National Minimum Wage: Motion

I move:

"That Dáil Éireann:

recognising that the national minimum wage is low, providing a full-time employee with less than €18,000 annually (with reductions for those under 18 or in their first job), and that amongst EU states it ranks as 12th highest when measured as a percentage of average monthly wages and 9th highest if measured in terms of purchasing power parity;

accepting that:

the current minimum wage has not kept pace with average growth in wages or been increased since July 2007;

the 2009 income levy has already reduced the real value of the minimum wage; and

the new universal social charge will be payable on wages at this level;

concerned that 116,000 workers, or 6.6% of the workforce, are living below the poverty line, that the working poor make up 24% of all those in poverty and 40% of all households in poverty, and that the minimum wage is especially relied upon for protection by women, migrants and other vulnerable workers;

noting that only 4% of workers, and only 1.2% of industrial workers in export sectors, are on the minimum wage, with no major impact on competitiveness;

acknowledging the role of a statutory minimum wage in protecting against unfair competitive advantage by unscrupulous employers who exploit their workers;

further acknowledging the opportunity available through the Labour Court, which has yet to be invoked by any employer, to plead inability to pay the national minimum wage;

reaffirming that a statutory minimum wage is a statement of core values, providing a threshold of decency under which society agrees that workers' wages should not fall, and that a reduction would signal a race to the bottom in which everyone — low wage workers, public and private sector workers, social welfare claimants and pensioners — will suffer;

believing that a reduction in the minimum wage will only create a disincentive to work, will have no impact on the public debt or on economic recovery and makes absolutely no sense at any level;

condemning the Government's logic that poverty wages will create more jobs and that welfare rates must be below even those poverty wages, which logic will in turn require major cuts in welfare payments; and

appalled that the Government's four year plan has targeted the most vulnerable members of society and convinced that the proposed reduction in the minimum wage of one euro an hour will have the most profound impact on those who are poorest, deepen their poverty and draw more workrs into poverty;

condemns the Government's unnecessary, unwise and unfair decision to reduce the national minimum wage and calls for a reversal of this cut."

With the permission of the House, I wish to share time with Deputies Tommy Broughan and Kathleen Lynch.

Is that agreed? Agreed.

I am glad of the opportunity to table this motion on the floor of the Dáil this evening in my name and that of my Labour Party colleagues, on the question of the national minimum wage. I reaffirm the Labour Party's unequivocal and unambiguous long-standing commitment to the effect that we will not implement any reduction in the minimum wage. It is low enough. If legislation under which the Government proposes to cut the national minimum wage, section 13 of the Financial Emergency Measures in the Public Interest (No. 2) Bill is enacted, we will reverse this particular measure, which in the event will effect an 11.6% reduction in the minimum wage from €8.65 to €7.65 per hour, or in excess of €2,000 per year. That is a commitment we shall give if we are part of any future Government.

In the event that the necessary commencement order is not in place, our commitment is then simple. We will not bring forward a commencement order to allow the provision of section 13 to take effect. I do not believe we can be any clearer in our commitment in this regard. For those who doubt it, it is time they started to believe, in accordance with the words as set out in this motion. The strength of the Labour Party's conviction in this regard may be gauged from the fact that notwithstanding that this matter was debated in Dáil on Thursday and Friday last, we are back here tonight with a clear and comprehensive motion that deals with all aspects of this crucial issue.

Cutting the minimum wage makes no sense at any level. Indeed, it is under the guise of dismantling barriers to employment that the Government is claiming a cut in the minimum wage will ensure the viability of small to medium-size enterprises, SMEs, and will support job creation in those sectors where significant unemployment has occurred. A closer look at the actual sectors where the minimum wage is being paid might well show, however, that these sectors are in a process of significant contraction. The Government's own reports for these areas, indeed, indicate the difficulties of creating jobs in these industries in future years and that the problem of survival in these sectors is one of over-supply in the markets they service.

What is vital from our perspective is the fact that the national minimum wage is a floor, not a comfortable standard of living measure. To put that in context it is equivalent to only 45% of average earnings in the private sector, or just more than half of the rate for manual, production, sales and clerical officers' hourly earnings in the second quarter of 2010. Let us ventilate the facts, articulate the reasons the Government is putting forward and let us rebut them, one by one, as I intend to do along with my party colleagues, Deputies Broughan, Kathleen Lynch and others who will contribute over the course of this debate.

Cutting the minimum wage makes no sense at any level. It undermines the social floor and it is proof positive that the least well off and most vulnerable are fair game as far as this Government is concerned. The minimum wage is one of a number of false explanations in relation to the current economic crisis, intended to deflect attention from the banks and Government mismanagement. The Government's claim that the Irish minimum wage is the highest in the EU is misleading, as I shall show in the course of my contribution. It should be noted that in countries where there are lower minimum wages, workers have access to excellent free medical care and cheap public transport, which improves their standards of living. It is likewise misleading to say that the budget leaves those on a minimum wage outside the tax net. While they may not pay any income tax, they have very high taxes on goods and services and user charges, amounting to a regressive social charge, as was pointed out to the Dáil last Wednesday, by my party leader, Deputy Eamon Gilmore. Taken together with the €1 per hour rate cut the weekly wage will be reduced, in effect, by up to €44 per week.

More than 60% of workers on the minimum wage are women, and many will no longer find it worthwhile to enter the workforce, which is contrary to the policy of encouraging women to do so, as was specifically alluded to in the four-year plan. Reducing the minimum wage will do little to improve competitiveness, as most workers affected are not in exporting industries. Evidence from the USA shows that states with a minimum wage have lower unemployment than those which do not. If there is no worthwhile minimum wage, there is no incentive for employers to train workers, or for employees to stay long enough to acquire skills. The result is higher labour turnover and lower productivity.

Reducing the minimum wage will lead to a large number of working poor, as in the USA where almost 20% of the labour force must have two or more jobs to survive, with negative effects on family life and social cohesion. It is clear that a net effect of reducing the minimum wage will be a reduction in the incentive for people to take up low paid jobs and ultimately result in higher social welfare costs. The most likely response of employers to a reduction in the minimum wage will be to cut the wages of their workers. The assurances the Minister gave workers that employers will not cut their wages does not stack up. Such assurances are either naive or cynical. They are certainly not based on a realistic assessment of the likely actions of employers. With a handful of honourable exceptions, employers will not be able to resist reducing existing wages, and the Minister has created more fear and uncertainty among workers.

The National Employment Rights Authority, NERA, has recovered literally millions from employers who defy the law and refuse to pay the minimum wage, and this cut will be a bonanza for them. Other employers will be emboldened by the cut and will simply reduce the wages for their workforce by diktat to the lower rate, and with the threat of NERA effectively now removed the workers will be powerless to defend their wages. More cynical employers will ask the workforce to agree to the cut, making them an offer they cannot refuse, for fear of losing their jobs. Some employers will do exactly that, and cook up excuses to justify dismissal of their existing workforce so that employees may be replaced by "cheaper" workers on a lower minimum wage.

To ensure that workers were protected from these type of actions by unscrupulous employers, I tabled an amendment in the name of the Labour Party last Friday, that aimed to protect the existing situation of workers. It indicated that the amendment of the national minimum wage to be effected by section 13 would not affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act or under any contract of employment entered into before the coming into operation of the 2010 Act, and any legislation to which it applied. It had the distinction of being widely agreed and argued for by Fianna Fáil and Green Party Deputies, but it was still voted against. As Deputy Shortall said, shame on every Deputy who knows that protection is needed but refused to support the Labour Party amendment.

