Tax changes and energy price drops ‘reduce Living Wage by five cent’ – experts
By Gráinne Ní Aodha, PA
Tax changes and a drop in energy prices have pushed the Living Wage down by five cent per hour, an expert technical group has said.
It added that the minimum wage is still €2.05 below the real Living Wage of €14.75.
The Living Wage is the minimum hourly pay needed by a full-time worker, without dependents, to afford the goods and services that people have agreed are essential for enabling a basic, decent, standard of living.
Its calculation by the Living Wage Technical Group (LWTG) is based on budget standards research undertaken by the Vincentian MESL Research Centre at the Society of Saint Vincent de Paul (SVP), and aims to reflect real costs faced by employees in Ireland.
Assistant Professor of Social Policy Dr Micheal Collins said it was the first time the Living Wage has fallen since the LWTG started calculating it a decade ago.
Over the past year, the technical group said living costs have increased for eight areas of expenditure included in the calculation, and decreased for seven.
The largest cost increases were in education (+6.6 per cent), housing (+6.2 per cent) and car insurance (+4.5 per cent).
Food costs rose by 1.5 per cent, coming off a 21 per cent increase in the previous year.
The largest cost increase in cash terms was rent, which rose by €12.28 a week to €210.60.
The biggest decreases were in household energy costs (-16.6 per cent), health costs (-4.8 per cent) and the cost of household services (-four per cent).
The Living Wage Technical Group said that tax changes in the last budget played “an important role” by increasing the net incomes of lower paid workers – and mentioned the Rent Tax Credit of €750 in particular.
“The combined amount of income tax, USC and PRSI that would be paid by a Living Wage worker reduced from €71.58 a week to 61.16 euro a week, a reduction of €10.42, mostly driven by the Rent Tax Credit,” the group said.
Robert Thornton, research manager with the Vincentian MESL Research Centre and a member of the LWTG, said: “The latest calculation of a Living Wage is nearly identical to last year, despite higher costs in some areas like food and rent, because of a combination of lower energy costs and tax changes made in the last budget.
“Nonetheless, there is still a significant gap of over two euro between the evidence-based Living Wage of €14.75 and the current National Minimum Wage of €12.70.”
Dr Collins, who is a member of the LWTG, said: “Recent policy measures have had a clear impact on the rate – without the Rent Tax Credit, the hourly rate would be 50 cent higher; without the temporary cost-of-living electricity credits the rate would be 20 cent higher.
“Although small, the decreased hourly rate shows the effects when Government takes steps to make expensive goods and services more affordable to people on lower incomes.”
Based on data from the Survey of Income and Living Conditions in 2017, a quarter of employees were earning less than the 2017 Living Wage of €11.70.
For full-time workers, one in five were earning less than the Living Wage, based on employees in all household types, not just single adults.
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.