Other hidden costs of the minimum wage

Nat O'Connor: The debate so far has not considered all aspects of the minimum wage.

Employers are quick to point out that the hourly amount paid to workers is not in fact the only cost of employing them. Employers’ PRSI contributions, HR and recruitment costs, training, etc all add to the cost of labour. That’s fair enough. Likewise, the call for a cut in the minimum wage is not necessarily to punish the 5% of workers currently on that wage, but it is to bring people from unemployment into low wage employment. At least, that seems to be the idea.

What is not often mentioned is that the taxpayer subsidises low wage employment.

For example, benefits like Family Income Supplement or subsidised rent (through the local authorities or the Rental Accommodation Scheme) assist low income workers. These costs may be less than the cost of payments to people who are unemployed, and I think it is generally better for people to be employed than not. But when employers and commentators call for a lower minimum wage, are they assuming that the state will step in to spend taxpayers’ money on subsidising those businesses that employ low wage workers (regardless of how profitable those businesses might become)? Are they aware that these supplements are often insufficient; for example, the growing waiting list for social housing or that nearly one in six households are at risk of poverty after benefit transfers?

If we are going to have a debate on reducing the minimum wage, we need to also have a debate on state subsidy of employment and what we regard as a minimum acceptable standard of living for working families.

Not to mention that many of the same commentators advocating a lower minimum wage also want to reduce social welfare payments.

Posted in: Labour market

Tagged with: Wages

Dr Nat O'Connor     @natpolicy

Nat O’Connor is lecturer in social policy in UCD’s School of Social Policy, Social Work and Social Justice and part-time policy specialist at Age Action Ireland. Previously Director of TASC, Nat also led the research team in Dublin’s Homeless Agency.

He has taught politics and social policy since 1999. He has a PhD in Political Science from Trinity College Dublin and a MA in Political Science and Social Policy from the University of Dundee. He is a Fellow of the Higher Education Academy (UK), a member of the National Economic and Social Council (NESC) and chairperson of the Irish Social Policy Association (ISPA). You can find him on LinkedIn (natoconnor) and TwitterX @natpolicy