David Chance: Now is the time to push for a living wage
THE Government will have to spend billions of euro to help Irish firms survive the Covid-19 shock. If it wants to avoid a re-run of the divisions caused by the financial crisis, it needs to build a fairer society – and the best way to do that is to push for a “living wage”.
It is now clear that a great deal of the funding for companies will have to be made in the form of grants as heavily indebted businesses simply will not be able to repay loans.
In return, the State should demand an income floor for workers which would allow them to afford the essentials rather than a “minimum wage” economy for some and a high wage for those lucky enough to work in the multinational sector, for example.
Anti-poverty campaigners, trade unions and progressive think tanks here have long advocated such a move, but the idea is no longer just the preserve of those on the left and has entered the economic mainstream as a means of boosting productivity and moving economic growth higher.
Of course, it would be unreasonable to expect shellshocked businesses to pay more at present, but a commitment to do so over time would help avoid another rise in inequality arising from the Covid shock which is hitting the young and poor hardest, less than a decade after they were scarred by the financial crisis.
Campaigners for a living wage in Ireland calculate the current rate for a wage that would enable full-time employed adults without dependants across Ireland to afford a socially acceptable minimum standard of living is currently €12.30 an hour.
It is probably no surprise that advocates include the Vincentian Partnership for Social Justice, the Unite and Siptu trade unions, the union-backed Nevin Economic Research Institute and TASC. But its appeal is broader.
Jim O’Neill, former head of Goldman Sachs Asset Management who was appointed commercial secretary to the Treasury by the Conservative government in Britain, believes a shift to a living wage is an essential tool to lift investment and productivity.
In an analysis late last year, Mr O’Neill noted that, despite record low interest rates and deep cuts to corporate taxes across the world, company investment had stalled.
“The problem, of course, is that without investment, productivity is not likely to increase. And without productivity growth, there is little reason to expect sustainable wage growth,” he wrote. “Higher nominal wages for low-paid workers can boost real earnings, increase consumer spending and help make housing more affordable.”
If anything, the impact of the pandemic has reinforced his beliefs.
“Yes, I am very much in favour of what I wrote. And as a result of Covid-19, I believe we will move more into an era of stakeholder capitalism, in which more thought about many aspects of our business model will emerge, of which better wages are consistent with the piece I wrote,” Mr O’Neill told the Irish Independent.
That would mean changing the narrative in Ireland from one which regards a €350-a-week emergency pandemic payment as an undeserved boon for some workers into one in which we question why we are prepared to tolerate a society in which some people earn less than that for a full-time job.
It might not be an entirely unreasonable exchange either for companies which benefit from a 12.5pc corporate tax rate, the second lowest among the world’s richest nations who make up the Organisation for Economic Cooperation and Development.
Another big win for Ireland from a living wage would be to the tax system. At present, income taxes here carry the hefty burden of redistributing money to the least well-paid, which means the State – and Irish taxpayers – effectively subsidise the below-par wages paid by companies.
If the tax system did not have to do that, the burden on all taxpayers would fall.
It would also mean that in times of economic crisis, the budget could respond more nimbly instead of being tied to this kind of redistribution that is hard-wired into the social payments system and is very difficult to change.
Implementing a living wage over time would also represent a big gain for social cohesion as one of many issues arising from the financial crisis bailouts was that they favoured the global elite and the wealthy while inflicting heavy costs on those less fortunate.
We also need to keep in mind that those who will end up paying the tab for State spending to help the economy recover from the impact of the pandemic are those who will be hit hardest by its impact, among them younger workers who have worse prospects and more precarious jobs.
The pandemic will widen existing gaps. If you went into the coronavirus lockdown poor and disadvantaged, you are going to come out of it into a world in which you will be even poorer and more disadvantaged.
There are few societies that can cope with that experience twice in 10 years as Jeffrey Chwieroth, professor of international political economy at the London School of Economics, wrote last week.
“The relatively young in particular fear entering a world of starkly limited employment prospects and with the prime responsibility for repaying the public debt incurred in the crisis,” he wrote on the Vox economic think tank website.
“Many also ask why their governments are often such policy schizophrenics, oscillating wildly between ‘neoliberal’ fiscal strictures in good times and ‘crisis socialism’ in bad times.”
The idea is no longer just the preserve of those on the left
Another big win from a living wage would be to the tax system