Many low-income/minimum wage earners will not be better off if their take-home wage is increased in accordance with the measures announced in the budget instead of being increased through a simple adjustment in the current 32-year-old COLA mechanism.

The social partners agreed way back in 1991 on a list of essential items necessary for a minimum wage earner to have a decent living.

The increase in prices year after year of these items was added to the wage and in this way the purchasing power of the wage was guaranteed.

This arrangement, known as the COLA, was inflation proof and, at the same time, contributed towards relative stability in industrial relations.

It was unpredictable in those days that the passage of time would render this list of items obsolete, as living patterns would change dramatically over the years. In the past two years, workers frequently complained that they could not make ends meet.

But the cause was not inflation as many believe, since the COLA catered for this. It was obvious that the time had long come for the list of essential items to be revised.

Last February, the government set up a Low Wage Commission (LWC) to advise how the minimum wage could be increased to ensure a decent wage for  minimum wage earners. It was earnestly expected that the LWC would do the obvious, that is to review present day social conditions and living patterns and recommend an updated list of essential items.

Instead, the LWC and the government have side-stepped the issue and introduced a mix of numbers as shown in the attached chart; a short-term patchwork based on what could be arbitrary figures.

Line 2 shows increases in the minimum wage, but we do not know on what criteria these were computed. Moreover, all the figures in lines 4 to 7 are based on the “obsolete assumption” that workers are still buying the same items that they did in 1991.

How the take home minimum wage will be increased from 2024.

These inputs in the equation disadvantage the workers. Because of this method, the figure of the take-home pay in line 8 is necessarily distorted towards a lower figure, but the meagre increases in line 2 will not compensate for this distortion.

It is no surprise, therefore, that workers feel that they have been short-changed by this method.

Another method, different from the above, but one which is more just and which remunerates the worker more fairly for his labour, is one that takes into consideration a wider scope of essential items that have now become an absolute necessity for a decent living since 1991.

There will be a variance between the two methods. The LWC no doubt is aware of this, but unfortunately it has chosen to adopt the one which is less favourable to the worker.

In other words, to put it bluntly, the minimum wage earner would be better off if he could opt to renounce to the increases in line 2 in return for a cost-of-living adjustment based on a fresh list of present day essential items. 

Moreover, the increases in line 2 would be diluted considerably as follows: in 2017 the government had introduced incremental increases to the minimum wage that saw workers who remained with the same employer for one year get a €3 bump in pay and, in 2018, those who remained with the same employer for two years got another €3 increase. Under the new adjustments, this €6 bump will no longer be given.

It is no surprise that workers feel they have been short-changed by this method

Regarding COLA: it is often stated in the media and elsewhere that this will cause prices to increase.

Let us not forget that the COLA is not an increase in wages but a reimbursement, paid in arrears, of the increase in prices registered in the previous year. Let us not tamper with this mechanism to the detriment of the worker. 

The position now is that the government and the social partners are locked in an agreement binding up to 2027; an agreement that does not look further into the future beyond this date.

Nobody knows what will happen after 2027, except that prolonged rounds of litigation between the social partners are very likely to occur. I am sure that in the near future the increases in line 2 will be challenged.

What we now need is simply to retain the COLA as a concept but with a revised list of essential items.

The worker would benefit further if one-time hand-outs such as the additional COLA, refunds and other titbit appeasements are not distributed indiscriminately to all including those who do not really need them but are spread out to the lower ranks of workers in the form of a quarterly permanent allowance (similar to the children’s allowance) so that these workers will get a bigger slice of the social cake.

In addition, those who are about to retire would benefit from a better pension and those who are planning to start a family would qualify for a better home loan.

These enhanced targeted payments will moreover help to narrow the widening gap between the rich and the poor.

The sooner we attend to these matters the better: “For the labourer is worthy of his wages.”