The minimum wage will be reduced by €1 to €7.65, and other employment agreements will be reviewed to remove barriers to the creation of new jobs, says the national recovery plan.

It says the Government will introduce legislation to reduce the minimum age by 12 per cent to €7.65 to enhance competitiveness. It says the current level is the second highest in the European Union in absolute terms and sixth highest when expressed in purchasing power.

This is having negative effects such as acting as a barrier for younger, less well skilled workers to enter the labour force; preventing small firms from adjusting wage costs downwards to maintain viability; and reducing the capacity of the service sector to generate extra employment by offering lower prices to people.

"Our circumstances have changed dramatically in the last three years. Price levels have reduced and earnings have adjusted downwards to help to preserve jobs. A reduction in the minimum age level- as proposed by the OECD - can also be expected to remove a barrier to job creation," it says.

The plan also says other employment agreements, known as employment registration orders and registered employment agreements, between employers and workers will also be reviewed.

These agreements cover pay and conditions in sectors such as agriculture, cleaning, hotels and the security industry.

A review of the framework of these arrangements will be undertaken by the Minister for Enterprise, trade and Innovation and finalised within three months.

The Migrant Rights Centre and the Mandate trade union said cutting the minimum wages of the lowest-paid workers would “degrade working conditions and lead to a decrease in productivity, damage consumer spending, and will place those with the lowest incomes, including migrant workers, in an impossible situation”.

Mandate general secretary John Douglas said the minimum wage was introduced in recognition of the “huge wage inequality that exists in this country”.

Labour Party enterprise spokesman Willie Penrose said the announcement showed the "least well -off and most vulnerable, are fair game as far as Fianna Fail are concerned".

"Cutting the minimum wage makes absolutely no sense at any level. The hardship such a cut will cause will be very significant for the tens of thousands of households who rely on minimum-wage employment and will act as a disincentive to work," he said.

Mr Penrose said there was "certainly some merit" in the proposals to reform registered employment agreements or employment regulation orders in the agricultural, catering, construction and electrical contracting sectors, but cutting the minimum wage was "stingy and mean-spirited".