I welcome the Minister of State at the Department of Enterprise, Trade and Innovation, Deputy Kelleher, who will hardly be surprised to hear I will be opposing vehemently this legislation on the national minimum wage. There will be very little agreement from this side of the House. We will be explaining to him why it is absolutely disgraceful that those on the lowest pay rates should have their salaries cut again.
I want to raise an issue of some significance, on which the Minister of State may agree with me but do nothing. It pertains to section 1 which concerns the pensions of officeholders and politicians. As I am not seeking re-election, none of these matters will affect me in any way.
I want to raise a few important points. It would be very useful if members of the Cabinet read the debate on the Ministerial and Parliamentary Offices Act 1938, in which the reasons for paying ministerial pensions were considered. I will refer to some of them.
Let me refer to an issue with which one of the Minister of State's advisers will be very familiar. When he and I used to discuss matters across the table, he always argued with me that a pension was no more than a deferred salary. That is an important point. The term "pension" may be an incorrect description of what Members are paid in addition to their normal salaries when they return to the backbenches having been Ministers. I would be happy if the system of payment was the same as in the private sector. When people are promoted and act for a number of years in a significant capacity and acquire expertise, experience and knowledge, it should be recognised that their future contributions will be more enriched than they would otherwise be. In many places, in the public and private sectors, after a certain period people maintain some of the allowance or increase received when acting in a promoted capacity. In that regard, I ask the Minister of State, having considered the question of deferred pay and what was said in the initial debate, to say that what Ministers receive when they return to the backbenches should no longer be called a pension. It should be called something else. What is driving the population wild is that people draw a pension while still being paid a salary. It is almost an oxymoron. It is a contradiction in terms, but that is not to say there is no justifiable argument to support the case that people who are no longer in their promoted role but who continue to bring added value to their contributions in Parliament and elsewhere should not have this recognised. This has nothing to do with me and it will never involve me in any way, but it is an important issue.
The former Minister for Finance, Charlie McCreevy, introduced a new system of pensions for public representatives, whether they be Ministers, Taoisigh, Presidents, Deputies or Senators. Under the latest scheme, a person is not entitled to collect a pension until he or she is 65 years of age. I will use as an example the Minister for Health and Children who entered the Houses at 23 or 24 years of age. Whether one agrees or disagrees with what she has done, no one will deny that Deputy Harney has given excellent service. I disagree with many of her policies, but that is not the point I am making. She was elected by and has represented the people for whom she has worked for over 30 years. If she decides not to run in the forthcoming general election, she will have spent 30 or 35 years as an elected public representative and contested possibly 14 elections. If she had started under the new system, she would not be entitled to receive any payments until she reached the age of 65 years. I do not know what age she is, but I think she is in her mid-50s. I would like someone in the Cabinet to think about this and explain how it could be ethical, just, morally correct or good in a democracy. I had this argument with Charlie McCreevy before he introduced the system. I gave the example I have provided for the House because he knew about it as well as I did. I would say this in front of him if he was here: he had to concede that I was correct in my argument. He said he was off, that it would not affect anyone for many years into the future and that someone else could change it. These were his final words in our one-to-one discussion. We should re-examine the issue.
We are introducing legislation, much of which is necessary, to tidy various aspects in the payment of pensions. Undoubtedly, the matter needs to be dealt with, but we are leaving ourselves with a major problem. If someone in their 40s stands for election, spends ten or 12 years in the Houses and decides he or she is finished in his or her late 50s, there will be no prospect of an income until he or she reaches 65 years of age. Can someone explain to me why this is a good idea? Is it because Ministers are afraid to explain to the people that this is bad for democracy?
One of the many things for which I am held responsible is negotiating the arrangements for teachers elected to the Dáil or the Seanad. Effectively, they provide a safety net to enable them to go back to work as teachers when they leave the Houses. Every time the issue is raised with me, it is raised by journalists. I would like the following point to be drawn to the attention of the Cabinet. In a democracy citizens have duties and responsibilities. Every citizen has a duty and a responsibility to act properly. One of his or her duties is to vote in an election. The highest contribution a citizen can make is to stand for election as a public representative and represent the people in the national Parliament. If that is the case, should we not make it easy for them to do so? Rather than criticise or question the arrangements I negotiated for teachers, should we not demand that anyone elected as a public representative have the same level of protection as a woman who is breastfeeding? The jobs of such women must be held open for them; they cannot be sacked or denied promotion. Surely that is logical in a democracy. Should we not encourage people to engage in politics and ensure they can make a contribution without having to worry about their responsibilities to their family or children? However, this debate is not happening because the Government is afraid of the people.
Public representatives always take a hit at the end of the day. They are the only group in the entire public sector which is deprived of long service increments. Why is that case? What is the logic behind it? The Minister of State's officials should be well able to answer this point. Why was one group singled out? There are over 200,000 working in the public sector, but only one group was singled out for such treatment. Is there not something inequitable or unjust about this? If we are to get rid of long service increments, should they not be denied to everyone?
The service of members of the Cabinet should be recognised in their salaries once they leave the Cabinet and if they continue in politics. That should take the form of an allowance, not a pension. It should not be called a pension because that is not what it is. One cannot draw a pension and be paid to do the same job at the same time. There are variations, but we could use this as a base. I have deliberately picked something that seems to be remote from the Bill, but that is what happens when one passes such legislation. There are ripples in a pool spreading from an earlier decision. In many ways, this little section could have an impact on the quality of persons who will serve our democracy as public representatives in the future. I would, therefore, like the Minister of State to address this point. I will not table an amendment because it would not be listened to. It is clear that we are in a cul-de-sac in promoting public representation, democracy, involvement, participation and attracting fresh faces into politics and we will eventually pay the price.
These points are general rather than specific to the Bill. However, I am supportive of the points made by Senator O'Toole. The issue is being examined, but clearly it is not sustainable to have pensions at such levels. That is where reductions are necessary, but I fully agree with the Senator on the context set. He used as an example the Minister for Health and Children, Deputy Harney. These measures do not apply to me because I am a member of the class of 2002. The Minister of State, Deputy Calleary, is an example of someone who must reach 67 years of age before claiming any entitlements.
