Any hike in the minimum wage will see restaurants getting more expensive – and could see many closing their doors, Chef and author JP McMahon has warned.

The Galway restaurateur was speaking after a new ESRI report warned that pay increases of around 14% will be needed by the end of the year to keep pace with inflation.

The report finds that after-tax disposable income fell in 2021 for the poorest fifth of the workforce, while it stagnated for those on salaries of less than €46,000 a year.

It suggests pay increases will be needed to ensure people are not worse off than they were in 2021.

On The Pat Kenny Show, Mr McMahon said the calls are “concerning” for the hospitality industry.

“We are faced with a lot of different rises at the moment,” he said.

“The VAT has just gone back up, we are still in the midst of an energy crisis and there is already wage inflation so I would be very worried that this wage increase … I don’t think it will help inflation; it will make eating out even more expensive than it is already.”

A restaurant Image: Hemis / Alamy

He said the increases will just go on to customers’ bills.

“When you sit down in a restaurant in Ireland, you have to remember that nearly 40% of the cost of your meal is going on labour,” he said.

“If that goes up, then naturally the food prices are going to go up again.

“I think it will just make eating out more expensive. If people think they can get into restaurants for making lots of money, I always think, look at who the banks are investing in.

“You will realise that banks do not invest in restaurants and a lot of them - particularly the smaller ones – are, sort of, family affairs that are run on passion and hard work.

“I think we really need to appreciate our local restaurants a bit more.”

People at Doheny and Nesbitts, 22-01-2022. Image: Sam Boal/RollingNews

Mr McMahon said he was also “very concerned” about the new paid sick leave scheme.

Under the plan, all workers are entitled to three days sick pay per year – rising to five next year, seven in 2025 and ten in 2026.

Employers must pay 70% of a worker's wage subject to a maximum daily threshold of €110.

"In theory, it all sounds great,” he said. “People are sick, they get paid for it.”

“In the private industry though, you have to find the money to pay people not only for their holidays but also when they are sick.

“If you have 30 staff, that puts a lot of pressure on you.

“Particularly if you are a small to medium-sized business, my concern is that it is going to severely impact the middle and you will end up with larger groups and larger companies kind of controlling the restaurants and the hospitality industry.

“The hotel trade will be able to spread these costs over different establishments and I think ultimately the independent restaurants will suffer.”

Photo: Leah Farrell/RollingNews.ie

The ESRI study finds a significant rise in 'material deprivation' in the past year – a metric that measures those who can't afford two items from a list of 10 essentials like warm clothing or a roast dinner.

The institute is warning that income inequality is increasing in Ireland despite the strong labour market.

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