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Minimum Wage Can't Be Raised 'In Vacuum'

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Jeffrey Beckles

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The minimum wage cannot be increased "in a vacuum", the Chamber of Commerce's chief executive warned yesterday, with the "ramifications" for the private sector requiring careful study.

Jeffrey Beckles told Tribune Business that The Bahamas needed to move away from analysing such moves "in isolation", and instead adopt a more holistic approach where the interests and concerns of all affected parties were addressed.

Pointing out that "timing" was often key in determining the extent of any initiative that results in increased business costs, Mr Beckles said many in the private sector - especially small and medium-sized enterprises (SMEs) were "finding it very difficult to survive" in an environment where daily power outages were only exacerbating difficulties.

He added that a "good example" of "arbitrary" decision-making would be the fall-out from any public sector wage increase, since the government would inevitably have to fall back on a taxpayer community already complaining it is "over-taxed" to finance this.

Responding to trade union calls for the minimum wage to be increased to between $250-$300 per week, up from the present $210, Mr Beckles told this newspaper: "Firstly, timing is everything.

"I don't think the issue is whether the minimum wage ought to be increased. The issue is timing, and we can't have this conversation in a vacuum. We've seen the results of decisions made without considering the ramifications. I think everyone agrees we have to get out of that mode, sit down, table the issues and talk with the stakeholders and financial analysts."

Mr Beckles, arguing that the projected impact of any minimum wage rise needed to first be established for the private sector, workers, trade unions and the wider economy, continued: "We can't do it in isolation.

"Bear in mind that the same [business] community is finding it very difficult to survive in the environment we're in now. That has nothing to do with whether the minimum wage is increased or not. We're in a very challenging time.

"We have to dot the 'i's', cross the 't's'm, fact check and make sure it's palatable," he added. "If it's agreed that the minimum wage is to be raised, where is the government going to come to pay that difference?

"They're coming back to you and me for that money. Bahamians are already screaming about being taxed and over-taxed. That's a good example of why you can't arbitrarily raise the minimum wage.

"You have to consider the small and medium-sized businesses of the country that are already struggling. It's not about whether we agree or disagree. We have to assess the impact across the board, and that can only be done by engaging all stakeholders who are affected. It's about the impact, and there's a lot to take into consideration."

Trade union leaders on Monday said they were pushing for a minimum wage increase to be formally discussed at the National Tripartite Council, the body created to resolve all labour, workplace and industrial relations issue in The Bahamas.

Obie Ferguson, the Trades Union Congress (TUC) president, told Tribune Business that such a rise was justified by persistent cost of living increases that had been further exacerbated by the VAT rate hike to 12 percent.

Branding the existing $210 weekly minimum wage as "inadequate" for the "average" Bahamian household, Mr Ferguson argued that his proposed increase of between 19 percent to 43 percent would not be too burdensome for Bahamian businesses to absorb because most were "doing well".

The first, and last, increase in the minimum wage occurred in mid-2015 in a bid to cushion the impact of Value-Added Tax's (VAT) introduction - and associated cost of living increases - on low income earners. The 40 percent rise to $210 per week was the first such occurrence since the $150 minimum wage was introduced by law in The Bahamas in 2002.

Pressure for further increases has come at regular intervals due to The Bahamas' economic difficulties over the past decade, especially when factors such as the VAT rate rise to 12 percent reduce household purchasing power.

Many Bahamians argue that $210 per week, or $840 per month, is not a "liveable" wage and it is impossible to make ends meet with such an income - especially if the worker has a family to support - given the constant rise in the cost of living.

However, minimum wage increases come with other consequences. They inevitably increase employer costs, which can result in companies laying-off staff or becoming reluctant to take on new hires.

Given that those earning minimum wage salaries tend to be young workers, such as school leavers, just entering the workforce, any reluctance by employers to hire at an increased salary could create barriers to entering the world of work. There is also a social cost to this, as young, unskilled minimum wage earners are often those responsible for the current level of crime.

Companies could also choose to pass increased minimum wage costs on to consumers, raising the cost of living, while any increase in salary at the workforce's lower end can result in greater expectations for a rise among higher-salaried workers - leading to cost-push inflation.

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