The minimum wage increase which was implemented in 2024 led to some modest price increases, according to a new study from the Economic and Social Research Institute (ESRI).
The study, which was funded by the Low Pay Commission, examined whether increases in the minimum wage affect the prices consumers pay for goods and services in industries with large numbers of minimum wage workers.
Higher prices may arise if businesses choose to pass some of the resulting increase in labour costs on to consumers.
The research found that, for most minimum wage increases implemented since 2016, there was no detectable impact on prices.
“However, the largest minimum wage increase to date, which was implemented in 2024, led to modest price increases in a small number of minimum wage intensive price categories,” according to the ESRI.
For seven of the eight minimum wage increases that were examined, no significant impact on prices was detected.
The only minimum wage change associated with higher prices was the January 2024 increase.
In that year, the minimum wage rose by 12.4%, from €11.30 to €12.70 per hour, which was the largest increase to date in Ireland.
Researchers found the increase was associated with a 2.5% rise in prices across affected categories including hairdressing, takeaway coffee, takeaway meals and restaurant meals.
The ESRI said that compared with minimum wage increases, other policies and economic events in recent years have had substantially larger effects on prices.
“VAT adjustments in 2019 and 2023, along with the Covid-19 pandemic in 2020, were associated with price increases three to four times larger than those associated with the 2024 minimum wage increase,” the study found.
Dr Paul Redmond, co-author of the report and Associate Research Professor at the ESRI, said the research shows that most minimum wage increases in Ireland in recent years were not associated with higher prices.
“The 2024 increase, the largest to date, was associated with modest price increases across a small number of goods and services,” Dr Redmond said.
“By comparison, VAT adjustments and the Covid-19 pandemic had a far greater impact on prices,” he added.
Ultan Courtney, Chair of the Low Pay Commission, said the research will allow the commission to make informed, data-driven decisions, even in complex macroeconomic conditions.
“The findings of the paper will provide a practical reference point that will help the commission assess the relationship between minimum wage changes and consumer prices in the years ahead,” Mr Courtney said.
In July, it was reported that the Low Pay Commission had recommended that the minimum wage should increase by 5.6%.
If the proposals are accepted by the Government, it would see the rate rase by 79 cent an hour from €14.15 to €14.94.
Any changes to the minimum wage will be announced on Budget Day.
