An increase in the National Minimum Wage in 2016 was effective in reducing wage inequality, particularly for younger workers, according to the latest research from the Economic and Social Research Institute.
The ESRI assessed the impact of the minimum wage rise from €8.65 to €9.15, which at the time was the first such increase since 2007.
The research was funded by the Low Pay Commission.
It revealed that increasing the hourly wage of the lowest-paid workers can narrow the gap between the lowest paid and highest paid workers, resulting in a reduction in wage inequality.
However, the ESRI cautions that previous research indicates that the effect of minimum wage increases on household income inequality may be "limited".
It said this was because many recipients may be part-time workers like students living in higher income households, and are unlikely to be the main breadwinner in that household.
The ESRI found that prior to the increase in the minimum wage, the wages of high earners were four times greater than those of lower paid employees.
After the increase came into force, that gap narrowed to being 3.7 times higher - reflecting an 8% reduction in the hourly wage gap between high and low earners.
The ESRI noted that the effect was stronger for younger workers, with the gap between high and low earners decreasing by 24% after the pay rise.
"This indicates that the minimum wage increase was effective at reducing wage inequality in Ireland," the ESRI stated.
The research also established that there was a knock-on effect for those earning just above the minimum wage, which could be explained by employers needing to maintain a wage gap between minimum wage workers and others.
"Potential reasons for this include the need for employers to maintain a wage gap between minimum wage workers and others. For example, if a worker earning €10.50 per hour sees a lower paid colleague getting a pay rise, then that worker may also require a pay rise to maintain their productivity and satisfaction with their job," the authors noted.
The ESRI found that while there was some evidence of a slight increase in household income among low income households after the minimum wage increase, the impact on household income was "quite limited".
The ESRI research was carried out by Paul Redmond, Karina Doorley and Seamus McGuinness and was based on data from the CSO's Survey of Income and Living Conditions.
