The amount of money people need as a “living wage” has fallen for the first time in its history. Falling energy prices and extra Government supports during the energy crisis have seen the calculated amount fall from €14.80 an hour last year to €14.75 this year.
The Living Wage Technical Group (LWTG) says the drop is principally driven by the impact of policy measures. The living wage is the minimum hourly pay required for a full-time worker, without dependants, to afford the goods and services that people have agreed are essential for enabling a basic yet decent standard of living.
Impact of Policy Measures
Dr Micheál Collins of University College Dublin (UCD) explained that the decline in the living wage is attributed to various factors. “A number of things like energy costs have gone down – last year they are down 16.5%. There are a number of areas where the cost of living has fallen alongside areas where the costs have gone up. When you put it together, the cost of living has gone up marginally by 1.7% comparing last year to this year.”
He further elaborated on the policy measures that contributed to the drop. “Other policy measures have kicked in – really temporary measures that the Government has been using. An increase in the rent credit and also those energy credits which are part of the drop in the cost of electricity. When you put those together then they are causing the living wage to fall slightly.”
Cost of Living Changes
The LWTG's calculation is evidence-based, building on budget standards research undertaken by the Vincentian MESL Research Centre at the Society of Saint Vincent de Paul (SVP), and reflects the real costs faced by employees in Ireland. The change to the annual living wage rate is determined by changes in living costs and income taxes. Over the past year, living costs have increased for eight areas of expenditure while they have decreased for seven.
The largest changes were increases in costs for education, which were up 6.6%, housing gas up 6.2% and car insurance up 4.5%. Household energy costs have dropped by 16.6%, health costs by 4.8% and the cost of household services by 4.0%. However, food costs rose another 1.5%, on top of a 21% increase the previous year.
The largest cost increase was rent, up by €12.28 per week to reach €210.60 weekly. Tax changes in the last budget, particularly the Rent Tax Credit, played a big role by increasing net incomes of lower-paid workers. The combined amount of income tax, USC and PRSI paid by a living-wage worker dropped from €71.58 to €61.16 weekly, mostly driven by the Rent Tax Credit.
The Gap Remains
Robert Thornton, LWTG member and research manager with the Vincentian MESL Research Centre, highlighted that the latest living wage calculation is “nearly identical to last year, despite higher costs in areas like food and rent, because of a combination of lower energy costs and tax changes in the last budget”. However, he emphasized that “There is still a significant gap of over €2 between the evidence-based living wage of €14.75 and the current national minimum wage of €12.70.”
A Historical Perspective
Dr Micheál Collins, a UCD academic and also a LWTG member, stated: “This is the first time the living wage has fallen since the technical group started calculating it a decade ago. Recent policy measures have had a clear impact on the rate – without the Rent Tax Credit, the hourly rate would be 50c higher; without the electricity credits the rate would be 20c higher. Although small, the decreased hourly rate shows the effects when the Government takes steps to make expensive goods and services more affordable.”
A Look at the Bigger Picture
Based on data from the Survey of Income and Living Conditions in 2017, 25.3% of employees earned less than the 2017 living wage of €11.70. Average hourly earnings in 2017 were €22.19 with median earnings at €17.50. One in five full-time workers in all household types earned less than the living wage. The Government has pledged to introduce a national living wage to replace the minimum wage in a phased basis until 2026, with the living wage set at 60 per cent of the median wage in any given year. Since January, the national minimum wage is set at €12.70 per hour. Median earnings in 2022 were €41,823 a year, according to the Central Statistics Office.
The Living Wage Technical Group (LWTG) acknowledges that, despite the drop, a significant gap persists between the living wage and the minimum wage, emphasizing the continued need for policies that address affordability and support lower-income workers. The group remains committed to monitoring and updating the living wage, ensuring that it accurately reflects the evolving cost of living in Ireland.
A Future for the Living Wage
The fall in the living wage may offer a glimmer of hope for workers struggling with rising costs. However, it is essential to remember that this drop is largely attributed to temporary government interventions. The living wage calculation is still significantly higher than the current national minimum wage, highlighting the ongoing disparity between what is considered a decent standard of living and what many workers are currently earning. While the government's efforts to address affordability are commendable, it is crucial to implement long-term policies that ensure a sustainable living wage for all workers, creating a more equitable society in Ireland.