The legislation that will cut the minimum wage has another sting in its tail. It allows the Minister to change the amount employers can deduct from wages in respect of board and lodging. The current situation is that if an employee is given bed and board as part of his or her employment, the employer can deduct this from the minimum wage. The deduction must be fair and reasonable, not just a sandwich at lunchtime, it must be stated in the employee's contract of employment and he or she must be given notice of the reduction. The maximum that may be deducted is set out in S.I. 95 2000 and is currently: full board and lodgings — €54.13 per week or €7.73 per day; full board only — €32.14 per week or €4.60 per day; and lodgings only — €21.85 per week or €3.14 per day.

The fear is that employers will further reduce this provision to further reduce workers' wages. The European Court of Justice has previously ruled that the cost of board and lodgings cannot reduce minimum wages. The Minister should, therefore, in accordance with the ECJ ruling use his order to rule that board and lodgings cannot be charged against minimum wages. In addition he should reduce significantly the amount that may be charged for board and lodgings. After all, Government logic for reducing the minimum wage is that there has been a decrease in the cost of living.

The minimum wage cut is a massive transfer from the poorest paid workers to their employers. It could take as much as €150 million out of the economy and more than €2,000 per annum from workers' pockets. The figure of €150 million is based on a €2,000 per annum cut in the wages of 75,000 people in receipt of the minimum wage. If only half their employers implement this cut, this figure will be €75 million. At a time when working families are struggling every day to make ends meet and to put food on the table they are being hit with three cuts, namely, a cut in the minimum wage, a cut in child benefit and a cut in social welfare benefit. Cutting the minimum wage is counterproductive as it will destroy jobs and damage consumer spending. As I stated, the cut represents a possible reduction of as much as €150 million, which is all the more pointless when we know it is the lower-wage earners who spend proportionately more in their local area and have a higher marginal propensity to spend. Their marginal propensity to save is limited and currently stands at 1%. This figure exploded during the previous two years and increased from the normal 4.5% to 12% or 13%.

The Minister has presented the minimum wage cut as some sort of "job stimulus". It is unfair and cruel to demand that low paid working people should subsidise their employment. This will not work as the impact of removing so much money from the local and real economy of shops and services will be the destruction of even more jobs. The majority of employers will simply pocket the savings. It is equally unlikely that employers will pass on the wage cut to customers. Even if they did, it would be minimal. For example, a wage cut of €1 in the hospitality sector is equivalent to a reduction of 0.61 cent in the price of a meal costing €60.00 or more. This cut is, therefore, unlikely to have any effect on demand. Big businesses will benefit more from the cut to the minimum wage. For example, an employer with ten employees will save €400 per week as a result of the cut whereas an employer with 100 employees will save €4,000 per week. This will advantage large employers and increase their ability to undercut small local businesses, destroying more jobs.

The Labour Party argues that the minimum wage cut does nothing to improve the public finances. It reduces income to the State from the universal service charge and increases the level of payments from family income supplement. The Government motion refers to the family income supplement, which is important for many people. However, I never understood it to be in place to indirectly supplement employers, to which this is tantamount. Cutting the minimum wage will take money from the public purse. This type of thinking has already got us into trouble.

There is no justification for a unilateral across the board cut in the national minimum wage.The Minister's approach is based on a series of myths. The Irish minimum wage is not the highest in Europe. The Minister has stated that it is ranked sixth highest but this disguises the reality. In real terms, those earning the national minimum wage since the time of the last increase in July 2007 are worse off by almost 2.7% as compared to their position in July 2007. To suggest it is not the highest in Europe is to ignore the fact elucidated on numerous occasions by my colleague, Deputy Rabbitte, that in 2007 prices in this economy had reached an all time high. As well as making comparisons with other members states in terms of the minimum wage rate we must also, to validate this exercise and ensure it is accurate in all respects, make comparisons with the cost of living in those member states. We will then have a true measure of the wage involved. Bus fares here have increased by 22% since 2007. The cost of electricity has risen by 2.2 %, local authority rents have risenby 21.5 %, the cost of breadis up by 12.5 % and milk is up by 19 %. People on the minimum wage of €8.65 are being asked to meet these costs despite their not having received an increase in payment since 2007. This basket of basic necessities, which are important in the context of measuring CPI, have been significantly increased.

There is already in place a mechanism under section 41 of the National Minimum Wage Act 2000 which allows employers who have difficulty meeting the minimum wage to apply for a reduction under a claim of "inability to pay". If the rate at which the minimum wage is paid is the problem it is being made out to be, it would be realistic to expect there would be a long queue of employers at the door of the Labour Court. However,no employer has at this point made an application in respect of "inability to pay".This is, in my opinion, a case of do not waste a good crisis.

At €8.65 the Irish minimum wage is not the highest in Europe. As I stated, according to the Minister it ranks sixth. Well informed others, including the Irish Congress of Trade Unions rank it ninth. There is already a lower starting rate of €7.79 for adults,highlighting just how unnecessary is a unilateral across the board cut in minimum wage. Existing rates are €6.06 for under 18s, €6.92 for first year adults and €7.79 for second year adults. Therefore, rates significantly lower than € 8.65 are already built into the minimum wage regime. There is a sting in the tail: the new minimum wage rates will be as low as €5.36 for under 18s and €6.12 for first year adults. Arguably, this impacts disproportionately on women, young people and migrant workers. 25% of workers in the hospitality industry and 12% of workers in the retail sector are on the minimum wage. These are sectors where women and migrant workers dominate. When it comes to the first in line to be kicked by this Government, it is a case of women and children first.

I question the legal underpinning for this approach. This wage cutting exercise is contrary to the approved wage-setting mechanisms established by the International Labour Organisation, a sister organisation of the IMF, which has confirmed that it has not sought this reduction. The Minister for the Environment, Heritage and Local Government, Deputy Gormley, went on the public record to confirm that a cut in the national minimum wage was insisted on by the EU Commission. The National Recovery Plan 2011-2014 contains a provision requiring consultation with the Commission on low sectoral wage setting mechanisms. How is this intervention by the Commission consistent with the objectives for social inclusion as set out in Article 3 of the Lisbon Treaty? Pay policy is not an EU competence. How then can the Commission be involved in these issues? The Labour Party sees this cut in the minimum wage as mean spirited and counter productive. All it does is inflict hardship on a significant number of people and households who rely on minimum wage employment. As I stated earlier, it will act as a disincentive to work.

People on the national minimum wage have not been immune to the fiscal adjustment. In real terms, those earning the national minimum wage since the time of the last increase in July 2007 are worse off by 2.7%. The income levy imposed a de facto cut of 2% and consumer prices, excluding mortgage interest, is 0.7% higher than in July 2007. Relative to our trading partners, Ireland's national minimum wage is lower than in the UK, Netherlands, Belgium, Luxembourg and France. This is important. In terms of the purchasing power of the national minimum wage in competitor EU countries, Ireland ranks sixth. Expressed in terms of the prevailing cost of living in each country, the purchasing power of the UK's minimum wage amounts to €7.33 compared to €6.78 for Ireland. Notwithstanding a significant fall in consumer prices in Ireland last year, the cost of living remained 34% dearer than in the UK in 2009 due to a combination of a fall in UK consumer prices and a depreciation of sterling during 2009.

