Legislation allows employers in Ireland to pay those under 20 less than their older colleagues - but is this fair?
The topic of sub-minimum wages has received a lot of attention lately, at both national and international level.
Earlier this month, it was discussed by the Oireachtas Enterprise Committee with Mandate, the ESRI, ISME and Retail Excellence Ireland attending.
One of the arguments put forward in favour of sub-minimum wages for young people is to ensure that wages are not set at a rate that is so high that employers are discouraged from hiring them, as they may have less experience and lower productivity than older workers.
Meanwhile, others argue against sub-minimum youth rates, believing there should be 'equal pay for equal work', and age should not be used as a means of discrimination.
We've been looking at both sides of the debate, along with recent research and approaches taken by other countries.
What is the sub-minimum wage?
The minimum wage is currently €12.70 per hour, however legislation allows employers to pay young workers an age-based sub-minimum rate.
Those aged under 18 can be paid 70% of the full rate, those aged 18 can be paid 80%, while those aged 19 can be paid 90%.
This means that workers under 18 can be paid €8.89 per hour, while workers who are 18 can be paid €10.16 per hour and those aged 19 can be paid €11.43 per hour.
Are many workers on the sub-minimum wage?
While businesses can legally pay these lower rates to younger workers, many choose to pay more.
Research carried out by the ESRI last year shows that just one in every 140 employees in Ireland is paid a sub-minimum youth rate. This is equivalent to around 15,000 workers.
"While all employees aged 15-19 could legally be paid a sub-minimum wage rate, the vast majority are on a higher rate of pay, " Dr Paul Redmond of the ESRI told the Oireachtas Enterprise Committe earlier this month.
"Regarding the characteristics of employees in receipt of sub-minimum youth rates, we found that just over half were women, while the vast majority - almost 80% - work in either the accommodation, food or retail sectors."
"Approximately one quarter work in small firms consisting of less than ten employees, while 80% are students," he added.
What has the Low Pay Commission recommended?
Back in 2022, the Government asked the Low Pay Commission (LPC) to examine the issues around retaining or removing the youth rates and to make recommendations on the subject.
In June of this year, the LPC published their report which recommends abolishing the sub-minimum rates - no sooner than January 2025.
"The Low Pay Commission recommends that if youth rates are abolished, after these rates have been abolished for two years, that a study be conducted to evaluate if there were adverse consequences from removing sub-minimum rates, in particular for those aged under 18," the report states.
"Should a significant adverse outcome be identified, the study should review the full range of policy options available to Government."
The Low Pay Commission recommended that consideration is given to how employers with young workers receiving the sub-minimum wages can be supported during and after the period in which youth rates are abolished - if they are abolished.
What does research show?
Recent research from the Economic and Social Research Institute (ESRI) shows that abolishing sub-minimum wage rates could have both positive and negative impacts.
Dr Paul Redmond of the ESRI said the positive impact would be that current sub-minimum wage employees would see an increase in their hourly wage.
He said there are several published international studies that have examined the negative effects for young workers.
"While some studies find no effects, others find evidence of negative impacts on hours worked and employment among young workers. However, these effects tend to be quite small," he added.
For employers, Dr Redmond said abolishing youth rates could lead to an increase in the wage bill of those that employ workers on sub-minimum wages.
"In related research published in 2021 as part of the ESRI and Low Pay Commission research programme, we found that the majority of employers do not employ minimum wage workers, and among those that do, minimum wage employees tend to make up a relatively small share of the overall workforce," Dr Redmond said.
"Therefore, while some employers may be more affected than others, the overall direct impact on labour costs of abolishing sub-minimum wages would likely be quite low," he added.
How does Ireland compare to other countries?
Minimum wages in the EU are quite common, with 22 of 27 EU countries currently having a statutory minimum wage.
However, age-based sub-minimum wages are less common, with just one-third of countries with a statutory minimum wage using sub-minimum youth rates.
