POLICY makers across developed economies have struggled to lift wages since the great crash – a big factor in the slow return of inflation. While it suits many employers, it’s seen as one reason overall growth remains dangerously sluggish.
Spain’s decision to hike its minimum wage by 22pc, even though unemployment remains high, signals a jump in the minimum wage that’s ignited a debate there about how it will affect the economy.
In Ireland, the government first introduced a minimum wage in 2000, setting it at IR£4.40 (€5.59) per hour.
Last year the rate was €9.55 per hour, but from January 1, 2019, it increased to €9.80, on the back of recommendations from the Low Pay Commission.
This works out at a monthly salary of €1,656.20 for employees on the rate. The increase will benefit 151,800 workers, according to the Department of Social Protection.
Controversially, back in 2010, with the country in the grips of recession and the Troika dominating economic policy making, the then-Fianna Fáil led coalition cut the minimum wage by €1 to €7.65.
However, the following year a Fine Gael/Labour government reversed the cut.
As in many countries, the minimum wage in Ireland differs from what is the so-called living wage, an unofficial measure of the income that allows an employee a basic but socially acceptable standard of living.
The Irish living wage was set at €11.90 per hour last year, 25pc higher than the minimum wage.
Looking at other European countries and, as at January 1 this year, 22 of the 28 EU member states had a minimum wage in place, with monthly salary variations across the countries, from €286 in Bulgaria to €2,071 in Luxembourg.
Ireland is at the higher end of the scale, although different standard working weeks and other variables between countries make direct comparisons difficult.
Compared with January 2009, minimum wages were higher in this year in every EU member state that has a national minimum wage, except in Greece, where they were 16pc lower.
Returning to Spain, and the socialist government says the increase will bolster spending and hiring, giving legs to Spain’s expansion.
But opposition lawmakers and wary business executives say any additional pep to the economy won’t be enough to offset the thousands of jobs they expect to be destroyed because companies can’t afford the jump in costs.
The increase to €1,050 a month came into effect at the start of the year and directly affects about 8pc of Spain’s workforce, or 1.2 million employees. Its effects are already rippling through Spain’s economy, forcing companies to respond.
Spain’s central bank estimates the wage jump could cost 125,000 jobs this year.
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