I am one of the people to whom Senator O'Toole refers in discussing the payment of increments. The system is unjust. Public sector pay levels must be cut because we cannot sustain current levels, but it is unjust that 23 individuals in the entire public service are denied increments. I would have no difficulty in accepting a lower salary — I advocate it — but it is unjust that just over 20 individuals are penalised. A senior Cabinet Minister who shall remain nameless said to me at the time that they did not consider being a Member of the Seanad to be a job. On that basis, the Minister questioned how increments could be paid. That is reprehensible and I said so to the person concerned.
I may not contribute to the debate on other sections, but obviously I support the Bill. While it is painful in the extreme that we must contemplate a reduction in the minimum wage, it is just to do so at this time. Consumer prices have returned to 2007 levels. The various joint labour council agreements and the minimum wage were set at a time when circumstances were very different. Circumstances now dictate that we have had to move to different levels. While these levels were set to protect employees in the past, the minimum wage, as it stands, and the joint labour council agreements set at the levels they are have become impediments to employment and certainly have become issues which threaten the sustainability of certain jobs. As a result, the minimum wage reduction is necessary — I know an amendment has been tabled — and as a result I commend the Bill to the House.
Much of what Senator O'Toole said is correct but we should probably have a wider debate on this issue. In Germany, people who lose their jobs keep a substantial portion of their income which decreases over time rather than going from one's full income to social welfare which represents an immediate massive and dramatic drop in income. Many people who have lost their jobs will not be able to draw down their entitlements from their defined benefit or defined contribution pension with the company for which they used to work, assuming the pension fund survived a company collapse. There is merit in having a longer discussion, taking into account people other than those mentioned in this section of the Bill.
The subject of salaries and the broader issue of encouraging a turnover of public representatives in the Dáil is slightly straying from the import of the Bill. I spoke at length on this issue a number of years ago, opposing the changes primarily because I view it as important that people can afford to retire from the Houses. It is critical that there is a turnover of Oireachtas Members during elections and that we do not have a situation whereby in years to come people may have full service. I entered this House at the age of 23 and this will not affect me either. However, when I am a citizen at some stage in the future, one should know that the Members of the Oireachtas representing one are there for the right reasons and not sitting on seats because they cannot afford to step down. This is something we should debate.
I know we speak a lot about electoral reform and the need to reform our institutions of State, especially the Oireachtas, including the make up and content of and numbers in the Dáil. A proposal to abolish the Seanad has been made by some political parties. This is fine, but the difficulty we have, as always, is that very few voices advocate for public representation. It is probably the one profession where there is no uniform voice defending public representation as a profession and as an important requirement in any democracy. Given the politically charged climate in which we live, we spend more time doing each other down rather than advocating the importance of having democratic accountability and the importance of having Houses of the Oireachtas that are representational and a mirror image of the public. It is a debate for another day but the views expressed by Senator O'Toole are important.
If in the future we have Members of Parliament who have given a lengthy period of service but who cannot draw their pension until they are 65, they may sit in the Houses of the Oireachtas for a number of years, taking up valuable space and not making a contribution because they cannot afford to retire. I have 18 years of service and I am 42 years of age. It will not affect me but in the future it will be very difficult to encourage young people who will have to make decisions early in life on whether they will stand for public office, whether they will be able to make a contribution and, more importantly, if the career does not work out or they decide to step down, whether they will be able to afford to do so. While those in all political parties and none speak about attracting young people into politics, I am quite sure that at the very least the present arrangements will not encourage people to stand for election at an early age. As Senator O'Toole is not standing again, he can be bolder and braver in saying what he believes.
We must be very conscious of the fact that the Bill also proposes a reduction in the minimum wage of €1 per hour and we must be sensitive to the broader public. However, the debate on public representatives is one for another day at another time. We should not rush headlong into abolishing the Seanad or Dáil and winding down democracy because it might be popular without thinking through the consequences of it. The same is true of diluting the representation which has served the country well given where we came from with Civil War politics and all that flowed from independence. The institutions of State have weathered many serious challenges since 1920 and 1921 and they have served the country well. We should not lightly abolish them without genuine concerted debate as opposed to thinking on the hoof. I take on board the views expressed by Senator O'Toole but I know he is not referring to it in the context of the Bill.
Sections 2 to 12, inclusive, agreed to.
We oppose this section which deals with the minimum wage. It was an easy option for the Minister to cut the minimum wage by €1.
I am sure the Minister of State is well aware of many of the regulations and complications that exist in the labour market at present, as this is his area of responsibility. Much concern has been expressed to him about various regulations, about the National Employment Rights Authority, NERA, and the complications they cause for employers. Much of this is very useful but I have had considerable representation from companies who say that even the most minor infringements on rotas and payments can create a huge amount of administrative hassle within a company. They feel it is much easier for companies which are not as rigid in their processes.
When looking at the issue of the minimum wage in particular, we must do so from the point of view of existing workers and the potential to create jobs. Where do the people on the minimum wage work? Essentially they work in retail and in the entertainment industry. They are the big sectors in which one finds people on the minimum wage, where people come in and out quite a lot. Other concerns have also been expressed to the Minister of State from within these sectors, such as with regard to double time and the huge cost to employers of taking on casual staff for weekends, which is when the retail and entertainment sectors operate mainly. They find their cost base is very high. There do not seem to be any solutions coming from the Government to deal with these issues. Removing €1 from the minimum wage has cut the income of those on it. Other taxation and social charges will also hit these people quite hard. A different approach could have been taken by the Government to help improve the efficiency of these industries, make it easier for employers to take on people and help them to control their costs while at the same time not penalising the very lowest paid workers in the sector.
It is difficult to understand why the Government is proposing this cut. Is it to create employment? Is it to penalise the most those in casual low-end labour?
The former, to create employment opportunities.
Is it to appease the Government's new masters in the IMF and the ECB? The issues of PRSI and the minimum wage are interlinked. If we are serious about creating jobs we should reward the entrepreneur who creates employment and we should entice people on low incomes to stay in work. The consequence of this Bill and the measures taken by the Government will be to drive people further into poverty. I discussed this issue with the Minister for Social Protection last night and earlier today and pointed out that the Government will make it more rewarding for people to remain on social welfare. I have always understood that Fianna Fáil preferred the Lemass economic model and that it was a pro-enterprise and employment party, although it has abandoned that model through its appeasement of the electorate over the past 13 years by throwing money at it. That has been itsmodus operandi and it has adopted the Bertie Ahern model of economics, which was to canvass from a lorry and throw money like confetti at different interest groups. Unfortunately, the rainy day has come.
