Tuesday, 11 September 2012

IMF targets minimum wage for employment-driven recovery

IMF targets minimum wage for employment-driven recovery

Tuesday, September 11, 2012
A cut to the minimum wage to reduce labour costs has been recommended by the IMF in its latest review on Ireland’s recovery.
The IMF report also suggests that the use of the private sector to train or help upskill unemployed people could play a useful role if well designed.

The IMF notes that rents have fallen and that Ireland’s national minimum wage (NMW) is higher than in the North and in Britain.

An IMF statement said: "A reduction in the NMW should be considered given the broad fall in consumer prices, including rents, in recent years, and because it is notably above the minimum wage in Northern Ireland and the United Kingdom despite the highly integrated labour market."

However, with dole payments coming to the equivalent of 62% of the minimum wage for someone working a 35-hour work, the IMF said there were "limits to reductions given the need to ensure the NMW provides adequate incentives to take up employment".

The IMF praised the Government’s Pathways to Work initiative, but said more support was needed to get people back to work: "The initiative will require additional, well-trained, case workers to support jobseekers get back into employment, where involving private sector firms, especially for the long-term unemployed, could also play a useful role if well designed."

In its response, the Government pointed out that it had already reversed a cut in the minimum wage.

On protection for distressed mortgage holders, the Government said new personal insolvency measures would "become operational in Jan 2013 or very shortly thereafter".

The report adds: "To best support growth during this consolidation, a revival of domestic demand must be facilitated, while also enhancing competitiveness and the readiness of the unemployed to take up jobs, as an employment-intensive recovery is needed to reduce unacceptably high unemployment."

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