By NATARIO McKENZIE
Tribune Business Reporter
INCREASING the minimum wage could ultimately reduce employment and limit the ability of the economy to grow, a top Bahamas-based economist warned yesterday, urging the Government to instead focus on increasing the skills and productivity of the workforce.
Ralph Massey, the New Providence-based author of numerous studies on the Bahamian economy, told Tribune Business the main problem was that a significant section of the workforce was illiterate and lacked skills.
“It’s not that we don’t have the talent or skilled people here; it’s the lack of the quantity of better trained people,” Mr Massey said.
“This has been the problem in the public school system for decades. Here in the Bahamas you have a public school system that is producing a large number of illiterates. Most can’t pass Math with a passing grade, and half pass English with a passing grade. The Government should focus on increasing the skills and productivity of its labour force.”
Labour Minister Shane Gibson recently said the Government will consider proposals for an increase in the country’s minimum wage. The minimum wage for the public sector is currently $210 per week, and $150 per week for private sector employees.
“This is the kind of popular thing that governments do in the belief that by edict they will improve the welfare of the people who voted for them by saying that they ought to get more,” Mr Massey said.
“What they should be looking at is improving the productivity of the workforce. Just passing an edict saying that you are worth more is a short-term solution which essentially causes lower employment from those sectors which are employing the most people.
“You also affect the cost structure of marginal businesses. The governments that have a penchant for this type of economic solution end up with lower jobs. This is what happened in America; they were basically issuing more food stamps and raising the minimum wage,” said Mr Massey, who is getting set to release a book, ‘What Happened to America?’, on that country’s economic crisis.
“In the short-term it creates the appearance of making people better off, but you are reducing the economy’s ability to grow,” he added of a minimum wage rise.
“When you have a country with a significant percentage of its labour force being illiterate, the country is tied up in a bad circle. Increasing the minimum wage will not help this. I think that the minimums wage issue is a cheap way for a politician to curry favour with voters.”