I congratulate the Technical Group on tabling the motion which gives us the opportunity to debate this very important topic. Reference was made to a leaked IMF document. I point out that what the previous Government agreed with the EU-IMF is itself a public document. It was agreed between the EU-IMF on one side and the previous Government on the other that this matter would be studied, that the study would be complete within six weeks and that the Government would give attention to that study.
If Deputy Keaveney thinks the reference by the Technical Group motion to the Labour Party is a new low in debate in this House, all I can say is that he is pitifully unaware of some of the carry-on of the Labour Party when it was in Opposition in recent years. Moreover, if these measures were being proposed now by a Government which did not contain the Labour Party, this House would be like the Wailing Wall of Jerusalem. In fact, we would hear the wails in Jerusalem.
In the interests of balance, I must agree with one point made by the Minister. I agree that the present Government did the right thing in reversing the minimum wage cut. The previous Government made two serious mistakes in regard to the minimum wage, first, by cutting it, because that did not work and did not achieve what it set out to achieve, and, second, in the way it was done. I say this because it is of clear relevance to the present debate for the simple reason that the very same people who approached us and made a case for the cutting of the minimum wage are the ones who are coming back now to make similar arguments for the dismantling of the JLC scheme. They are almost the same personalities making literally the same arguments.
The previous Government was seduced and entertained by the arguments that no sooner than the ink would be dry on the legislation reducing the minimum wage by €1 an hour than there would be a rush of employers to take tens of thousands of people off the dole queues. Of course, that did not happen. While there was a rush, unfortunately, it was a rush to the bottom.
There have been media reports referring to the women staff in the Davenport Hotel who took a case because their wages were reduced, even though they had been employed before the changes came into force. I can tell from my own constituency clinics what happened at the time the Government introduced the new minimum wage. Many people, including migrant workers, young people, women and those who were not well educated — I say that in no condescending way — told me their employers were putting pressure on them. Employers threatened to get rid of part-time workers unless they agreed to the new minimum wage, although they were employed before its introduction and were supposed to be entitled to the old minimum wage. They were told there were thousands of people prepared to do their jobs, and they were subjected to all sorts of pressure and displacement threats. It was an immediate race to the bottom.
The Minister's claim that the new regulations he is introducing will not affect those already in the system is especially risible. Despite minimum wage legislation which is clear, precise and specific and which everyone can point to, the new regulations would have created a two-tier system. If it was impossible to make a two-tier system stick in that regard, how much more impossible will it be in the more amorphous situation we are talking about here? It is unthinkable.
The traditional view was that wage floors imposed on lower wage workers had a terrible effect on employment. The latter view, supported by much study, is that a binding minimum wage set at a low level, as it is in this country, will have at most a marginal negative effect on employment. The Duffy Walsh report cites various studies, such as that by O'Neill, Nolan and Williams in 2006 and the 1995 study from Card and Krueger of Princeton University, and there is much additional contemporary literature that all comes to the same conclusion, namely, cutting low wages or refusing to put a floor on a low wage sector has at best a minimal impact on job creation. In some cases, in fact, imposing minimum wages or putting a floor under wages actually has a positive effect on employment, which is the conclusion of the Duffy Walsh report and is supported by practically all modern literature on the subject. There is no doubt that people in the JLC sector in this country are low paid, by any standards. For the most part, they are paid an average €10 an hour. That includes people who get time and a third, which rate, in the overwhelming majority of cases, applies to Sunday work or to those who get extra pay because they are more experienced or skilled. If anybody has any doubt about this, let them open the Duffy Walsh report on page 29 and look at tables 4.4 and 4.5. One table deals with wages on a weekly basis for people in the JLC sector as opposed to others in the private sector; the other deals with hourly rates. One can get a distorted picture dealing with weekly rates because some of the people in question are part-time, do not work a full 39-hour week and therefore their wages show up as being lower. To rectify the situation, the hourly rates tell us those people are paid roughly 40% of what the private sector in general is paid.
