Increasing the National Minimum Wage in 2016 reduced wage inequality between high and low earners, but had no significant impact on the income of households, according to new research by the Economic and Social Research Institute.

The report entitled 'The impact of a change in the national minimum wage on the distribution of hourly wages and household income in Ireland' examined the effect of the 2016 minimum wage rise from €8.65 to €9.15 per hour.

It found that as a result of that 6% increase, the gap between the top 10% of earners and the bottom 10% narrowed by 8%.

Following the 2016 hike, the number of people earning the minimum wage or below fell by 40%.

The report's authors found that when the rate was €8.65, around 10% of workers were earning €9.15 an hour or below,

However, after the increase, that figure fell to 6%.

The research also suggests that changes to the minimum wage also had knock-on effects on the wages of higher paid workers earning up to €11.50 an hour - possibly due to relativity claims from higher paid employed.

The authors suggest that these "spillover" effects may result in wage increases for the lowest paid 25% of the workforce.

However, overall gross household incomes were not strongly impacted, as minimum wage earners are not generally the main earners in their households - and are often located in households at the higher end of the income distribution.

National minimum wage to increase to €9.80 from January

The research revealed broadly similar improvements for men and women, though younger workers experienced more pronounced benefits.

The authors state: "The significant spike observed in the distribution of earnings is suggestive of a high level of compliance with the 2016 minimum wage ruling" - and that this in turn is likely to have heightened the estimated impact of the policy on reduced earnings inequality.

The research was co-authored by Dr Paul Redmond, Dr Karina Doorley and Professor Seamus McGuinness and was produced under a partnership agreement between the Low Pay Commission and the ESRI. 

Chairman of the Low Pay Commission Dr Donal De Buitléir welcomed the report, saying that it provided valuable data on the impact of the National Minimum Wage on the distribution of income in Ireland.