During the course of 2010, this differential is likely to have narrowed due to UK inflation running at 3.2% in October and Irish inflation running at just 0.7%, along with a strengthening of sterling. The UK rate is, in purchasing terms, expected to be higher than in Ireland due to a 2.2% increase in the UK national minimum wage rate in October 2010 to bring the rate to £5.93, which is €6.93 in nominal terms. The impact of the national minimum wage on the cost of services in the Irish economy is grossly exaggerated. Some 5.1% of those employed in private sector services in the Irish economy were earning the national minimum wage as of the second quarter of 2010 and while a larger number of workers were receiving sectoral wage levels, which are calculated as a premium over the statutory minimum wage, just one quarter of the total basket of goods and services is made up of services regulated by EROs and REAs.

The Labour Party is strongly of the belief that we must reaffirm and confirm that a statutory minimum wage is the very minimum and it is a statement of a core value of our country. It provides a threshold of decency under which society agrees workers' wages should not fall. A reduction would signal a race to the bottom, in which everyone, including low wage workers in the public and privates sectors, social welfare claimants and pensioners, will suffer. We will not condone this cut and, at the first opportunity if this legislation is enacted, we will reverse it. If it is not and a commencement order is required to ensure the reduction is introduced, we will not bring into operation the relevant and necessary order. That is a clear and unambiguous commitment from the Labour Party and every Member should support working class people who work in the minimum wage environment, particularly women, who comprise 60% of those on the minimum wage.

I strongly commend my colleague, Deputy Willie Penrose, for using Private Members' business this week to highlight the appalling decision by the Government to cut the national minimum wage from €8.65 an hour to €7.65 an hour under the Financial Emergency Measures in the Public Interest (No. 2) Bill. The campaign to introduce a national minimum wage in Ireland was a long, difficult struggle led by the labour movement and by the Labour Party. One of the key figures in the campaign for a minimum wage was Mr. Peter Cassells, who prioritised this important campaign during his tenure as ICTU's general secretary.

I was honoured to be involved in the minimum wage campaign and I was delighted, as Labour's then spokesperson on enterprise, trade and employment, to support the introduction of the national minimum wage of IR£4.40 per hour under the National Minimum Wage Act 2000 — more than 100 years after the first minimum wage was introduced in New Zealand in 1896. I argued strongly at the time that the existence of a national minimum wage is a "statement of core values, providing a threshold of decency under which society agrees that workers' wages should not fall" and this is reiterated in our motion. However, it is also clear that since the introduction of the national minimum wage, it has operated in an effective way and has not been a disincentive to work. However, the appalling proposal to reduce the minimum wage will clearly have the opposite effect.

The experience in the US and the UK, for example, has proved that the introduction of a minimum wage is overwhelmingly positive in protecting the pay and conditions of the lowest paid, reducing the cost of social welfare payments and encouraging consumption. It has also been found that the existence of a minimum wage does not have a negative effect on job protection or creation. Landmark research in two US states by economists David Card and Alan Krueger in the 1990s found that an increase in the minimum wage did not lead to job losses. In general, they concluded that the existence of minimum wage regulations have negligible negative effects. This research has been supported by other Nobel Prize winning economists such as Paul Krugman and Joseph Stiglitz. In the UK, the impact of the minimum wage has been monitored since its introduction by Tony Blair and Gordon Brown in 1999. Various studies by the low pay commission and other bodies have found the minimum wage and increases in the hourly rate to have had a positive impact.

However, even in the face of all of this evidence to the contrary, the Minister for Finance and his colleagues continue to insist that they are reducing the minimum wage to address our high unemployment rate and fall in competitiveness. The Minister for Enterprise, Trade and Innovation said two weeks ago in the debate on the IMF/EU bailout: "On labour costs, we will reduce the minimum wage by €1 per hour...(based on ) research showing that a reduction in the minimum wage would result in an increase in employment in the medium term." There is no such research and slashing the national minimum wage by a euro an hour and by €40 per week will simply not achieve this objective.

The Government and, especially, our delusional Minister for the Environment, Heritage and Local Government, have also tried to argue that cutting the minimum wage was forced on us by the ECB, IMF and EU as the cut in is included as part of the "structural reforms" to facilitate a so-called "adjustment in the labour market" in the EU/IMF programme of financial support for Ireland. This is clearly untrue and the Minister was clearly lying——

The Deputy cannot make the accusation that a Minister has lied.

He was clearly misleading his colleagues, as was pointed out by Mr. David Begg in his analysis of an interview with Mr. Ajai Chopra of the IMF on "Morning Ireland" on 29 Nov 2010, which clearly showed the proposal to slash the minimum wage came from the Ministers for Finance and the Environment, Heritage and Local Government and all their colleagues.

However, this shameful cut in the national minimum wage is being used as a trigger to produce an internal devaluation following the banking guarantee catastrophe of September 2008. This means that the lowest income families and households will have incomes cut and social welfare benefits slashed. The reduction in the minimum wage is, therefore, part of a wider ideological policy of this Government. Fianna Fáil and the Green Party are cutting the minimum wage and targeting the lowest paid workers in order that social welfare benefits, in turn, can be further slashed and burned.

I welcome Fine Gael's support for the Labour Party's defence of the minimum wage, which we worked so hard to introduce, but the party also wants to achieve an internal devaluation by crushing the most vulnerable in our society and slashing social welfare rates. The identical proposal for €3 billion in social welfare cuts by Fianna Fáil and Fine Gael and their €6 billion austerity packages show that they continue to be the Jedward of Irish politics. Fine Gael also wants to slash core public services with almost 50,000 redundancies planned. However, while an internal devaluation is the Fianna Fáil-Green Party-Fine Gael aim, as Deputy Penrose outlined, prices have not dropped to match the decrease in wages and conditions.

In October 2010, it was reported that consumer prices as measured by the consumer price index, CPI, had increased by 0.7% in the year since October 2009. The CPI for November 2010 was also 0.6% higher than in November 2009. Deputies who do a weekly groceries shop — and I am one of them — will acknowledge that the cost of food remains relatively high, especially for families with children. The Central Statistics Office also recorded in November 2010 that housing, water, electricity, gas and other fuel costs increased by 9.2% compared to November 2009. There were decreases in clothing and footwear of 5.5% and of 3.3% in alcoholic beverages and tobacco but they are dwarfed by the increases in fuel and housing costs alone. There were also increases in the prices of prescribed drugs and medication and house and motor car insurance and the ongoing costs of rents, petrol, hairdressers, GP fees, entertainment and leisure services remained high. "Rip-Off Ireland" is clearly alive and well, yet our poorest working families will have €40 per week less to cope with relentless rising prices.

Crucially, the Government has made no effort to control or lower prices for basic goods or services which is what most of the income of low paid workers is spent on. Why, for example, has it not tackled cartels in the liquid fuel, motor, medical and legal sectors that keep prices artificially high for these goods and services? Why are we slashing the minimum wage while actions against these outrageously sheltered cartels are long-fingered? One will not find them in the four year plan or next year's budget. They will be dealt with down the line, but the Government is prepared to cut the income of our poorest people while leaving our richest people escape.

It is grotesque, however, that the Government should use the device of an internal devaluation to allow Ireland to stay within the euro area by crucifying citizens living on the minimum wage and social welfare who are bearing the brunt of the so-called adjustment. As my colleague, Deputy Róisín Shortall, eloquently highlighted in this Chamber last week, who among us could survive on €297 a week on the minimum wage? How do we expect minimum wage workers to adequately feed and clothe their children when their already low wage has been cut by €40 a week and they have to pay the new universal social charge, one of the most shameful actions of the Government?