The Minister of State has been very involved with employment and with workers and their rights in both his previous and current Departments. I do not believe that members of Cabinet sat down and reasoned out the issues when drawing up the four year plan and putting this Bill together. It seems to me a bit like the plan the Green Party had the morning it decided to announce its departure from Government. It seems like its members had a rush of blood to the head and decided to leave Government. A similar thing seems to have happened to Fianna Fáil and it has decided that because it cannot do A or B, it will do this. It has taken what it sees as the path of least resistance, but it is not the best path. Take, for example, the city of Cork and the nature of employment there. In many industries people are in lower end jobs, work on a casual basis, are predominantly young and come from a socioeconomic class which requires them to work. Their work is mainly manual, unskilled and often in the service industry. We are creating a new tier of poverty in this area. At the same time, we are telling employers a different story.
The Government has it back to front. The Minister of State is someone who is very much in touch with what is happening on the ground and I am sure he has got the message from the people. In the context of workers, the Bill — this section in particular — is not pro-employment. The Government funked political reform and did not have the bottle to go further. It took the path of minimum disturbance and took a certain amount from the Taoiseach and another amount from Ministers but forgot about their entourage and about what the political class has been doing for the past 13 years. Yesterday, the Minister for Finance, Deputy Brian Lenihan, came out and condemned social partnership. He sat at Cabinet and voted in the Dáil on all the social partnership agreements. If he was so disturbed by what was agreed, why did he not speak up or vote against the measures agreed by the social partnership? The problem with social partnership was that we forgot about the pillar that is the Houses of the Oireachtas and bypassed it. I am probably in a minority in my party on the issue of social partnership, but I believe it was good.
I saw the Minister of State on television recently speaking about what Fianna Fáil has done over the past two years in putting the people first. It never put them first and that is the problem. If we did an analysis of the position from 1997 to 2002, 2007 and 2010, we would see that the only maxim Fianna Fáil works from is based on how it will win votes. That is its maxim. Its maxim should not now be that it has done well for the country because it has put it first for the past two years. That is a terrible indictment of its standard.
Has Senator Buttimer ever voted against his party?
Yes, when I was a member of Cork City Council.
Senator Buttimer to continue, without interruption.
Thank God I was elected to this House. Senator Ó Brolcháin may talk about voting against Government or party, but he has sheepishly come in here with his colleagues time after time and pressed the "Tá" button because he cannot vote against them because he is too afraid to.
We are on section 13.
Fianna Fáil is either for the people and the national interest or it is not. However, it has not been for them. It has made a hames of the boom, its policies have come to the end of the line and the waterfall of money has dried up. Now, instead, the Government is a bit like Fagin in "Oliver!" and will have to pick a pocket or two. It will pick the pockets of the poor people on the minimum wage, those who need employment and whom we should be looking after.
The job of the Government is to protect the most vulnerable and those in need. Its job is social protection, but it has lost sight of that. At least a former Taoiseach, Charles Haughey, had the courage to say he would look after those on social welfare. I remember that when I was young he gave out free toothbrushes. Fianna Fáil is doing the equivalent of taking them back now.
The smile has gone from the faces of Fianna Fáil members now.
People cannot get their teeth sorted out either.
That is the point I am making. I love the term used in the title of the Bill, "financial emergency measures in the public interest". This Bill is not in the interest of workers who are most in need. Why did Fianna Fáil not bring in real reform on budget day? Senator Boyle spoke last night about the political class, but why did the Government not introduce real reform of the political class in the budget? Instead, it has decided to cut the minimum wage and to penalise those who are most in need. The cuts to those on the minimum wage are of the order of 12% compared with cuts of 6% for politicians. The Taoiseach and Ministers can well afford the cut they took, but ordinary workers, the people we should be looking after, cannot afford the cuts they must face. These people are not on Grafton Street getting hairdos or buying executive gifts for Christmas. They are people we all know who are worried about how they will survive. They are trying to manage their bills and trying to balance one against the other. When they cannot manage or balance them, they are going to the credit union or to moneylenders for a loan. This is my concern.
I pointed out that the Fianna Fáil-Green Party economic policy was the most serious attack on family life today. It has scared husbands, wives and children and they go to bed at night too frightened to talk about the future. Family life is being destroyed and a wedge is being driven between husbands and wives and parents and children. Parents are being forced to make choices and people are being condemned to a level of poverty they should never have reached. Fianna Fáil must forget about politics and think of people and quality of life. The issues should be quality of life and a decent standard of living. This Bill is an attack on our Constitution and on the rights of citizens. We are condemning people to poverty and that will be the Fianna Fáil legacy after 13 years in power. Fianna Fáil can point to new roads, the Luas and so on. While these are grand, they can be replaced. People's lives cannot be replaced. The quality and value of life have been degraded and denigrated by the policies pursued by Fianna Fáil in Government over the past 13 years, especially over the past two years. This was exemplified yesterday with the €40 million bonus to AIB workers. It took the Minister for Finance five days, from Thursday to Tuesday, to say that could not be allowed. Then, this morning, we discovered that people working at the higher level in the Department are being looked after. The cosy cartel continues.
There are real concerns with regard to the minimum wage which is to be reduced by 12% through this legislation. Social welfare payments are to be reduced by 4%. We need to be careful about poverty traps when considering the reduction in the minimum wage. The Bill provides for certain safeguards, such as giving the Minister the power to vary the minimum wage. I would love to hear a commitment from Fine Gael that it will reverse the measure when it gets into power.
It is in our pre-budget submission.
Perhaps Senator Ó Brolcháin should read our policy documents.
I do not always read Fine Gael's pre-budget submissions.
I will quote it for the Senator.
Please allow Senator Ó Brolcháin to continue without interruption.
He is always asking us to come up with solutions but he will not read our policy documents.
