Sinead Pentony: When the Report of the Independent Review of EROs and REA Wage Setting Mechanisms was published on Wednesday, there was a general view that it’s a well researched report that puts forward a set of evidence-based recommendations that aim to “....create a framework within which greater efficiencies and necessary adjustments in payroll costs can be achieved in the affected sectors”. While I may not agree with all of the recommendations, there are certainly plenty of sensible proposals that will lead to benefits for all stakeholder groups. However, IBEC were obviously disappointed that it did not call for the abolition of the JLC system and said that the Review “...was totally out of touch with the need to create and sustain jobs.”
The following day (Thursday), the Minister for Enterprise, Jobs and Innovation published his own set of proposals that aim to pursue the agenda for “radical overhaul”; many of which are at odds with the carefully researched recommendations in the Report. Again, the message was about creating and sustaining jobs. However, the Report makes clear the finding that the balance of evidence does not support the assertion that lowering pay will lead to the creation of more jobs. The problem in the domestic economy is lack of demand - not competitiveness - and the wage cutting agenda will only exacerbate the problems in the domestic economy further. The Global Competitiveness Report 2010-2011 identified our small market size; poor infrastructure; macroeconomic instability and dysfunctional financial markets as factors inhibiting competitiveness.
In the absence of any serious efforts to address the full range of costs of doing business in the domestic economy – commercial rents, waste charges, professional fees, energy costs and the price of food - the focus is firmly on the easy target – low paid workers. The only protection many of these workers have, is the JLC system, but even within this system there is widespread abuse and derogation of responsibilities on the part of the employers. The NERA report shows that only about 20 per cent of investigated firms were compliant with the rules.
In TASC’s Submission to the Independent Review we identified the need to monitor, evaluate and review low paying sectors on a regular basis, which should be used to identify the labour market and competitive impacts of the various wage floors and the equality and poverty impacts of these wage floors. This is how evidence-based policy making works.
In Budget 2011, the budgetary measures included a cut in the minimum wage and the abolition of Section 23 tax reliefs for those renting private accommodation. The former is due to be reversed in the coming weeks. However, the implementation of the latter was postponed, following concerns about the impact of ending the reliefs and that an impact assessment was needed to ascertain the effect of phasing out such reliefs. The Programme for Government (p.23) is also committed to publishing cost-benefit analyses for major infrastructure proposals and “tax expenditure”. All of this points us in the direction of evidence-based policy analysis and formulation, albeit belatedly.
The labour market is central to the economy and any changes therein must be carefully considered. The government now has a well-researched 117 page report on the various wage setting mechanisms. Why would it not apply the same level of rigour to this aspect of the economy that is being applied to other parts of the economy? And why would it ignore the findings in this report in favour of anecdotal assertions that are being portrayed as fact? We must do our best to ensure that the facts win out over fiction, in the interests of evidence-based approaches to policy making and in the battle to protect the incomes of low paid workers