There has been no increase in the minimum wage since July 2008 and its real value over that period has been significantly reduced through the introduction of the 2009 income levy. For most minimum wage workers, a simple trip to the cinema is an unattainable luxury. One would have little or no change out of €50 after bringing a few children to the cinema and buying a few bags of sweets or an ice cream for them. However, the Minister of State is prepared to stand over this hypocrisy and madness. The Society of St. Vincent De Paul has reported a surge in calls for assistance since January with the number of calls up 35% across the country. The number is higher in urban areas, including by more than 50% in Cork and more than 40% in Dublin. The calls have been from low income and minimum wage earner families.

The Labour Party has continually highlighted — and does so again in this motion — that 116,000 workers or 6.6% of the total workforce already live below the poverty line and the working poor make up 24% of all of those in poverty. Cutting the national minimum wage also targets workers who have perhaps the strongest work ethic in the country. Minimum wage workers get paid a pittance for doing tough, grinding jobs, for example, cleaning, security and restaurant service that many in our society simply will not do. In the context of health care costs and the medical card, for example, these minimum wage workers would in many cases be better off not working and the Government is giving them such an incentive through its shameful performance on this measure. As the Society of St. Vincent de Paul has stated, "These are workers who pay for everything and qualify for nothing."

Many businesses and their representatives also agree that a reduction in the national minimum wage will not enhance competitiveness or create new jobs. The chief executive officer of Retail Excellence Ireland, Mr. David Fitzsimons, sent a briefing note recently in which he stated that he supports the Labour Party position that a reduction in the national minimum wage is "not necessary". Some of the loudest calls for reductions in the minimum wage came from elements within the fast food industry. Yet this is one of the sectors that is performing very well and making significant profits during the recession as people choose cheaper eating-out options.

The savage cut in the minimum wage contrasts strongly with the ongoing refusal of the Government to reform outrageous and unjustified high pay in the banks, semi-State bodies and particularly in the private sector. This week there was the fiasco of the proposed bonuses in AIB. It is grotesque that senior management in an organisation can earn hundreds of times the salary of the lowest paid worker in the same organisation. As Polly Toynbee noted long ago, the cancer of outrageous pay and bonuses comes directly from the private sector, and especially from the financial services sector.

Our sister party, the Labour Party in the UK, has proposed the establishment of a new high pay commission to overhaul the dysfunctional compensation system. There also clearly should be a maximum rate for public sector and semi-State salaries, perhaps set at €150,000. On a number of occasions in the past year I have called on the Minister, Deputy Brian Lenihan, to establish a high pay commission for Ireland to review compensation across the economy, not just in the public sector but also throughout the private sector. Of course, a high pay commission that examines and regulates pay in the public and private sectors could be a mechanism for curbing excessive salaries that may discourage dynamic and effective people from leading public sector positions.

In conclusion, the €1 cut in the national minimum wage is appalling and shameful, and must and will be reversed. It is designed to make the poorest workers in the country bear the brunt of the Government's crazy banking policy through an internal devaluation mechanism, which the Labour Party opposed from the start in September 2008. However, the Government has taken little or no cognisance of its implications for the poorest and lowest income people in this country. I commend Deputy Penrose once more on bringing forward this motion.

I congratulate Deputy Penrose on introducing this motion. Most of us were shocked and amazed at the details of the budget. When the Minister for Finance made his Budget Statement there was no detail in it, but when the details emerged we were shocked. I am not sure why we were. After all, we have had 13 years of Fianna Fáil rule and we know at this stage that members of the Fianna Fáil Party are masters at protecting their friends.

The budget ultimately resulted in the Government removing just under €5 billion from the economy, not the €6 billion it had announced. I do not believe one can include the sale of State assets, because it is a once-off event that will never happen again. It will not have that option next year. When it comes to adjusting our finances there is nobody like Fianna Fáil for exposing the type of class ridden society we have. If others were drawing up this budget, they would have started at the top. They would have provided that those working at the top in semi-State companies who are earning sums in excess of €200,000, €300,000 and €400,000 per year would have their salaries halved. That did not happen. Anybody else would have ensured all the consultants who are employees in the State sector would have their wages reduced. That also did not happen. It is as if the woman who cleans the hospital is a lesser being than the consultant. She is not. She is as important and pivotal to the health of the patients as the consultant. Fianna Fáil does not recognise that because, ultimately, the only people that party has any kinship with are those with great wealth.

One wonders who put together this budget. Clearly, the people who did so are so far removed from the everyday lives of ordinary people that they do not realise its consequences. I met three women yesterday afternoon when I was walking through town. One was a widow, one was a lone parent and the third was on the minimum wage. I believe that when the first two left, they walked away feeling sorry for the woman on the minimum wage because she was going to lose €41 per week of her income. Nevertheless, the widow has been impacted twice while the lone parent has been also impacted. These were three average women out walking during the afternoon, two of them seeking work, and this Government had done that to them.

They had one message, "Get rid of this awful Government. It does not realise what the rest of us have to put up with." Christmas is approaching and people on the minimum wage will be left with less than €300 per week on which to live. That money is needed to put food on the table and to buy toys for their children. Believe it or not, the poor still celebrate Christmas, although this year they will have less with which to celebrate it. Instead of starting at the top, this Government started at the bottom again, as it has always done.

The last two speakers are correct that good employers are not seeking this reduction in the minimum wage. Thankfully, there are some very good employers. They know a happy workforce means a more productive company. What worries me desperately about this move is that it is not about the minimum wage, but is directed at social welfare. It is about driving down social welfare and ensuring the gap between what one gets paid for work and what one gets from the State will be even greater. People who are on social welfare through no fault of their own, who have worked for the past ten years and have never been unemployed previously and who now find themselves at the mercy of this awful Government must sit up and take notice.

People on the minimum wage will not be able to afford the increased costs in health, education and their utilities. They will not be able to afford to put food on the table for Christmas. When the general election is held in January or February I hope the reaction will be like that of a woman to whom I spoke recently. When a Fianna Fáil canvassers came to her door last weekend she said, "Not only have you blighted my life, you have darkened my door. Get out of my house." That is exactly what Fianna Fáil will be told on the day of the general election, and it cannot come too soon. People on the minimum wage will not forget this. It is the most dramatic drop in income that any group in this country has absorbed.

The Minister of State, Deputy Conor Lenihan, and his colleagues will defend it through the amendment to the motion. Until now I believed that the Minister for Social Protection had some compassion for people who are dependent on the State. I now believe he does not. No Minister with that portfolio should have allowed this to happen. When the Minister is having his dinner on Christmas Day, he should think of the people to whom he has done this, the people whose lives he has destroyed. They will be waiting for him, but not in the long grass. This time, they will be in full view, standing at their doors waiting for him. They will tell him not to darken their doors and to get out of the driveways, as one canvasser was told last week.

The Minister knows this cut is awful and should not happen. He must reverse it.