I am concerned about the potential for poverty traps. Clearly the minimum wage cannot be reduced for people who are currently at work.
I would like an assurance from the Minister of State that people who are currently in employment will not suffer a reduction in their wages.
They will simply be sacked and replaced by people on the lower rate, for God's sake.
The minimum wage will be reduced by €1 to €7.65. I want to be absolutely certain that the effect of this reduction will be monitored. As I am not completely convinced by the argument that reducing the minimum wage will lead to increased employment, I want to see evidence of the impact of the decision. Reducing the minimum wage will bring it closer to the money one would receive from social welfare allowances. It will not be worthwhile for the primary earner in a family with two children to seek work rather than stay on social welfare.
I agree it is the key point.
Why is the Senator doing it then?
He should sit beside me.
As it will be within the Minister's power to vary the minimum wage rate, the safeguards built into the Bill will not be as important as the decisions made by Governments. Ireland has the second highest minimum wage in Europe, after France. It was put in place to safeguard the lowest paid workers in our society and reduce poverty levels. The minimum wage is important and I am glad it was not simply abolished but it should be considered in the context of wider efforts to remove anomalies that create further poverty traps.
We should also introduce a maximum wage which is linked to the minimum wage. This budget attempts to introduce a maximum wage of €250,000 in the public service but a considerable amount of work remains to be done on wage structures in this country. Benchmarking was a serious mistake and the Croke Park agreement is unsustainable. The Bill fails to address the country's wage structure in a holistic fashion.
I will be brief because we have debated these matters at length on the Order of Business and the Social Welfare Bill 2010. Senator Ó Brolcháin hit the nail on the head. We must give people incentives to work. The shrinking gap between social welfare and the minimum wage means there is no incentive for people to get off the dole and their medical cards to join the workforce on a wage of €7.65 per hour.
IBEC did not call for a €1 reduction in the minimum wage. The unions certainly did not demand a cut. Where is this policy coming from and has the Government put any thought into its decision? It is ludicrous to cut the minimum wage by €1 at a time when people in the higher echelons of the public service are getting bonuses of up to €200,000. There is no fairness in a system that allows this to happen. Senator Ó Brolcháin's party is allowing Fianna Fáil to reduce the wages of the poorest workers while at the same time offering massive bonuses to higher civil servants who do not need them. That is why we will be voting against this section.
I could have anticipated Senators' comments because the matter has already been debated on several occasions and their parties' views are well known. No Government wakes up with a rush of blood to its head and decides to reduce the minimum wage. Evidence supports the decision to reduce it at a time of rising unemployment. Nearly 300,000 people are unemployed and a further 150,000 are on the live register and receiving social welfare payments while, possibly, in part-time employment.
The minimum wage cannot be viewed in isolation from labour activation measures, the tax system and social welfare payments. Many of the sectors to which Senators referred are governed by collective bargaining arrangements rather than the minimum wage and a wide range of low paid jobs are governed by employment regulation orders and joint labour committees. The change introduced in this Bill will not have an impact on these arrangements. In the coming months, we will be conducting a review of the collective bargaining arrangements of the joint labour committees with a view to streamlining them. Even though people are blaming the EU and the IMF or the Government as it suits them, many of these measures have already been announced in the context of amalgamating the joint labour committees.
Approximately 52,000 people are currently employed at the minimum wage. Our legal advice clearly states that if an individual is working under contract at or above the minimum wage, that contract will continue to obtain. It has been brought to my attention that certain employers have already begun to lay off staff. That is a breach of contract and the National Employment Rights Authority is the statutory body charged with enforcing contracts and terms and conditions of employment. When the order is signed under this section, the new national minimum wage will be €7.65. Those who worked under the old system will have contracts and agreements with their employers. Employers are obligated to pay that unless there is an agreement between the employer and employee to reduce the rate.
I refer to the comments of the wise old sage, Senator O'Toole, in regard to the remuneration of public servants and public representatives. That should not cloud this. Regardless of what happens with one group, we cannot deny people on social welfare the opportunity to find employment even if it is at a reduced rate of remuneration. That is, effectively, what Senators are saying.
We know the economy is struggling, there are competitiveness problems and people on the lower end of the scale are losing their jobs. By reducing the rate, we could get employers to take on a extra employee or retain employees. For every employer who would like to undermine the terms and conditions of his or her employees, there are multiples of decent employers. The National Employment Rights Agency's figures also suggest that to be the case.
There is a difficulty in retaining people at €8.65 per hour. Forfás produced a report which I am sure is available to Senators. There is statistical data in regard to high unemployment. This must be flexible. There is a need to try to shift as many people from social welfare into employment.
If the minimum wage is not reduced, employers will not be able to afford to take people on. The Senator is looking at this the wrong way. The idea is to ensure that an employer who has a number of employees can take on another employee or two employees.
Senator Buttimer spoke about walking around the streets, and we all do a bit of that from time to time. We are quite conscious that numerous businesses are struggling. They cannot sustain these wage rates, or if they want to take somebody else on, they cannot do so currently. There are also other pressures and burdens on employers, such as rates, local authority charges and other costs. We are trying to shift a cohort of people who are currently on social welfare into employment by employers creating more jobs due to the reduction in the minimum wage. That is what is behind this measure.
This legislation allows for the minimum wage to be adjusted upwards or downwards. I am very proud of the fact my party introduced the minimum wage legislation in 2002. The minimum wage has increased quite dramatically over the years, of which we are very proud. However, we are now living in a very difficult and different time. People have suggested it will force more people into poverty but I would argue the exact opposite. A number of employers would be able to retain or create additional job opportunities on the new minimum wage.
Senators talked about the minimum wage in isolation but perhaps they should look at the social welfare legislation, at family income supplement and at the other supports which are available. If they are not aware of them, I will circulate the information to them but perhaps they conveniently forgot about them.
In regard to unscrupulous employers, the National Employment Rights Agency is a statutory body to ensure terms and conditions are adhered to.
The legislation provides for the reduction in the minimum wage but also states the Minister has the authority to increase or decrease it. Looking at our competitors in the eurozone and in other EU countries, we must be conscious that we have difficulties in several sectors of our economy in which we are not as competitive as we would like.
