SFA calls for 3-year freeze to the minimum wage

As the Low Pay Commission prepares to deliver its recommendations to the Government over the summer months, the Small Firms Association (SFA) calls for the National Minimum Wage (NMW) to be frozen at its current rate for 3 years...

AJ Noonan, Chairman of the Small Firms Association, said “Small businesses truly are the engines of our economic recovery.  We have a vital role to play in terms of employment generation, especially in regional towns and villages and rural Ireland.  Artificially increasing labour costs will not only dampen this recovery, but will ultimately lead to both the prevention of job growth and to job losses.”

“The SFA has welcomed the establishment of the Low Pay Commission and its mandate to make independent, evidence-based recommendations on the National Minimum Wage. The National Minimum Wage Act 2000, clearly sets out the factors which should be assessed as part of any review, namely inflation; movement in the earnings of employees; level of unemployment and employment; national competitiveness and relevant exchange rate movements.  On the basis of an assessment of these indicators, there is no rationale for increasing the NMW at present,” AJ Noonan continued.

Furthermore, the SFA has made the case for maintaining the NMW rate for a 3-year period “in order to give small businesses, which are just starting on the recovery path, certainty over their labour costs.  This would also ensure that job creation efforts are realisable for the low-skilled workers and young people still on the live register who need an entry point into work and upskilling from where they can develop their skills and increase their wages relative to their productivity levels.”

AJ Noonan stated “looking at the profitability of small businesses, it is clear that they will have grave difficulty absorbing labour cost increases without productivity gain. From an examination of the 2012 average gross (pre-tax) profits in small businesses in the sectors with the majority of NMW workers, it is clear that they would not be able to offset NMW increases against profits, as in micro firms (1-10 employees) which are 84% of all businesses in Ireland, average pre-tax profits in Accommodation and Food businesses were €14,549; in Retail were €21,470 and Other Services were €16,582.  This means that they would have no choice but to offset NMW increases against reductions in hours or jobs, job growth or capital or skills investment.”

He added “A higher minimum wage would have a disproportionate impact on small businesses outside Dublin, where the NMW represents a higher proportion of the average wage. Given the urban/rural imbalance already being experiences in the recovery, this is of particular importance.”

AJ Noonan stated “It is the SFA’s firm conviction that it is imperative for the competitive position of Ireland that wage levels are decided in a competitive labour market and are not constrained by an artificial legal instrument such as the minimum wage.”

He concluded: “An ill-considered review of the National Minimum Wage will cost jobs.  Small businesses are taking tentative steps to recovery and in many cases growth.  The job of Government is to make sure these steps can be taken with confidence and with the necessary supports in place.”

Article Published: 05/05/2015