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:

"endorses the national recovery plan as a strategy for economic recovery with the aim of restoring stability to the public finances, improving Ireland's cost competitiveness, stimulating enterprise growth and job creation; and in particular recognises that:

the national recovery plan identifies how Ireland's national minimum wage, NMW, has increased six times since its introduction and is now 55% higher than its original level — by the end of 2010 the consumer price index is forecast to have increased by approximately 28% since 2001;

research states clearly that a reduction in the national minimum wage will result in an increase in employment in the medium term;

the reduction in the minimum wage is one element of the labour market reforms outlined in the national recovery plan which also includes the review of sectoral agreements, new labour market activation policies and welfare policy;

NMW workers are concentrated in sectors badly hit by the downturn including retail, hotels, restaurants and horticulture;

the State must act to remove any legislative and policy obstacles to job creation;

even after the reduction to €7.65 per hour, Ireland's NMW remains in the top tier of EU minimum wage rates and the new rate will remain about 12% higher than the UK;

individual employment rights in Ireland have a sound legislative foundation, active compliance systems and robust institutions for adjudication on rights and resolving disputes together with broad social support; and

the Government is providing support for lower income families particularly through the family income supplement."

I am grateful for the opportunity to respond to the motion.

I understand the Minister of State is sharing time with the Minister, Deputy Batt O'Keeffe, and the Minister of State, Deputy Billy Kelleher. Is that correct?

That is correct.

I am always amused when I hear Labour Party Deputies promising to reverse things that this Government has done, given that the Labour Party leader, after two minutes on "The Late Late Show", blindly and blithely asserted that he would not reverse a single cut that we had imposed.

No, he did not. That is incorrect. The Minister of State is repeating the untruth his brother stated last week.

So much for turning the clock back.

Allow the Minister of State to speak.

This is not a budgetary measure.

The Minister of State is misleading the House.

Allow the Minister of State to speak. All Members should be allowed to speak without being shouted down.

I simply wanted to tell the Minister of State he is not getting away with it.

Auberon Waugh complained that the problem with conservatives was that they never actually turned the clock back. It seems that the Labour Party is in the same category.

Auberon Waugh is a prime Fianna Fáil source.

The National Recovery Plan 2011-2014 is a strategy for economic recovery with the aim of restoring stability to the public finances, improving Ireland's cost competitiveness and stimulating enterprise growth and job creation. Reducing the budget deficit is necessary but it will not, by itself, solve the economic difficulties. Continued export growth will protect and expand high-value employment and stimulate domestically traded sectors of the economy.

Ireland has regained competitiveness over the past two years as wages have adjusted and costs have fallen, helping to price ourselves back into global markets. The frontloading of structural reforms to increase competitiveness and to improve labour market flexibility is central to the strategy outlined in the national recovery plan. Building on the progress already achieved by this Government, it includes extensive measures to underpin our ability to compete in international markets by reducing the costs facing business, but also by increasing competition in sheltered sectors of the economy and supporting sectoral enterprise policies.

I am glad to say that there is now clear evidence that wage and other costs are adjusting throughout the economy, and are expected to continue improving relative to trading partners. The fall in the live register in each of the last three months is a welcome sign that these changes are beginning to bear fruit. The latest research shows that a reduction in the national minimum wage will reduce the cost of doing business and support an increase in employment in the medium term.

It is clear that there are significant labour market bottlenecks that we have to tackle. These include the access to opportunities for up-skilling and re-skilling, especially in the case of those who were employed up until recently in sectors that have been most affected by the impact of the recession; the challenge — in the face of tight fiscal conditions — of targeting cost-effective activation programmes to those most at risk of losing contact with the labour market and of drifting into long term unemployment; and developing a more effective and streamlined response to the needs of the unemployed and removing disincentives to participation on training, education and employment opportunities.

In order to target better our activation measures, the national employment action plan,or NEAP, supports activation measures for job seekers and provides for a systematic engagement of the employment services with unemployed people. It has been in operation since 1998 and is currently being re-invigorated to ensure deeper engagement with those at risk of long-term unemployment. The Minister for Social Protection has set out his plans for the rationalisation of the NEAP towards greater capacity and efficiency. These measures will include more frequent and intense intervention with priority clients; the development of a profiling and case management system in 2011; sanctions in the case of unemployed persons on the live register unreasonably refusing to co-operate with the plan and-or with appropriate training, education and employment interventions; and changes to provision for one parent families to alter the passive nature of income maintenance that currently prevails.

In 2009, job search support measures were put in place to double the capacity to cater for the rise in referrals from the national employment action plan, increasing the annual referral capacity to 154,000 persons in 2010, which is almost double the referral capacity that existed in 2008. Despite the difficult fiscal situation, the number of training and employment programmes for the unemployed has increased significantly from 66,000 in 2008 to over 160,000 in 2010.

The labour market activation fund aims to assist in the creation of training and education provision for the specific priority groups among the unemployed. A total of 60 organisations have been successful in securing funding. These organisations encompass the private, not-for-profit and public sectors and are providing approximately 12,000 training places for priority groups of the unemployed at a cost of €32 million.

In addition to the training and employment provision for the unemployed, the Government has indicated in the national recovery plan and in the 2011 budget that it will be introducing several new measures to strengthen the framework of labour market activation supports for the unemployed. These will include a skills development and internship programme with provision for up to 5,000 places; an expansion of the number of placements available on the work placement programme from the current figure of 2,000 to 5,000 in 2011; and a new community work placement scheme, which will provide up to 5,000 additional places in the community and voluntary sector.

An estimated 166,000 learners, including the unemployed, will benefit from full-time and part-time further education opportunities. Almost 1,800 unemployed people were supported to embark on part-time undergraduate and postgraduate programmes from September 2009 in areas that support the goals of the Smart Economy. Over 70% of these were between six and 12 months on the live register and 55% indicated that their motivation for undertaking the programme was to enhance their career prospects.

The labour activation measures I have outlined are being complemented by measures to generate employment opportunities, including the extension of the employer job PRSI incentive scheme to the end of 2011 and by the transformation of the business expansion scheme into a new employment and investment incentive. The family income supplement scheme provides income support to families with children that have employees on low earnings. The payment effectively preserves the incentive to take up or remain in employment in circumstances where the employees might only be marginally better off than if he or she was claiming other social welfare payments.

The FIS applies equally to one and two-parent families. The payment amount is based on a fixed proportion of the gap between the assessable income — net of income taxes and social contributions — of the household and prescribed FIS income thresholds. Currently this fixed proportion is 60% of the difference between the weekly income and the income threshold for the family size. As these thresholds are linked with the number of dependent children in a household, FIS provides an important policy instrument in reducing child poverty in working households, as well as improving incentives to work. FIS was paid to 25,963 families last year, in respect of 55,724 children.

By implementing these measures over the past two years, we have radically transformed the nature of our skills-based economy. All is not lost and many of the people who previously worked in our boom economy are now getting the opportunity to re-skill, retrain and to re-educate themselves. This is happening in line with a situation where the economy is expected to grow in the future. It is no accident that we have responded swiftly to this challenge, doubling the number of places in a very short timeframe. The minimum wage reduction has to be seen in the context of making ourselves more lean, more competitive and more ready to adopt the export led growth that will grow with greater intensity once we climb out of our current situation. I thank Members opposite for their patience.

I welcome the opportunity to contribute to this debate. The national recovery plan presents a detailed strategy to drive economic recovery, restore stability to the public finances, improve our international cost competitiveness and provide the necessary support to our enterprise sector. The Government's priority is to ensure that the business environment continues to be supportive of enterprises, large and small, promotes export growth and encourages growth in all areas of the economy. The Government's four year plan has a particular focus on structural reform. The measures to tackle high input costs for businesses, action to remove barriers to employment, and the enhanced activation measures are all critical to improve our competitiveness and underpin economic growth and job creation over the next four years.