I spoke about registered employment agreements in the Dáil last night. There are registered employment agreements across the construction industry and yet we all know what is happening. People are being employed under C2 certificates. Rather than being paid the registered employment agreement rates, people are tendering on a contract basis on a C2 certificate. The registered employment agreements are being circumvented because they are not sustainable in the current climate.
That is a complete red herring.
That is not the reason. The Minister of State is not giving the House the right information or rationale behind this.
The Minister of State is replying and Senators will have the opportunity to come back in if they so wish.
I am making a point on what is happening in industry. If Senators are not aware of it, they should be.
We are very aware of it.
Across industry, the C2 certificate is being used to circumvent paying the registered employment agreement rates in various sectors. That has been brought to my attention on numerous occasions by people tendering as self-employed contractors and not charging the rates under the registered employment agreements. That is a fact.
When wages are out of kilter with what the economy can support, there is the issue of the black market and the cash economy. That is also quite evident in the construction industry. A new tax incentive was announced in the budget to improve energy efficiency in homes and tax relief is available on expenditure up to €10,000. That was to try to encourage people to stay in the legitimate economy. That issue is causing difficulties.
No government walks lightly into the national parliament and asks it to support a reduction in the minimum wage. However, it is necessary because of the circumstances in which we find ourselves. We hope it will allow people currently on social welfare to be employed. It will also allow students or those seeking part-time work to find a few hours work here or there which heretofore they may not have been able to do because employers were unable to pay €8.65 per hour as has been stated in numerous debates in the Dáil and, I am quite sure, in this House recently.
Many Members pointed out that rates of pay were too high, including double time on a Sunday and so on. They all highlighted that employers could not afford these rates of pay. The Government has taken some action to try to address that and we are now hearing a different story from Senators.
The Minister of State's reply had nothing to do with the minimum wage. What is worse is the argument being given to his parliamentary party members who are peddling that line and trying to create a connection between registered employment agreements, joint labour agreements and the minimum wage. I listened very carefully to the Minister of State but I could find no logical connection. I look forward to him proving me wrong on this.
I would like to know how the Minister of State's figure of 52,000 people on the minimum wage was calculated. His officials obviously gave him that figure. I would say it is closer to 90,000. Approximately one in 20 of the workforce is on the minimum wage. The Minister of State can work out what 20 into 1.8 million is. That figure is wrong for a start.
The Minister of State said people are getting out of the registered employment agreements through C2 certificates and I have no reason to doubt him. However, I defy him to tell me how many of those C2 agreements are at minimum wage level. I guarantee him none are at that level. They will all be above the minimum and completely disconnected from it. That is why it is not part of what we are saying today.
The Minister of State mentioned the construction industry and keeping people in jobs. How many people in the construction industry or in the black market economy in the construction industry are being paid the minimum wage? That is not happening. These are the kinds of red herrings being brought into this argument time and again. I agree with the point the Minister of State made about registered employment agreements but I completely disagree that they have anything to do with the minimum wage. I will sit here until I hear him make a connection but I have heard many people in his party make the points he made. If he had dealt with the registered employment agreements and various aspects of them, I would have had great difficulty opposing him.
Senator O'Toole was not listening. He should read the official report.
I listened to every word the Minister of State said.
The Senator was certainly not listening.
I would like to know what kind of businesses are struggling because of the minimum wage. I have not come across such businesses. I have asked for information about them but I have not found them. Perhaps the Department has the information and it would be very helpful if this information was shared with us.
The people on the minimum wage are people without a voice. They have no connection with registered employment agreements or joint industrial council agreements because none of these people on the minimum wage is likely to be a member of a trade union. They are people without a voice and without protection. The trade union movement is opposed to the reduction of the minimum wage, not because it affects their members but rather because it affects people who are poorer than that and who are outside the protection of the trade union movement, outside of any protections. The registered employment agreements do not deal with minimum wage levels, the reason being one does not have to have a registered employment agreement to pay people at the minimum wage. Why would one go to the trouble of negotiating for months or a year to register an agreement at minimum wage levels? There is no connection between these two and they are completely separate.
I would like to hear how jobs are to be created. This Bill introduces a disincentive, a measure which will take money out of the economy because the one certainty about people on the minimum wage is that they spend every cent. It all goes straight back into the economy. A reduction in the minimum wage is taking money out of the economy. This must be causing small businesses to struggle even more. For instance, the local shop will suffer because people will not buy a cake at the weekend or some other little extra they might try to put on the table. The Minister of State's point is unreasonable but I agree with him that anyone who is contracted under the minimum wage is protected. The Minister of State has dealt with labour law for the past two years and he knows it better than I do. I do not have any worries about his capacity but rather I am focusing on the issue. People at the end of their contract or those without contracts are sacked and replaced by people at a lower level. This does not create one extra job nor does it protect any job. All it does is put more money back in the pocket of someone up the line.
It is very significant that this is the direction we are taking. I could not believe it when I heard the boss of IBEC state on the record that IBEC had not sought a reduction in the minimum wage. IBEC made it clear it was not its suggestion. It was interesting to hear that Mr. Chopra made it clear the IMF did not demand a reduction in the minimum wage. There is no condition relating to the minimum wage in the agreement. The suggestion did not come from any of those bodies.
The National Competitiveness Council is the Minister of State's adviser on competitiveness and he is still offering the view that competitiveness can be improved by reducing the minimum wage but I would ask to see the evidence for this. I do not see any evidence to prove that point. People on the minimum wage are not working in the area of competitiveness. None of the jobs we are trying to create in global industries and international business depends on the minimum wage which belongs to a different place altogether.
The minimum wage rate does not affect the members of trade unions. I cannot find any trade union members who are earning the minimum wage. The National Competitiveness Council did not look for a reduction in the minimum wage, neither did IBEC nor the IMF. The Government is the only body looking for a reduction. Why is it is being reduced? Despite the efforts of decent people such as Senator MacSharry who has made efforts on behalf of people whose homes are threatened by repossession through an inability to pay their mortgages, we have failed to protect them. I am not saying I could do any better but while we have failed to protect those people, we then reduce the minimum wage and make a certain class of people even worse off. The public note we have managed to put structures in place to save the banks. I supported the Government on every single one of the measures on this issue. I have disagreed quite regularly with my Fine Gael colleagues on some of the Government measures. Why then turn around and, having looked after the banks, go to the opposite end and hammer people on the minimum wage? What does this achieve? We need to re-evaluate our decisions.