Ireland and the Netherlands are currently the only EU countries with sub-minimum wage rates for those aged 18-20.
Only three other EU Member States have sub-minimum wage rates for all workers aged under 18.
Today, Ireland's sub-minimum youth rates are not the European norm.
In recent years, most other EU countries have either been removing or increasing their youth rates.
Outside the EU, the UK has also been removing youth rates.
Previously, workers under 25 were not entitled to the full UK minimum wage, which is named the 'National Living Wage (NLW)'.
In April 2021, 23 and 24 year-olds became entitled to the full NLW, and from the start of April this year, that was extended to employees aged 21 and over.
The UK Low Pay Commission said a review showed that abolishing sub minimum youth rates for 23 and 24 year-olds "did not find any impact on aggregate employment, or on employment in low paying sectors."
"For 23 and 24 year-olds as a whole, they did not find any effect on average or usual hours worked," it added.
How is the sub-minimum wage viewed by employers here?
The Irish Small and Medium Enterprise (ISME) association appeared before the Oireachtas Enterprise Committee to share the views of members.
"The phrase "a fair day's pay for a fair day's work" must be interpreted both ways," said Neil McDonnell, CEO of ISME.
"Those who lack the skills and experience of older work colleagues must necessarily accept their remuneration will reflect this," he said.
"Similarly, those young workers who have acquired greater skills and experience than their peers are not constrained by law from accessing higher-paid employment," he added.
Mr McDonnell stated that the sub-minimum rates are not discriminatory on age grounds.
"They represent a formal recognition of the lack of experience that is a function of youth," he said.
"As such they are not discriminatory - in the same way that the legal voting age, age-related prohibitions on alcohol and tobacco use, driver licensing laws, service-related pay increments, and the fact that you must be 21 years old to stand for election as a TD are not discriminatory on age grounds.
"We therefore recommend retention of sub minimum rates of pay for younger workers, even if in modified form," he added.
Jean McCabe, CEO of Retail Excellence Ireland said the recent increase in the National Minimum Wage, along with other rising costs has had a significant negative impact on retailers.
She said the abolition of sub-minimum rates would have a "similarly detrimental effect".
"Sub-minimum rates are a critically important part of the retail environment in Ireland," she said.
"Not only do they allow companies to manage labour costs, but they also provide crucial opportunities and learning experiences for younger workers.
"Early work experiences provide a very useful platform for young people to learn how to engage in a work environment, deal with customers, develop soft skills and a strong work ethic," she added.
If sub-minimum rates were removed, Ms McCabe said employers may face a "domino effect" of more experienced staff asking for higher wages to reflect their seniority.
She said abolishing the rates would also deter employers from employing inexperienced personnel, therefore impacting on future career opportunities.
How do young workers feel?
Mandate Trade Union has long been vocal on its concerns around the sub-minimum wage for young people, calling for it to be abolished on numerous occasions on behalf of its members.
Greg Caffrey of Mandate claims the National Minimum Wage Act provides for and facilitates age discrimination.
"The Employment Equality Act, although it provides protections for the citizens of Ireland, alarmingly the act contains a provision which permits age discrimination to be facilitated through the National Minimum Wage Act by allowing it to prescribe for sub-minimum rates of pay to be paid to young workers soley based upon their age," he said.
He said this is a contradiction of the Employment Equality Act 1998, which states discrimination based upon a person's age is illegal.
"The application and implementation of sub-minimum wage rates provide for our young workers to be discriminated and exploited by employers who apply sub-minimum wage," he said.
Taoiseach Simon Harris has said a decision on whether or not to abolish the youth rates will be made before the Budget in October.
"Should the sub-minimum wage not be abolished by Budget day, Mandate Trade Union shall be actively campaigning on a national level to have the abolishment of sub-minimum wage an election manifesto issue," Mr Caffrey said.
"Sub-minimum wage rates should be abolished in line with the expert opinions and recommendations contained within the Low Pay Commission's report," he added.