Our plan seeks to support the private sector by removing potential structural impediments to competitiveness and employment creation, and by pursuing appropriate sectoral policies to encourage export growth and a recovery of domestic demand. Labour costs represent a relatively high proportion of the total input costs across a range of locally trading sectors. They are a significant input into the cost of domestic services, and they also affect our ability to sell abroad. In addition, they are a significant influence on foreign direct investment decisions. Let me be clear, labour market reform is a prerequisite for Ireland's long-term economic recovery. Unless steps are taken now to address labour market inflexibility, it is likely to inhibit employment growth in Ireland and lead to a loss of competitiveness in the coming years.

The national recovery plan outlines how Ireland's national minimum wage has increased six times since its introduction; it is now 55% higher than its original level. It is forecast that by the end of 2010 the consumer price index will have increased by approximately 28% since 2001. The hourly rate of the national minimum wage is the third highest in the EU, after Luxembourg and France, and, at its current rate, is 30% above the average national minimum wage level in the EU 15.

Minimum wage levels vary widely within the EU, from €123 per month in Bulgaria to over €1,683 per month in Luxembourg. The countries with relatively high minimum wages are Luxembourg, France, Belgium, the Netherlands, Ireland and the United Kingdom, in all of which the minimum wage has been close to or above €1,000 per month. Another five member states — Portugal, Slovenia, Malta, Greece and Spain — comprise a second group with intermediate minimum wages, from nearly €550 to €900 per month. A third grouping of nine countries with the lowest minimum wages — between about €100 and €400 per month — consists of Bulgaria, Romania, Latvia, Lithuania, Slovakia, Estonia, Hungary, the Czech Republic and Poland.

When assessing compensation across the economy on an hourly basis, the Central Bank found that per-hour economy-wide compensation levels were 12.8% higher in Ireland than the euro area average in 2008. It is interesting to note that the OECD has emphasised the importance of wage flexibility as a means of boosting demand for Irish workers and preventing unemployment from persisting at high levels. According to the latest figures from the CSO for the second quarter of this year, the minimum wage rate now applies to about 3.2% of the workforce and has a disproportionate effect on employers in the hospitality, retail, manufacturing and horticultural sectors, which are suffering from extremely difficult trading conditions. Labour costs are a high percentage of operating costs in these sectors.

The latest advice available states that the minimum wage sets a baseline for wage negotiations. It is assumed that wages up to 1.5 times the minimum wage are affected by changes in the rate, and up to 30% of wage rates may be affected by a change in the national minimum wage. In addition, it is estimated that anywhere between 170,000 and 300,000 workers are covered by either employment regulation orders or registered employment agreements which set out minimum wage rates on an hourly or weekly basis for specific categories of employees. Our four year plan commits to reviewing these.

I will state clearly that financial benefit to the Exchequer is not the rationale for the proposed reduction in the minimum wage. The four year plan states that, given the scale of the unemployment problem, any legislative and policy obstacles to job creation must be removed. It is essential to strike the right balance among the minimum wage, labour legislation, social welfare rates, taxation and activation of the labour market to avoid disincentives to returning to work. The programme of activation measures being implemented by the Government, as mentioned by my colleague, Deputy Conor Lenihan, will keep workers close to the labour market so they are ready to take up the jobs that will arise as the economy recovers.

Recent research published by Forfás, and advice following from it, clearly stated that a reduction in the national minimum wage would result in an increase in employment in the medium term. The challenge we all face is to work to restore economic growth, maximise employment and prioritise the needs of the most vulnerable so that the progress we have made in tackling poverty in recent years can continue.

I wonder where Deputy Shortall will get her savings. She spoke about not accepting reductions in the minimum wage and in social welfare benefits. It is becoming increasingly obvious that the Labour Party and Fine Gael are becoming the alternative collision rather than the alternative coalition.

That is a tongue twister.

Fine Gael wants a 3:1 ratio of spending cuts to tax increases, while the Labour Party favours a 50:50 split. While the Labour Party set out a €6 billion target in its pre-budget submission——

Four point five.

——the Labour Party favours a net adjustment of €4.5 billion. Fine Gael has produced a four year plan but the Labour Party has plans only for next year. Fine Gael wants to cut public sector numbers by 30,000, which is twice the Labour Party target. If the parties opposite cannot agree on these fundamentals, their ability to form consensus and take tough decisions in government is at best questionable and at worst laughable. Despite the many criticisms from the Opposition, the Government is taking the difficult decisions and the necessary action to return Ireland to economic growth.

It has put €40 billion into the failed banks.

For that reason, I commend the Government's motion to the House.

I welcome the contributions in the House, although many economic theories are being turned upside down. The Labour Party's proposal, if taken to its logical conclusion, suggests that in times of crisis we should increase wages unilaterally across the broader economy. That would certainly dig us out of a hole. Any economic study would suggest that in times of high unemployment and problems with competitiveness, wage restructuring across the broader economy is essential. This is particularly the case in view of the fact that wage restructuring is taking place across the eurozone and, more importantly, across the globe in general. It is important that we consider this in a broader context, making sure there is competitiveness in the economy, that we can sustain the current wage rates and that we can trade our way out of our present difficulties.

The purpose of the minimum wage is to protect people on low wages and ensure they have a proper and decent standard of living. It was introduced in 2000 by a Fianna Fáil Government. Successive Fianna Fáil Governments have increased its level to €8.65 and, more importantly, established a strong corpus of legislation to protect workers' rights. It is disingenuous for people to come to the House and point out that this Government is unilaterally throwing away all the gains made by workers in recent times. It is simply not a credible argument. We must have an honest debate in the House about the difficulties that are being experienced. It is true that no Government likes to reduce the minimum wage, but we must be honest with people, particularly those who are on social welfare and would love an opportunity to work but, because the economy cannot sustain a minimum wage rate of €8.65, cannot obtain employment. A reduction is essential to provide a stimulus in that area.

The Minister, Deputy O'Keeffe, referred the areas of wages, taxation, social welfare and labour activations measures which must be taken as an overall package. Let us consider the areas which are struggling and under great pressure, including the hospitality, retail and the horticultural sectors. It is not a credible argument for people to suggest they can sustain the present rates. Shops, supermarkets, retail outlets, restaurants and bars are closing throughout the country as we speak. Were we to take on board the Labour Party policy, then we would increase the minimum wage even further above €8.65. In his opening remarks, Deputy Penrose stated that those on the minimum wage spend proportionately more in the local economy and that they contribute more to central services in the immediate economy.

That is correct.

If that is the case then an increase should further help local economies. Unfortunately, economics does not work that way. We live in a real world, something that will dawn on people who are flirting with and considering the policies of the an alternative Government across the House. It is like playing leapfrog with a unicorn in that it may sound like a good idea in the beginning but it gets progressively painful as one continues.

Let us consider what the Government has done in recent times. I refer to the four year plan to ensure funding is available to the State during the next four years. This deal involves the IMF, the EU and other organisations and states throughout the European Union. This is an indication that there is no short-term, quick-fix solution to the issues we face. We are in a difficult situation. The country is on a precipice. We must bring forward policies that are difficult, which may be painful and will cause a certain amount of distress to people. We accept as much on this side of the House. However, at least we are honest enough to point out that this is necessary. This applies not only to the reduction of the minimum wage but throughout the public sector, the readjustment of pension contributions, the embargo in place, the seeking of further efficiencies from the public sector and in the private sector as well.

