The Restaurants Association of Ireland (RAI) believes the proposed increase in the national minimum wage will stifle job creation and have a destabilising effect on the restaurant and hospitality industry.
The RAI has made a submission to the Low Pay Commission in relation to the implications of the proposed raise of the minimum wage in Ireland.
The minimum wage was introduced under the National Minimum Wage Act 2000 and currently stands at €8.65 per hour. As of January 2015, Ireland had the fifth highest minimum wage of the EU.
The RAI is concerned about the need to create more jobs in the restaurant industry and the economy.
The report found that the economy has entered 2015 with reasonably strong momentum. However, the main caveat is that consumer spending is still fragile and that the recovery has been concentrated in the greater Dublin area.
Key risk factors facing the Irish economy include the high level of sovereign debt, SME and personal debt, in particular mortgage arrears, the ongoing pressure on personal disposable and discretionary incomes.
The restaurant sector is categorised as part of the SME sector. The SME sector accounts for around 54 per cent of total employment in the Irish economy, and 70 per cent of total private sector employment.
Given the importance of employment creation in the economy, said the RAI, it is essential that policy towards the sector remain as favourable to job creation and activity within the sector as possible, adding that the ability to increase prices is still very limited in the sector and with many of the costs of doing business under pressure, the sector continues to be characterised by tight margins and challenging trading conditions.
"Given the still fragile nature of Ireland’s economic recovery and the still very difficult environment for the restaurant sector, the notion of increasing the national minimum Wage, which would have a push through effect on wages up the line, does not make any sense," the RAI said.
"It would increase the cost base for business and would undermine the cost competitiveness of the economy. It would fly in the face of the aspiration to make Ireland the ‘best small country in the world in which to do business’ and the aspiration to preserve and improve the competitiveness of the economy.
"The tax and welfare system should be used to put money into people’s pockets, rather than facilitating and encouraging an economically damaging upwards spiral in wages. The notion of pushing up wage costs at this juncture fails to recognise the business realities in what is still a very challenging economic environment."