One does not even need to look at the Duffy Walsh report because one can look at the latest figures from the CSO, produced last weekend. These looked at average earnings throughout the economy which, apparently, are now €674.56 per week, down from €709 some two years ago, a considerable drop. In the public sector average earnings were €871.09 per week; in the private sector they were €602.85. What is interesting is that the CSO looked at different sectors within the private sector. Surprise, surprise — in the accommodation and food services sector, the very sector where the vast majority of workers are JLC workers, average wages were €288.63 per week. We are talking about the very lowest waged people in the economy.
I have a question for the Minister, Deputy Bruton. Does national salvation lie by cutting these wages even further? Are the wages of those people who are barely eking out a living really such an obstacle to national recovery? Would reducing them open the floodgates to job creation? There is not a scintilla of evidence to support any of those propositions.
However, there are important demand consequences, as was mentioned. We are dealing here with people who are at the very bottom of the wages rung, who have to spend every cent they earn in order to survive from one week to the next. They spend all their money within the domestic economy. It follows, as night follows day, that if there is a cut, resulting in their earning less money, they will have less money to spend in the domestic economy. The jobs and livelihoods of people such as shop assistants etc. who depend on these people spending their money will suffer. Jobs will be lost. The Duffy Walsh committee suggested the figure in question would be approximately 10,000. I do not know the statistical evidence for that but suspect it may understate the situation. The reason tens or hundreds of thousands of jobs have been lost in the domestic economy is that domestic demand has fallen catastrophically. It follows that if one further reduces domestic demand by reducing wages further demand will fall even more and the consequences will be more of the same — more unemployment, less tax revenue and more people dependent on social welfare, a system that is creaking at the seams. There will be more welfare traps. It will become less attractive for people to go to work and more attractive to stay on welfare simply because people will not be able to afford to go to work if their wages are cut by much more.
The issue of Sunday premiums is a total myth. People telephone my office and write letters and e-mails claiming people are getting double time on Sundays. The JLC for the main sector of people who work on Sundays was recently changed, without any ado, very quickly and efficiently. The time premium was reduced from time and a half to time and a third. That is the position for the vast majority of people who are paid extra for working on Sundays — time and a third. Most of those people are on €9 an hour. I know a few of them — they now get €3 an hour extra. Let us say they work four hours on a Sunday — that is an extra €12 before tax. Will interfering with or taking that away destroy the economy? In 1993 the British Government decided to abolish Sunday premiums but this action did not create a single solitary job, as all the studies show. That is the reality.
I utterly reject what the Minister stated about the Organisation of Working Time Act 1997. We are told there is legislation which covers this matter, namely, that Act. However, with all due respect, there is a fundamental difference between the JLC system and the legislation of 1997. If employers do not meet their obligations under a JLC, then the National Employment Rights Authority, NERA, is there to enforce them. On the other hand, if an employer does not meet his or her obligation under legislation it is up to the individual who may be vulnerable, perhaps young, a migrant or a part-time employee, to take on the employer. It is an impossible contest but that is the shift being made here.
Why do we have JLCs in the first place? The reason is that collective bargaining was not available in those sectors. Now we are reversing the whole process, sweeping away what was put in place of collective bargaining even through collective bargaining is still not available. That is what is happening throughout the Minister's proposed additions to the Duffy Walsh report. I do not accept them.
The same is being tried in regard to extra pay for more experience or more skills. Do we expect a migrant worker who works part-time and may be in an extremely weak position vis-à-vis an employer to go and negotiate this rate for himself or herself? Of course, people will say about Sunday working that under the legislation one can go to the Labour Court. However, it would take at least five years to get into that court — that is the reality.
Another proposal was mentioned by the Minister, although not today in the Chamber nor, indeed, in the public domain. In regard to the derogation clause he mentioned two points, the first that there is a derogation clause under the national minimum wage legislation, which is the case; the second that there is a derogation clause attached to national wage agreements. He did not make entirely clear in which direction he wished to go. The Duffy Walsh committee chose the derogation clause under the national minimum wage, where there is at least some protection for workers, and insisted on putting another restriction on it. If the Minister is talking about the derogation system being under the national minimum wage there will be no protection. The employer can say, "Look, can't pay, good night, that's it, no appeal". The whole system will be set at nought.
This is insidious and I am deeply surprised that the Labour Party is so blasé and casual about the matter.