People are faced with harsh realities on a daily basis. Employers with up to nine employees may have to look one of them in the eye and explain that they cannot be kept on. Employment rights are in place to deal with employers who abuse their workers and seek to undermine workers' rights. A body exists and is available to inspect, enforce and prosecute people who infringe on workers' rights. Equally, many employers throughout the country are keen to retain as much employment as possible. That is not possible at present in the economic cycle. Certain people have consistently highlighted that this is an attack on the poor and those on low pay. It is not an attack on low pay. This is about attempting to ensure that more employment is generated for people with low skills or people in part-time work.

Deputy Penrose referred to the reduction in the minimum wage and people using the minimum wage and the family income supplement as a subsidy for employers. The same argument could be made in the case of a person who is employed for two days per week and who draws social welfare for three days per week. That is the same argument. Is that a subsidy to employers? No, it is simply that the employer cannot afford to pay such a person for two days per week or only needs that person for two days per week. We must be honest. Those in positions of leadership, regardless of which side of the House, should be able to stand up and clearly state that this is done out of necessity because of the need to ensure we are competitive and can generate more employment at the lower end of the economy. This is the purpose of it.

Those of us on this side of the House have been proud in recent years to consistently increase the minimum wage as part of the social partnership agreements. The agreements set out clearly, in statute under the National Minimum Wage Act, how we arrive at increases in rates of pay. One could argue that further rates of pay in the economy may not be sustainable in the longer term. We must be honest about this as well. For example in construction, people are not being paid according to registered employment agreements and are moving to C2 forms. People are now working as self-employed persons and undercutting the rates of pay because, one could argue, the rates of pay in the current climate are not sustainable. There is a haemorrhage of jobs throughout the construction sector. To suggest we are attempting to undermine all protections in this House does not represent a fair debate.

Regarding the four year plan, the Minister, Deputy O'Keeffe, outlined the commitment to review the registered employment agreements, REAs, and the employment regulation orders, EROs, which is essential. Even before the advent of the IMF this was something we discussed in the House on Committee Stage and Second Stage debates on employment rights. There is a need to streamline these agreements and bring cohesion to these areas and to collective bargaining. This is a matter on which we must bite the bullet. We must ensure the system is in place which responds to market needs.

Market need is not about putting profit in employers' pockets. It relates to the demands of the market and what it can sustain at a given time. At present, we cannot sustain the existing arrangements across the board as suggested by certain people opposite because it is popular and it provides a good soundbite. Some of the wages in our economy are unsustainable at present. We are competing against other eurozone members and the UK. Some have suggested we should follow the UK but we must be more competitive than the UK. If we are not more competitive than the UK our people will be working in the UK. This is something about which we must get real. We have no wish to force people abroad but if we try to sustain the current rates of pay in some areas that is where people will end up. We cannot sustain the existing numbers in employment without a lower rate of pay.

This debate is an opportunity to outline that an employment rates body exists, that is, the National Employment Rights Authority, a body much criticised and maligned from time to time. When I was Minister of State with responsibility for labour affairs, I took part in several debates in which people urged me to reduce the number of inspections and to ensure certain industries would not be inspected because they were under pressure, which speaks volumes. The National Employment Rights Authority exists for a definite purpose. It ensures workers' rights are protected and that rates are agreed in a competitive situation, either through the legislation in place to deal with the minimum wage, or through the enforcement of EROs or REAs.

We must accept there is a need for an urgent discussion in this Chamber and elsewhere on the setting of wage rates throughout the economy. There is merit in the motion but it indicates a certain amount of populism propagated in certain quarters. It has been suggested this is an attack on the poor and on people on social welfare. It is nothing of the sort. The Government is making difficult decisions to at least ensure that competitiveness is sustained in the economy. For example, students have not been able to access work in recent times as everyone is aware because many of the businesses employing people on the minimum wage cannot survive.

Only when an order is signed will the minimum wage be reduced. Employers should be conscious that they would be in breach of employment legislation if they unilaterally reduced the minimum wage without discussion or consultation with their employees, a fact which must be highlighted. While the minimum wage is €8.65 per hour, employers must pay €8.65. People should not be shy about reporting instances of abuse to the National Employment Rights Authority.

No Government is keen to come to this House and reduce the minimum wage. However, it has been done for the reasons I have outlined and for the reasons outlined by my colleagues on this side of the House. We must be honest. This process is to ensure that people can find work at the lower rate of pay in very difficult times in this economy and for their families.

I wish to share time with Deputies Clune, Damien English, Paul Connaughton and Richard Bruton.

I support the motion and I commend Deputy Penrose for bringing it forward. The Minister of State, Deputy Kelleher, spoke of making decisions with regard to competitiveness. Government's role is to strike a balance and find a fair solution. Competitiveness for the small employer can be dealt with in two ways. First, there is the crude measure of cutting the minimum wage. The other is to eliminate the employers' PRSI contribution of 8.5% on employees' earnings which would save €30 a week per employee on the minimum wage for each employer while the Government would save €40 per employee a week. Both measures benefit the employer; the first penalises the employee.

How can the Minister of State expect someone to live on €297.62 a week? Under the old minimum wage rate of €8.65 an hour, an employee on a 40-hour week would earn €346 a week, €17,992 a year. On top of that, he or she would pay an income levy of €359.84 a year. The new rate will see a reduction in weekly pay of €41.46, or €2,080 a year, with the gross wage coming to €306 per week, €15,912 a year. In addition, a minimum wage earner will pay €435.76 on the universal service charge and an extra 21%, €75.92, in tax. Not only has the minimum wage been reduced, the amount of tax minimum wage earners pay has increased.

There is a contradiction in the Minister of State's claim that those on the minimum wage will not remain on that wage level. Many of them are women in temporary employment in cleaning and the hotel trade. They will not come off the new minimum wage quickly.

We all agree employers have difficulties with rising costs. I had that experience over many years as a self-employed accountant. A measure, however, must be found that does not penalise the less well-off. A single person on the minimum wage will more than likely not qualify for either a medical card, rent supplement, because they work more than 30 hours a week, or fuel allowance. Under the old rate, the margin between jobseeker's allowance and the minimum wage averaged at €143 a week. Under the Government's new rate, the difference will be €110 a week. The Government should be putting in place measures which will encourage people to go into employment. Instead, it has come up with a proposal that if a jobseeker gets a job that pays the minimum wage, he or she will actually lose many social welfare supports which may not be to his or her benefit with little difference in income rates.

The Minister of State pointed to minimum wage rates in other countries. However, Ireland has its own standards. Would the Minister of State be able to live on €297 a week? It would be a good effort if all Members, once a year, tried to live on the minimum wage for one week. If that happened, I am sure the Minister of State would not be introducing this proposal.

The Minister asked where the Opposition parties would find budgetary savings. The reduction in the minimum wage actually makes no savings for the Exchequer. All it does is further penalise the less well-off and create a greater social wedge. Yet, the Government had no problem putting €40 billion into the two failed entities of Anglo Irish Bank and Irish Nationwide Building Society. We also need to know when the Minister for Finance first learned about the €40 million AIB bonus package. His road to Damascus conversion yesterday to get the AIB board off the hook does not ring true.

I commend the motion to the House. I hope the Government will see some rationale and common sense on this matter and reverse its decision on the minimum wage.

