€11.45 Living Wage

Nat O'Connor: A technical, evidence-based analysis has led to the calculation of a Living Wage for Ireland of €11.45 per hour. This is based on a single person working full-time (defined as 39 hours/week). The calculation is based on detailed data from the Vincentian Partnership for Social Justice's budgeting.ie work, which describes each item required for a person to have a Minimum Essential Standard of Living or MESL.

The MESL standard is based on focus groups done with people living on low incomes, to agree a minimum standard of living, sufficient to meet someone's needs (not wants). It is not a poverty standard, but a minimum for a dignified life. Once the standard of living is agreed, researchers from the Vincentian Partnership for Social Justice look annually at the cheapest possible goods and services available in the market.

The categories of cost can be seen in the summary of the Living Wage (page 2). Some commentators have suggested that €11.45/hour (€446/week or just over €23,000/year) is 'too high' or includes unreasonable 'needs'. Let's look at that.

It might be argued that more frugal living is possible than described by the Living Wage. Well, core expenditure can be seen in detail here for the example of an Urban dwelling adult living alone. (Other detailed budgets can be seen here).

For a single man living alone in an urban area, a Living Wage will allow €57 per week for food along the following lines. Grocery shopping in a chain supermarket (typically a German discounter) including fresh fruit and vegetables for a healthy diet and a limited quantity of luxuries. For example, there is sufficient budget to allow three eggs per week, two litres of milk per week, one packet of biscuits per week, one jar of instant coffee every six weeks, one jar of jam every eight weeks, and so on. The budget does allow for one Deli lunch per week (€5.60), one Chinese takeaway every four weeks (€11.20) and a Sunday lunch out every six weeks (€10.00).

In terms of clothing, the Living Wage allows just over €10.00 per week. For a man (pages 9-11 of the same document), this would typically include: six pairs of socks/year, a pair of slippers every three years, a heavy jacket (€45) every year, a casual shirt every year (€15), a suit every three years (€144), a pair of shoes/year (€30), and so on. Obviously, these are the cheapest available goods. If someone wants a more expensive piece of clothing, he or she will have to make it last longer.

There is similar detail available for personal care items (e.g. shaving cream) and health care (e.g. dental visits). Energy bills are expected to be covered by €9.99/week. The household goods section is instructive. The scenario assumes that a single male lives in furnished rental accommodation and so does not own any furniture. A basic television is owned (€119.95) and is expected to last for ten years, likewise a toaster, iron, and so on. A wooden spoon (€1.99) is expected to last twenty years.

The television licence (€160/year) is an expensive cost, at over €3/week. No allowance is made for cable or satellite television. (By the way, 411 people were jailed last year for non-payment of the TV licence)

This budget allows someone to send 20 Christmas cards and four other greeting cards per year, with a total allowance of 30 stamps (55 cents each). The cost of stamps was calculated before the recent nearly 10 per cent rise in the cost of a stamp, to 60 cent - which means yet another €1.50 will have to be squeezed out of an annual budget that is already insufficient. This follows a pattern of publicly-regulated costs going up, such as Dublin Bus fares up 15-25 per cent in 2013.

Some commentators have criticised the allowance of spending for 'social inclusion'. Let's explore that. Under communications, the budget allows for a basic mobile phone (€59.99) and €5 of credit per week. It allows for a laptop (€479) meant to last for five years - i.e. costing €1.84/week. A printer is allowed for (€59.99/ten years), as well as 500 sheets of A4 paper every year (€4.99).

A person on this basic budget has €2 per week to make a donation to charity and is assumed to save €5 per week.

An annual holiday is included, which is illustrated as a week-long trip to Galway from Dublin, with seven nights accommodation (€25/night) and €299 in spending money.

Purchase of one newspaper per week is allowed for (€2.20) and a DVD rental four times a year (€4.60). A trip to the cinema is allowed for every two months (€8.50). Two swims a month are allowed for (€5 each) as well as a weekly football match (€5/week for 9 months/year).

There is a €15/week allowance for socialising/entertainment. This might allow three or four pints of beer per week, or a cup of tea/coffee every day.

The LivingWage.ie website has a new note outlining the allowances for social inclusion and participation under the Living Wage calculation, available here.

There is much more detail in the background data and reports, all available for scrutiny. While there may be quibbles about line items, what any serious examination of the data will show is that the Living Wage is based on a very modest, simple lifestyle. There is very little room for emergencies or special occasions. And the Living Wage is not meant to describe a poverty line, but it is a description of what the focus group participants believe is the minimum required for a dignified life, underneath which no one should be expected to fall. If anything, the Living Wage is too frugal - and of course the reality is that many people on such an income could still experience material deprivation. Not everyone lives beside a supermarket and disability or the needs of extended family members can put further pressure on people's budgets.

The details of the budgets merits serious attention, for many reasons.

It makes it clear that many people in Ireland go without many essential goods and services. This is bad for them, but it is also bad for local shops and immoral for Irish society because such deprivation would be unnecessary if national income was distributed more fairly.

It shows that every small increase in costs under public control or regulation matters - including energy, postage, telecoms and public transport, as well as the effect of VAT and other indirect taxes on prices in the market.

Raising people's incomes up to an evidence-based Living Wage would boost local spending power and benefit many small enterprises across Ireland. It would boost VAT income for the state and lower pressure on supplemental and special needs social welfare payments.

Like with the minimum wage, businesses that genuinely cannot afford to pay a Living Wage could be dealt with on a case-by-case basis. The Living Wage also provides an evidence base to interrogate why some goods and services are more expensive in Ireland than elsewhere, and what could be done to boost competition or regulate costs to lower the cost of living.

At the heart of the Living Wage argument is the proposition that everyone who works full-time should be entitled to a very basic, minimum standard of living sufficient to for a dignified life. But even the modest suggestion of paying at least €11.45 per hour won't happen unless people and organisations demand it.

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