I am not being high-minded when I say this is ethically and morally wrong. I do not wish the Minister of State to think I am preaching. I am no more ethically or morally correct than anyone else and I have made more mistakes than most along the way. This measure is ethically and morally wrong. I know the Minister of State, Deputy Kelleher, well enough to know that we would share many of these views and this measure is not necessary.
In reply to Senator Ó Brolcháin's point, people in his party took a stand in government on issues such as stag hunting where lives were not threatened. It was an issue of principle. I did not agree with it but I understood the Green Party's position. I cannot understand hurting small people at the bottom of the pile. Most of them probably do not even vote so they are not a threat to anyone. I do not understand why we cannot stand up for them.
We must focus on the issue of the gap between the rates of social welfare and the minimum wage. This was raised by Senator Buttimer yesterday and he touched on it again today. Senator Cummins, among others, has also raised the issue. I have been listening in this Chamber for years about the problem of the gap between welfare and the minimum wage, that it was not worth people's while to go off welfare and onto the wage. We are now narrowing the gap so this must surely worsen the situation. I remind the Minister of State it is to do with the percentages of smaller amounts. I am talking about the actual money figure.
The provision in section 11(1) provides that the Minister may vary the rate by order and this aspect of this issue sent shivers down my back. This means the Minister will sign a ministerial order in his or her office and it will be introduced without any discussion. This is very regressive. I applaud my colleagues in Fine Gael who, most creditably, have said that they will restore the minimum wage if or when they get into power. At least then we can get some good out of this legislation because it can be done by ministerial order when that time comes. This is a classic example of Fine Gael outmanoeuvring Fianna Fáil on the issue of fairness in wages. It has made a very fair argument during the years which I believe people will support. It will be a big issue for ordinary people who look at decisions taken, what was said and done and three or four decisions such as this are absolutely appalling.
Senator Ó Brolcháin talked about monitoring, but I do not know what monitoring in which we need to engage. When the new jobs are created, I will want to know where they are and in what industries. The Senator should indicate where he expects them to be created. I cannot figure out what new jobs on the national minimum wage will be created. Will they tend to be created in areas of the services industry? Even in good restaurants where one would expect the national minimum wage to be paid, the reality is staff are all being paid more than it because that is what is required to hold on to them.
I thank the Minister of State for at least not being sucked into the trap of saying the national minimum wage is the highest in Europe because we all know that when purchasing power is taken into account, it is far from being the highest in Europe; it is more like the sixth or seventh highest. I appreciate the argument was not tossed out, but it is one that has been made by others, which is an issue.
Senator Ó Brolcháin told us benchmarking was a huge mistake, which I would like to hear explained. I put my hands up: I led the negotiations on establishing a national minimum wage and on the establishment of benchmarking. It appears I have much to answer for. However, I would like to hear what exactly was wrong with either of them. According to today'sIrish Independent, it cost €1 billion, but this sum was divided among the 250,000 people who worked in the public service. As one of the officials accompanying the Minister of State will know off the top of his head, it worked out at a figure of 7.5% on average. Some have said benchmarking wrecked the country, but we are talking about a country that is in a hole for the €85 billion we have had to get from the European Union. People can still stand up and point to a group of public servants and claim it is their fault that the country is where it is because they were paid too much. What does Senator Ó Brolcháin think should have happened in 2002? Should all of the public servants and others who profited from wage increases have stood back and let even more go for even larger helicopters and more millionaires to build bigger houses in more vulgar places? What was it that we should have done at that stage? Should ordinary workers have stood aside and watched the flow of wealth being created — faux wealth as it turned out — move in another direction? Perhaps they should have said: "We will be good here. We don't want this." That is exactly where we find ourselves in terms of the decisions made. It is utterly irrelevant to suggest benchmarking has anything to do with the national minimum wage. Those on the Government side have run out of arguments; there is none left.
The Senator certainly has not run out of them.
The Minister of State is right; I could continue for some time yet, but I will take a break at some stage to hear a little of what is coming back to me.
We are making the inequality in our society even worse and I do not believe it will create an extra job or save any industry. I ask the Minister of State to come back and contradict me with hard evidence. I am not talking about a shop here or there; what industries does the Government believe will be resuscitated by reducing the national minimum wage? Where are the new jobs to be created by the reduction in the national minimum wage? What is the assessment of the loss to the economy by reducing the national minimum wage? What is the balance to be struck? There are the issues to which we need to give long and hard consideration. At a minimum, the Government's case on reducing the national minimum wage is not proved. Even if it were not ethically and morally questionable, even in pure financial and economic terms, it has not been shown or proved to me that any jobs will be saved or created as a result of this.
The most important point the Minister of State made was that as a consequence of the budget and the Bill, the black economy would flourish even more. Senator O'Toole is correct in stating it is more like one in 20 people are on the national minimum wage. The Minister of State spoke about C2 agreements, etc., but how many of them are at national minimum wage level? He also spoke about businesses struggling, but I suggest very few are struggling as a consequence of the level at which the national minimum wage has been set. Let us consider two segments with many working on the national minimum wage: retail and hospitality. I talk to people in Cork city who advise me that they are struggling not because of the national minimum wage but because consumer confidence is low and they are not spending. In addition, credit for small businesses is being frozen by the banks. There is also employers' PRSI, on which my party made a proposal. There is the issue of VAT on labour-intensive activities. None of these is part of the national minimum wage argument.
The reduction in the national minimum wage equates to approximately €2,080 per annum. I will outline to the Minister of State some statistics and if I am missing something, I will happily vote with the Government. The level of male unemployment is 16.7%, or one in six. Men aged under 25 years account for one third of that number. Some 6.5% of the workforce are long-term unemployed, five times the 2007 figure. Some 84% of the job losses affected people under the age of 35 years, 55% of whom are under the age of 25.