Considering there was not much time last week to discuss the reduction in the minimum wage rate, I am glad to have a further opportunity to focus on this measure. It makes no sense for the Government to reduce the minimum wage by €1 per hour as it does not save the Government any money for balancing the budget. Decisions in this area should always be taken to encourage people into work and off welfare, as they will always be better off in employment.

Fine Gael proposed in its budget submission that the minimum wage should not be cut but the 8.5% employer's PRSI contribution should be abolished, a more cost effective measure for employers. Such a measure would be more imaginative than taxing the 4% of workers on the minimum wage. Those budget cuts last week that focused on the lower paid will only take money out of the economy, leaving less discretionary income to be spent on activities such as going to the cinema or going out for a bite to eat. Instead of providing an economic stimulus, the Government has provided a disincentive for people to spend money.

Fine Gael also proposed the reduction of the VAT rate from 13.5% to 12% to encourage more consumer spending or for people to make home improvements such as house extensions. These kinds of imaginative and creative measures will get the economy going again and keep people in work. The Government, however, has done the opposite.

I was disappointed there was no focus on the joint labour committee's employment regulation orders. This is an area that needs urgent assessment rather than a nodding commitment to tackling it some time like that given to dealing with nursing home regulations. We have heard all the arguments against these orders but they actually make it expensive to employ people and run a business in sectors including agriculture, hotels, retail groceries, security, tailoring, shirt-making and contract cleaning. The JLCs and employment regulation orders are making it difficult to operate businesses and employ people, not the level of the minimum wage. The focus has been on the wrong area. It should have been on the JLC and employment regulation orders in an effort to get business costs down.

I welcome this important motion and thank Labour Party colleagues for tabling it. The key message is that it is a statement of core values. What a legacy the Government will leave behind. First of all it breaks the country and then it leaves people in dire straits. Families are panicking and wondering how they will pay their weekly food bills. On top of all that, as a final stroke, the Government hits the minimum wage. It had done well on that previously, with our support because we all bought into this statement of core values. The minimum wage is about fairness and setting a mark in order to make it worthwhile to work. If the minimum wage is cut by another euro per hour, however, it will not be worth working. People also face the cost of getting to work, even though the Government has failed in many areas of public transport. Deputy Penrose and I represent rural areas where many people cannot just hop on a bus to work. Even where buses are available there are no free travel passes, so it costs money to get to work. The Government should make it worthwhile to work and thus, wages must cover costs as well as providing a decent amount of money to live on. That will not happen if the minimum wage is cut further, however. The cost of living in Ireland is not as cheap as in other countries.

Groups that attended Oireachtas committees to seek a reduction in the minimum wage never proved their case. We asked them to tell us honestly whether this was about trying to drive other wages down, because the minimum wage is often used as a benchmark, but they never came back to us with any answers. Last week, Ministers quoted documents which showed that if the minimum wage was increased by a certain amount there would be a corresponding loss of jobs. There is no conclusive proof that jobs will be lost by leaving the minimum wage as it is, however. If there were, we would have a proper discussion about it, but there is no proof. It is not good enough to make such incorrect statements.

What is the real history of this matter and who made the decision to reduce the minimum wage? Fianna Fáil TDs will be campaigning in the next couple of months saying that Europe or the IMF did this. They will say: "Sure, those boys in Europe are awful. We'd no choice". They will blame everybody else but that is not true. When we met Commissioner Ollie Rehn one of the first things he mentioned was the minimum wage. I found that very strange and wondered what relevance it had to our meeting with him. He said: "We'll have to address the minimum wage and will have to look at that". I asked him why he was singling out the minimum wage and he said it was not his call but something that we would have to look at. He said it had been discussed within the Government's plans. He said it was not his idea but it had obviously been put into his head by the Minister for Finance and other Ministers. It was the Government's idea to do this because it failed to tackle the cost of business across the board.

It failed miserably. I thought the Minister of State, Deputy Kelleher, would make a change on this. He said he would tackle it. On many occasions during Question Time, we discussed red tape, insurance costs, banking charges, telecommunications and PRSI, all of which are heaped onto businesses. All of these costs were discussed with promises to cut them by 25%, but it never happened. The four year plan contains more wishy-washy statements about tackling competitiveness, while all the Government is doing is driving down the minimum wage. Fine Gael presented an alternative option — if the Government really wanted to reduce business costs while protecting employees, it should be done by reducing PRSI. It is the same difference because it reduces the cost to business of employing staff. Seemingly, that is what the Government wanted to do, but I do not believe it.

In other budgetary measures, the Government proved that it comprises a mean bunch of people. Who else would go after a blind person or hit carers, another group the Government failed to address during the good times? The same logic flows from the minimum wage cut, which is a mean attempt to take money from people at the lowest end of the jobs market. They do not have much money, yet they are working in some of the toughest jobs: behind a bar or in a restaurant, working weekends, as well as split shifts and double shifts, just to make a living. Nonetheless, they get whacked by this Government at the last minute. It is very wrong.

The Government has made a serious mistake in reducing the minimum wage. I compliment Deputy Penrose on his speech. He is correct in saying that this does not make any political or economic sense. It is wrong to attack people on low incomes. I am afraid that the Minister will push more people onto social welfare because it will be better for them than to work. We cannot have a situation where it will not pay those on very low incomes and in receipt of rent allowance to work. Work should pay in this country. What is the thinking within the Minister of State's Department? Approximately, 465,000 people are unemployed.

According to the recent CSO figures, there are 299,000.

There are more than 400,000 people unemployed.

The live register is different.

On the live register they are still unemployed.

I am just trying to be helpful to the Deputy.

That is grand but I will be helpful to the Minister of State also. The Minister of State, Deputy Conor Lenihan, said earlier that this seems to be very good news for the Government because the figures are down. He forgot to mention the number of graduates and others who have emigrated. In my own county and town, I have noted the number of young people who will not be home for Christmas. This is the first time in recent years that we have seen young people having to leave the country because there is no work for them. More young people will be graduating in June, yet there will be no work for them either. I hope there will be places for them to go to because there will be no work in this country.

I would like the Minister of State to answer this question — with that number of people on the live register, why did more than 5,000 people receive work permits to enter this country last year? Was that done to push down the minimum wage? Even if the Minister of State's unemployment figures are correct, why do we need to bring in people to do work which can be done by Irish workers? The Department should examine this matter.

Deputy English is right to refer to stealth taxes, which have been discussed by Opposition Members as well as Fianna Fáil TDs. The Government has lost control of local authority regulation. There has been no respect for business for the past 20 years because the Government thought builders and bankers would keep the country running, but that was never going to happen. We forgot where we started in small businesses, which constitute the backbone of the economy. Nevertheless, small businesses have been attacked by the Government through over-regulation and attacked by local authorities through stealth taxes. Every time local authorities wanted an increase in water charges, rates or other levies, they thought they could impose it on the business community and they did so. I am surprised that over the years the national chambers of commerce did not take a case against the Government and local authorities because that section of the community was paying rates yet getting nothing for them.

Small businesses pay rates, water and refuse collection charges. A new regulation now seeks to control where publicans put their empty bottles. There are to be more levies and regulations over where bottles are to be disposed of. Publicans are hardly able to keep the pub doors open, not to mention pay their staff and taxes, yet somebody comes along with a new regulation stipulating that empty bottles must be disposed of in bags and buried for Deputy John Gormley and the Green Party. The sooner we get rid of this Government, the better because it has destroyed business and the country generally. The sooner the Government leaves office, the better because this green energy campaign is costing jobs and money in rural Ireland.

Debate adjourned.