A business group has warned that an increase to the minimum wage will lead to reduced hours for workers.

CEO of ISME Neil McDonnell was speaking as the Cabinet endorsed an 80c rise in the minimum wage.

This will bring it to €11.30 an hour, effective from January next year.

But Mr McDonnell earlier told Newstalk Breakfast businesses can't afford it.

"It's completely understandable that people under huge cost of living pressure at the moment are going to look to close that gap.

"And the first place they're going to look is though their wage packet.

"Unfortunately increasing wages, increasing the minimum wage, isn't the solution to a cost of living crisis.

"Employers are not going to be able to bridge this gap".

He said: "What this will actually cause, come the 1st of January... as we drive up wages via the national minimum wage, unfortunately the outcome of that for a lot of workers will be reduced hours".

He said the solution for all workers lies in tackling "the cost of living - most particularly the cost of housing.

"And we need to build, and stop objecting to building locally".

While People Before Profit TD Richard Boyd Barrett said people can't live on less.

"We need urgently to increase the minimum wage - we would say we should be going a lot further, and moving it to a living wage.

"It is just not sustainable to live on the sort of wages that many people are having to put up with."

On the prospect of reduced hours for workers, Deputy Barrett said: "If they're talking about reducing hours, that has probably more to do with the impact of the cost of living increase on people than reducing their spending.

"Whereas if you boost people's incomes, it can actually be a boost to the high street and to the small and medium enterprises".