Sub-minimum wages: young people, old attitudes

Laggard European Union member states must act to ensure abolition of sub-minimum rates of pay.

The topic of sub-minimum wages has attracted considerable scrutiny in recent months, nationally and internationally. In Ireland, it was the subject of discussion at the Oireachtas (Irish Parliament) Enterprise Committee in July, with representatives of trade unions and business in attendance.

According to Ireland’s Economic and Social Research Institute (ESRI), elimination of sub-minimum wage rates would not have a substantial impact on company accounts. Lobbyists for private enterprise however adamantly declared otherwise.

The Irish Small and Medium Enterprise Association (ISME) told the committee that greater payroll expenses for SMEs would mean increased operational costs in industries requiring a lot of workers—such as retail and hospitality—and that the ESRI’s conclusion was ‘simply factually untrue’. The ISME chief executive suggested employers had to ‘babysit‘ inexperienced teenagers. His counterpart at Retail Excellence Ireland claimed elimination of sub-minimum wages would lead to increased youth joblessness, because higher compensation would reduce employment opportunities.

Legal entitlement

Currently in Ireland, 19 year-old workers are legally entitled to 90 per cent of the national minimum wage of €12.70, equivalent to €11.43 per hour. For 18-year-olds the flooor is €10.16 per hour and for younger workers €8.89. Those most affected work in the hotel and retail industries.

The Irish government has authorised an evaluation of the economic consequences of eliminating sub-minimum pay rates for young employees, following a recommendation by the Low Pay Commission to scrap the reduced wages. The LPC proposes eliminating the decreased rates sometime after the beginning of 2025, with biennial evaluations to determine any negative effect, particularly on young workers themselves.

In 2023, the Council of Europe found that Ireland was in breach of its responsibilities on labour rights—including in providing decent living standards for young workers—under the revised European Social Charter. In the context of the 2000 European Union Employment Equality Directive, age discrimination ought to be legally acknowledged as prohibited in relation to employee compensation, similar to bias based on gender, ethnicity and disability. The directive has a wide-ranging reach, including practically every labour regulation pertaining to pay.

Changed attitudes

The main business lobbyists argue that younger workers are not as productive and require training—although, for instance, all new employees in retail and hospitality in Ireland are given the same form of training when they start. This outlook was previously applied to workers with disabilities. It still is in the United States, where section 14(c) of the Fair Labor Standards Act permits licensed employers to pay ‘handicapped’ workers a sub-minimum rate.

Of course, attitudes have changed and, in Europe, this is now a blatant violation of the 2000 directive, which notes that employers are legally obliged to provide accommodations to facilitate access, participation and advancement in employment or training for individuals with disabilities, unless these would strain the company excessively. The burden will not be considered excessive if it can be adequately addressed by measures in place under the disability rules of the relevant EU member state.

Yet arguments justifying discrimination on grounds of disability, now discredited, are still often made against young people. In Ireland this social wrong was enabled by the National Minimum Wages Act—passed in the same year as the directive—which explicitly discriminated against young people.

Authoritative precedence

Directives take authoritative precedence over national law and, where there is a conflict, the courts in member states are obliged to prioritise EU legislation. Yet, 24 years on, the Employment Equality Directive is still to be appropriately respected by eight EU member states which, as the European Trade Union Confederation has observed, maintain sub-minimum wage rates for young workers.

The Treaty on the Functioning of the European Union and the myriad directives and regulations which give it practical affect offer an abundance of benefits for employers—but they cannot have their cake and eat it. Moreover, the EU’s Charter of Fundamental Rights, with came into force with the Lisbon treaty in 2009, includes a range of principles protecting enterprises and employees.

The new Labour government in the United Kingdom has declared that it is ‘taking the first steps towards making rates the same for everyone, regardless of age, by narrowing the gap between the National Minimum Wage, for 18–20-year-olds, and the National Living Wage.’ It is time for Ireland, among others, to do the same.