Will higher minimum wage push inflation, drag on economy?Wednesday, September 04, 2013
POLICYMAKERS should decide on a new minimum wage in a matter of weeks.
The commission in the labour ministry — which is overseeing consultations on the legal wage floor — closed off acceptance of written proposals last Friday, while meetings across the island
are scheduled for the next two weeks.
Stocks surged in the open act of trying to meet the needs of the lowest-paid workers faced with higher cost of living, protecting what little growth Jamaica stands to achieve over the medium term, and meeting the conditions of the International Monetary Fund.
Still, no increase may be put into effect at all (as in 2004 and 2010), while any adjustment to the national minimum wage and minimum wage for security guards will likely make up for loss of disposal income.
On the face of it, the wage floor has increased substantially over the last decade, moving from $2,000 for a 40-hour work week in 2003 to $5,000 last year -- a 150 per cent increase.
But inflation over that period totalled 297 percent, officially.
Some economists don't favour an increase in the minimum wage.
Kirkland Anderson reckons that increasing the minimum wage now would lead to higher inflation levels and, ultimately, further contraction in the economy.
The Northern Caribbean University associate professor of economics and management believes that worker productivity needs to be increased in order to avoid the inflationary impact of increasing the wage floor.
In the same vein, international management consultant Trevor Hamilton said that as productivity levels remain low employers will continue to get less output that what they are paying for.
"The only solution is increasing productivity," he said. "While the minimum wage continues to be adjusted, the working poor must be given the necessary tools and skills they need to earn more."
Even then, Hamilton is not opposed to an increase. He suggested that the rise in public transportation costs and school materials, which grew by 25 and 20 per cent, respectively, could be used as a possible guide to determining a wage adjustment.
Damien King pointed out, however, that changing the legal wage floor may not benefit the most vulnerable among income earners.
"Most of the lowest-paid occupations are in the informal sector where laws and regulations are flouted anyway," said the head of the Department of Economics at the University of the West Indies, Mona.
But considering that the minimum wage is close to or below the lowest paid jobs in the country, he believes a higher wage could mean laying off more people in a struggling and shrinking economy.
Danny Roberts, worker representative on the Minimum Wage Advisory Commission, said there is no empirical data to show a correlation between minimum wage increase and unemployment over the years, such an argument would be abstract.
"However, the increase has to be measured having regard to the needs of the workers and their families, the general level of wages currently in the country, the cost of living and, importantly, the IMF conditionality which speak to minimum wage as a social security benefit," he said.
The Minimum Wage Advisory Commission, is appointed by Government to consider and advise on all matters relating to the Ntional Minimum Wage.
The commission comprises representatives of the Government, trade unions and employers' group and is mandated to review the rates annually.
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