The long-held fear that raising the minimum wage inevitably leads to job losses appears to be unsupported by recent evidence, at least in the context of Ireland’s economic performance. A new study from the Economic and Social Research Institute (ESRI) found no discernible increase in unemployment among low-paid workers following a decade of annual minimum wage increases, from 2016 to 2025. This finding challenges conventional economic thinking and offers a nuanced perspective on the impact of minimum wage policies on employment levels. The research, funded by the Low Pay Commission, arrives as policymakers globally continue to debate the merits and potential drawbacks of increasing wages for the lowest earners.
For years, economists have debated whether increasing the minimum wage creates a trade-off between higher earnings for some workers and job losses for others. The core concern is that businesses, faced with increased labor costs, will respond by reducing their workforce or slowing down hiring. However, the ESRI study suggests that this hasn’t been the case in Ireland during a period of significant economic growth. The study specifically examined whether minimum wage employees experienced a higher likelihood of job loss in the six months following each annual wage increase. Researchers found no such correlation.
Economic Conditions Played a Role
It’s crucial to understand the economic backdrop against which these minimum wage increases occurred. As the report itself acknowledges, the period from 2016 to 2025 was characterized by robust economic growth and historically low unemployment rates in Ireland. The Central Statistics Office consistently reported falling unemployment figures during this time, creating a tight labor market where demand for workers outstripped supply. This strong economic climate likely mitigated any potential negative employment effects of the minimum wage increases.
“It is important to acknowledge that the minimum wage increases that we focus on in this study coincided with a period of strong economic growth and low unemployment,” the report states. “similar policy changes could generate different outcomes if enacted during a period of weaker economic performance.” Dr. Paul Redmond, an author of the report, echoed this sentiment, stating, “In this study, we find that recent minimum wage increases, which occurred during a period of strong economic growth and low unemployment, did not increase the likelihood of minimum wage employees losing their jobs.”
A Shift Towards Youth Wage Rates
Although the study offers reassurance regarding overall employment levels, it likewise highlights a potential shift in employer behavior. Researchers found a growing trend of businesses utilizing sub-minimum wage rates for younger workers – those under the age of 20 – to offset the rising cost of labor. Current Irish legislation allows for tiered minimum wages based on age: 90% of the standard rate for 19-year-olds, 80% for 18-year-olds and 70% for those 17 and under.
The ESRI study revealed that the use of these sub-minimum youth rates has increased significantly in recent years. In 2019, less than 20% of employees under 20 were paid a sub-minimum wage. By 2025, that figure had risen to 30%. This suggests that employers are increasingly relying on these lower rates to manage labor costs as the overall minimum wage continues to climb. The report notes, “employers are increasingly using sub-minimum youth wage rates to keep labour costs low as the minimum wage gets higher.”
How Youth Wages Operate in Ireland
The tiered system for youth wages is designed to encourage youth employment by reducing the cost for employers to hire younger, less experienced workers. However, the increasing reliance on these rates raises questions about potential exploitation and the long-term impact on earnings for young people. The study also found that young workers who “age into” a higher minimum wage band did not experience an increased likelihood of job loss, suggesting employers are not simply terminating employees when they become eligible for a higher wage.
Implications for Future Policy
The findings of this study are likely to inform the ongoing debate surrounding minimum wage policy in Ireland and beyond. Ultan Courtney, Chairperson of the Low Pay Commission, emphasized the value of the research, stating, “Our work relies on rigorous, data driven research and this research provides valuable insights into the effects of increases in the minimum wage.” The Low Pay Commission is currently preparing its recommendation to the government regarding the 2027 minimum wage, and this research will undoubtedly play a role in their deliberations.
The study underscores the importance of considering the broader economic context when evaluating the impact of minimum wage policies. While the Irish experience suggests that increases can be implemented without necessarily leading to job losses during periods of strong growth, the researchers caution that different outcomes may occur in a weaker economic environment. Continued monitoring of employment effects, particularly for low-paid workers and young people, will be crucial as policymakers navigate the complex challenges of ensuring fair wages and sustainable employment.
The Low Pay Commission will continue to analyze data and consult with stakeholders as it prepares its recommendations for the 2027 minimum wage. Further updates and information can be found on the Low Pay Commission’s website.
Disclaimer: This article provides information for general knowledge and informational purposes only, and does not constitute financial or economic advice.
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