I return to my core point which concerns the philosophy in which I believe. The job of the Government is to protect the vulnerable, particularly those in low income jobs. The Minister of State's argument makes no economic or social sense. Even the Republicans in the House of Congress are not voting to cut the minimum wage. They signed a deal with President Obama last week to keep the middle-class tax cut alive. However, the Government works from the mantra that if we fix the deficit and the banks, everything will be okay, but it forgot one ingredient — the people. What is money? Why do people need money? The problem is that the 18 or so people around the Cabinet table are so cocooned that they have lost sight of the ordinary common person who struggles.
I do not know how many there are in the Cabinet; I was never a member. They change the number nearly every week. Is Senator Ó Brolcháin's party still in government or has it left?
Senator, please. We are on section 13.
I will check and get back to the Senator.
The Green Party is like a three-wheeled bicycle; half of it is on stabilisers.
We are on section 13 of the Financial Emergency Measures in the Public Interest (No. 2) Bill.
I am talking to section 13. The Minister of State spoke about activation measures and supports. However, the most important aspect the Government has failed to address in the budget or the Bill is that people must be better off in work than on social welfare. As a result of this measure, they are not. The Government has reduced tax credits, revised tax bands, brought in a universal service charge and cut the minimum wage. The end product is that these measures have been targeted at those on middle to low incomes. Where is the incentive to provide employment, for a person to take up a job or for the ordinary person to spend? Consumer confidence is at an all-time low. It is to be hoped it will pick up by Christmas and people will go to Cork city and other cities to shop and support local industry.
The Minister of State spoke about businesses struggling. Our party proposed the abolition of the 8.5% rate of employers PRSI for staff earning below €356 per week for at least three years, which would have the effect of reducing the cost of employing a person on the minimum wage level for 40 hours per week. The Government did not even do that.
That is not Exchequer neutral. It involves a cost for the Exchequer.
We are talking about people. In the Minister of State's matrix, this is about a cold computer printout of analysis of a budgetary figure. He is not trying to keep people in jobs. When account is also taken of the people who have emigrated, the position has become a great deal worse. If we are serious about incentivising work, the minimum wage should not be cut.
I wish to make a few brief points. The Minister of State made some comments, not related to this matter, about C2 contracts being abused in order that employers, especially in the construction sector, would not have to take on employees. In recent years a similar accusation was made about general practitioners who took on locums for their holiday cover. The locums were not self-employed. Revenue made it clear that it would charge the general practitioners employers PRSI and make them responsible for the tax obligations of the locums and then that work practice changed overnight. Now locums are considered to be employees and tax and PRSI are paid accordingly. Apart from a very small percentage of people, that old work practice has essentially disappeared. The Minister of State could make a recommendation that Revenue would examine the number of C2 contracts that have been issued by people in the construction sector, issue a warning on this issue similar to the one they issued to the general practitioners, dentists and pharmacists and perhaps that would have the effect of changing work practices fairly quickly.
Mr. Liam Griffin, a hotelier in County Wexford, has expressed his view on this issue on local media. Knowing the type of person he is, I assume he has also contacted the Minister of State about it. Mr. Griffin said it is not sustainable to pay a student €22 an hour to collect glasses in any of his hotels on a Sunday afternoon. I do not believe he was talking about cutting the minimum wage. The minimum wage may impact on the cost per hour of employing a student, but I do not believe his approach would be to hammer everyone on the minimum wage in order that he could deal with specific problems in the hotel sector, entertainment business and throughout the services sector. What is at issue is the need to deal with some anomalies that exist that cause problems for employers in terms of retaining workers, developing their businesses and creating more jobs.
The Minister of State must acknowledge that the way the Government went about this has had the effect of hitting the lowest paid workers in our society. All workers have been dealt a blanket punch when action should have been taken to deal surgically with the problems in this area. This measure was an easy option for the Government. The Minister of State knows all the problems in this area which have been highlighted by people like Liam Griffin, other hoteliers, restaurant owners and service providers, not only in Country Wexford but throughout the country. They have been in contact with him. Rather than saying it would examine different policies and mechanisms such as joint labour committee agreements, the Government took the easy option to keep it going for a few months.
I advise Senator O'Toole that I can only go by the official statistics. The number of people on the minimum wage is 52,000 according to the CSO's last quarterly household survey. This equates to 3.4% of the working population being paid at or below the minimum wage. Two reports have been published on this area. One is a Forfás report and the other is an OECD report which recommends that the minimum wage should be readjusted in line with falling wages. Those are two reports that address this issue for fear the Senator might think we make things up on the hoof.
I clearly said that this legislation had nothing to do with those who are paid by collective agreement in the context of joint labour committees or joint industrial council agreements. That is exactly what I said. I went on to elaborate that in terms of these issues there is pressure because C2 certificates are undermining the position. For fear the Senator thought I was interpreting that this legislation would impact on the others, as it were, clearly it will not. In the context of joint labour committees and employment regulation orders rather than registered employment, at the lower rates of pay in the hospitality sector and other areas where the rate of pay is a few cent above the minimum wage, the minimum wage has an impact on those areas. There is talk of the effect being 1.5 times the number who are on the minimum wage. We accept this will have no impact on registered employment agreements and other areas that are at the higher end of collective agreements in the context of hourly rates of pay.
There is a definite issue in terms of wage adjustments in economies where jobs are being shed at a high rate. There are two ways of addressing that issue. We could take a simplistic view, which has been propagated, that rather than taking the difficult decision of reducing wages to try to introduce competitiveness, by continuing to increase wages, we would trade our way out of our difficulties. That is not a credible argument for anyone to put forward. It was said that people on the minimum wage will spend their money, that because they have very little disposable income, they spend it on the essentials such as food and heat that people need to live. That is an accepted fact. The argument that were we to increase the minimum wage, people would spend more of it is not credible. Any economist from any ideological background would say that if one continually inflates wages, one will run into difficulties at some stage.
I want to clarify the position regarding a reference to the views of the Minster for Finance on social partnership. First and foremost we operate collective Cabinet responsibility in government. Decisions are made in that context and collective Cabinet responsibility pertains on that matter. If the State did not make the adjustments in the context of pension levies and other revenue raising measures to fund services, we would have a very unsustainable position. As of now, we probably would not even be able to deliver on the rates of pay currently provided for public servants and civil servants or to provide services.
