in the EU when Luxemburg is excluded. In many other countries, people on lower rates of pay are taxed much more than in Ireland.
The regions in Ireland with a weaker economic performance will seriously suffer if there is an increase in the minimum wage.We cannot allow this to happen. It is regions like this that need help to recover. There are still restaurants closing in small towns in Ireland. Many restaurants and businesses are still in debt and can’t afford to have cost increases imposed on them.Furthermore it will result in fewer jobs being created. It will have a destabilising effect on the restaurant and hospitality industry. The level of unemployment in the wider economy is the issue here.
At the end of 2014 the cost of living was .6% below 2008 levels. Calculations show that the minimum wage is 19% above the level established at the time of its inception.
The bottom line is that if a person is running a business and is not making money, they will go out of business and everyone that works for them will lose their jobs. How can we justify an increase? Many members of the Restaurant Association of Ireland ask me - How will we stay in business? The last time there was an increase in the minimum wage of €1, businesses had to reduce workers hours.
What businesses want is stability and security in terms of costs. This will determine whether businesses will hire new staff. If the minimum wage is to increase in a few months’ time, businesses will then decide not to hire immediately. There needs to be a realistic look at the corresponding costs of businesses in areas such as PRSI as I’ve previously mentioned.
The Low Pay Commission makes its final decision whether or not it will increase the minimum wage; it must conduct a detailed analysis of the cost of doing business in Ireland. The 28 regulatory and inspection bodies that the restaurant industry deal with annually, the rising cost of energy, the rising cost of insurance, the shackles of upward only rent reviews and the ever increasing cost of product raw material.
Before I end, I must point out to the committee that for every €1 paid in wages, businesses must pay 8.5% PRSI contribution. It is not a simple argument. To say that we should increase wages across the board for all businesses, be it profitable or not is absurd. I would ask the committee to think about those businesses who haven’t seen the recovery of the economy yet before you advocate for a blanket approach to increasing wages. Thank you.
Ends
1