Other hidden costs of the minimum wage

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

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

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

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

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

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

Posted in: Labour market

Tagged with: Wages

Dr Nat O'Connor     @natpolicy

Nat O’Connor is a member of the Institute for Research in Social Sciences (IRiSS) and a Lecturer of Public Policy and Public Management in the School of Criminology, Politics and Social Policy at Ulster University.

Previously Director of TASC, Nat also led the research team in Dublin’s Homeless Agency.

Nat holds a PhD in Political Science from Trinity College Dublin (2008) and an MA in Political Science and Social Policy form the University of Dundee (1998). Nat’s primary research interest is in how research-informed public policy can achieve social justice and human wellbeing. Nat’s work has focused on economic inequality, housing and homelessness, democratic accountability and public policy analysis. His PhD focused on public access to information as part of democratic policy making.