Dr Micheál CollinsNERI (Nevin Economic Research Institute)Dublinmcollins@NERInstitute.net

@ MLGCollinswww.NERInstitute.net

Earnings and Low Pay in the Republic of Ireland

Statistical and Social Inquiry Society of IrelandCork, 14th April 2016

Outline1. Introduction2. Context3. Data4. Earnings5. Hourly Earnings & Low Pay6. Modelling Low Pay7. Conclusion

1. Introduction• NERI research project on incomes and low pay

o QEO Spring 2015 (& 2016)…

• Limited understanding of earnings (of all types)

• Few detailed examinations of low pay (recently)o including the MW

• Relevant to know:o for policy formationo for measuring progress etc

2. Context• Increasing interest in earnings:

o Recoveryo Literature on segmentation/polarisation etco Low Pay Commissiono Sustainability of redistributive system (tax & welfare) to

smoothen the income distribution• direct income disposable income• relevance of changes to the pre-distribution• not looked at for a while

• Literatureo Blackwell (1989), Nolan (1998), Barrett et al (2000)o MW related / OECD annual estimates on low pay…

• Throws up some research questions around:o The structure and distribution of earningso The low paid:

• how many• who• where

3. Data• CSO SILC 2013 (released January 2015)

o Sample of 4,922 households and 12,663 individualso Detailed income data (direct, gross, disposable)o Income data cross checked with tax and welfare recordso Detailed socio-economic characteristicso Weights for non-response etco Never perfect, but…o Earners

• 4,449 earners• 3,825 receive employment income• 654 self employment income• 3,369 employees whose PES = at work

o normal monthly gross earnings in main job & normal hrs per week

• Market income or ‘direct income’

• leaving out employers PRSI contributions• pensions…• Looking at:

o all individuals aged 17 years or moreo excluding those with no market income

4. Earnings • x3

o Overallo Employeeso Self Employed

• Charto each bar = €1,000 range of incomeo height = no of individualso merge all those with €150,000+

80% 20%

15%

15% 50%

15% 50%Top 10%

15% 50%Top 10%

Top 5%

Gini Coefficient = 48.99

5. Hourly Earnings & Low Pay• Looking at hourly earnings data for employees• Data:

o PES = at work and who are employeeso gross monthly earnings & no. of hours usually workedo main job

• Three thresholds:o Minimum wage of €8.65 per hour (2013)o Living Wage of €11.45 per hour (2014) = 66% median

o Low Pay Threshold €12.20 per hour (2010)

Approximately:

• 345,000 employees below €11.45

• 400,000 employees below €12.20

Who are the low paid? (incidence)

o Of all those who are low paid:• 60% women• 35% aged 18-29; 28% 30-39yrs; 17% 40-49yrs…• 24% in wholesale and retail sector• 18% in accommodation and food sector• 43% work 35hrs+ ; 26% work less than 20hrs• 82% permanent contract• 50%/50% split across full-time and part-time

Who is most likely to be low paid? (risk)

o Of all employees who are:• male 21% are low paid; female 29%• aged 18-29 = 53%; 60yrs+ = 25%• Sectors:

o Agri, forestry, fishing = 65%o Accommodation and Food = 61.5%o Admin and Support Services = 52%o Wholesale and retail = 43%

• low hours = 49%• Temporary contract = 48%• In poverty = 59% are low paid

Living Standards and the Income Distribution

All Employees The Low PaidLiving below the poverty line 3.2% 7.4%Difficulty making ends meet 27.5% 35.9%Unable to afford unexpected costs 45.9% 66.1%Borrowing for ordinary living expenses over last year

15.2% 20.7%

Experiencing Deprivation 19.4% 31.6%

from Table 8: Distribution of those at Work by decile, 2013

from Table 8: Distribution of those in Low Pay by decile, 2013

6. Modelling Low Pay• Concluding section of the paper• Getting a little deeper• Logit where dependent variable is earning less than

€12.20 per hour

• Findings:o Risk of low pay higher for:

• temporary contract workers• women• private sector workers• younger workers (non-linear effect for age)

o Risk of low pay lower for:• part-time• household with children• Dublin based workers• firms of 10+ employees

o no effect:• low hours

o Splitting into high-income & low-income, but limited difference

7. Conclusion• Some policy implications/relevances:

o structure of worker incomeo taxation policyo the starting point for redistribution (direct income)o the effectiveness of the minimum wageo effectiveness of interventions for low income working

families?o firm size & temporary contracts

• Raises questionso women and young people….

Dr Micheál CollinsNERI (Nevin Economic Research Institute)Dublinmcollins@NERInstitute.net

@ MLGCollinswww.NERInstitute.net

Earnings and Low Pay in the Republic of Ireland

Statistical and Social Inquiry Society of IrelandCork, 14th April 2016