I do not want to go into the broader debate on the IMF-EU support mechanism which took place in the Dáil today and on which there was a vote that was passed. Bandying about the figure of €85 billion as being the amount we are being forced to take from the IMF and EU is not the case. This funding is available in overdraft form. If the State can go back as a sovereign entity to the capital markets and borrow at a lower interest rate than that which has been provided of 5.8%, there is no obligation on us to draw down the €85 billion. It is a contingency fund to allow the State to plan its way out of its current difficulties and in the meantime for it to be able to pay public servants, civil servants and provide services the public needs. The EU-IMF fund does not mean we are being forced to borrow €85 billion. It allows us the facility to do so in the event of our needing it. More importantly, if we can get back into the capital markets at an earlier stage than we anticipate, it is up to any government to decide to do that.
It is not cast in stone that any government must follow the diktat laid out in the four year plan. Any government can decide to draw up its own four year plan and fund it accordingly. People will have to be conscious, however, that if they decide to tear up the four year plan, they had better ensure they can access the international markets somewhere else before they do so. People must be honest about this. We have to pay our public servants and provide services and no other avenue is available to the State at this time other than the EU-IMF support fund. I could argue this forever and a day. I know there are ideological views on this also and no matter what statistics I provide, some people will not support the emergency legislation to reduce the minimum wage. We cannot see the minimum wage in isolation as there are social welfare supports available for people on the minimum wage with larger families, including family income supplement. People are also forgetting that we had to make a very difficult decision recently in reducing the jobseeker's allowance for people under 25, which has been dramatically decreased. People who were previously on jobseeker's allowance at a high rate have seen payments reduced also.
The minimum wage is being reduced by €1 per hour from €8.65 to €7.65 and there is still quite a deficit between what a person would receive on jobseeker's allowance and what people get with the minimum wage while single and living at home. People should consider the whole social welfare code, labour activation measures and the minimum wage. I accept that no Government would want to reduce the minimum wage but there are some reports supporting our views. Considering the issue rationally, we are hoping that people bring to the National Employment Rights Authority or other agencies evidence of exploitation from the reduction in minimum wage or breach of contracts.
There is a cohort of people who cannot take on extra employees because they cannot afford the present rate of €8.65 per hour. If there is a shift of a number of people from social welfare, where they cannot achieve any form of temporary work, to being able to enter the labour market, it will be positive. I have heard the comments of Members and I know they may not listen to what I have said because there are strong views on the matter. The Government has taken a decision, based on evidence and reports, in order to try to shift a number of people currently on social welfare. Businesses will be able to retain or take on extra staff because of this measure.
This will primarily affect the services area, including the hospitality and retail sectors. Some of these areas are also governed by employment regulation orders established under joint labour committees. I am not confusing the two of these and understand the differences but I did make the point that other areas of the labour market have collective agreements at the higher end; they are also under pressure because of the way the C2 cert system is operating.
I thank the Minister of State for his comprehensive reply and accept the point about employment agreements. He did not deal with the issue of where the jobs would be created and where they would be lost. He half dealt with the issue of the gap between welfare and minimum wage by dealing with jobseeker's allowance. That does not take from the force of the argument I made previously.
I have said what I had to say and I do not intend to carry on with this discussion. I got caught up in my own argument on the question of benchmarking. People should be aware of the following point when discussing benchmarking. It costs €1 billion per year and the Minister, in his last contribution on this issue in the Dáil a couple of weeks ago, indicated that the amount which the public sector has paid back over the past two years is €1.8 billion. That includes Deputies and Senators, as well as everybody else.
It is important to note that benchmarking has been reversed and the Croke Park agreement has an objective to save another €1.2 billion. By the end of next year the public sector will give back €3 billion per year. That disposes of any argument about where we are with benchmarking or what it has done. We should look at the people who got us into the hole for all those billions and I completely agree with the Minister of State on his point about the €85 billion. I have said myself that it is a draw-down facility. We can forget that example but we can use the €35 billion for Anglo Irish Bank or the other bits and pieces that can be added. I can put another set of figures in front of the Minister of State but I took the €85 billion in a rhetorical flourish. Although I agree with the Minister of State's comments, it does not take one iota from my argument. How much have these people paid back?
It sticks in my craw when people point to the public sector, benchmarking or the Croke Park agreement and ask how it will work. We will discuss it later and people appear to find it complex. It will save more than 20,000 jobs and over €1 billion per year. I do not know what part of this people do not understand or find unsustainable. I hear people saying that we cannot afford the agreement, insinuating that we cannot afford to save 20,000 jobs or €1.2 billion. That is illogical. I will listen if people argue that the agreement is not working or delivering, as it must be made to work and deliver. There is an idea that we cannot afford it but we cannot afford not to have it. If we did not have it people would be on the streets fighting but this is an agreement which can deliver for the people. We will discuss it later today. I will oppose the section.
The Committee divided: Tá, 27; Níl, 19.
Tellers: Tá, Senators Niall Ó Brolcháin and Diarmuid Wilson; Níl, Senators Maurice Cummins and Liam Twomey.
Question, "That section 14 stand part of the Bill," put and declared carried.
Question, "That Schedule 1 be Schedule 1 to the Bill," put and declared carried.
Question, "That the Title be the Title to the Bill," put and declared carried.
Question, "That Report Stage be taken now," put and declared carried.
Question, "That the Bill be received for final consideration," put and declared carried.
Tellers: Tá, Senators Niall Ó Brolcháin and Diarmuid Wilson; Níl, Senators Maurice Cummins and Joe O'Toole.
I thank the Members who contributed on Committee Stage. It is obvious that very difficult challenges face us. This is a financial emergency measures Bill and those who read the recitals on pages 3 and 4 will understand the reasons it was before both Houses of the Oireachtas. There was a division in this House. I could not bring about consensus, although I tried by force of argument, but I understand many Senators had alternative views.
I look forward to the discharge of the commitment given by the Fine Gael Party to reverse this appalling measure as soon as it gets into government. I thank the Government for making it easier for Fine Gael to do so because the reversal can be effected by ministerial order rather than by legislation. All could be well in the future.
Sitting suspended at 5.20 p.m. and resumed at 5.30 p.m.