By Malcolm Strachan
WHILE the nation’s power crisis has weighed heavily on the Bahamian people over the past nearly three months, we have somehow been able to shift our focus to another subject - increasing the minimum wage. It is four years since the last increase of the national minimum wage to $210 per week or $11,500 per annum – and since then the government raised value added tax from 7.5 percent to 12 percent.
During that same period, The Bahamas went from being ranked the eleventh most expensive place to live to the third highest on the cost of living index. Ranking fifth on the index in 2017-2018, as of mid-year 2019, the country currently ranks third (per World Population Review).
Though there have been indicators we are on the cusp of a turnaround, this is not being felt on the ground as low and middle-income families have become well-acquainted with hard times. The furrowed brows of our brothers and sisters at local grocers is a vivid image etched in the minds of most Bahamians. Too many of us live hand-to-mouth, daily contemplating how we will make ends meet.
Certainly, we share the burden of each other’s pain, as he who feels it knows it.
Not only do we agonisingly pay outrageous light bills for a defective service, we spend thousands on fees and other expenses for our kids’ schools. For many of us, by the time we pay our mortgage or rent, the BPL bills and purchase groceries, the majority - if not all - of our resources are depleted for the month. For some of us, once we can at least ensure our kids are taken care of, we are merely grateful we can live to fight another day.
Tragically, many of us have it much worse.
Now, as we seek to find answers, many have turned to what seems like the simple solution.
Thus, it begs the question: “Will an increase in the minimum wage alleviate the pressure we feel as a society?” Perhaps. But that may not be a determination we can make based solely on how we feel.
Nevertheless, there are still many among us unconvinced the decision is as black and white as some view it to be.
Understanding the country’s current economic environment can serve us greatly in making a case for whether we should support the push for a minimum wage increase or not.
Maybe a good starting point would be for us to first consider the current context for this discussion.
An estimated 14.8 percent of the populace living beneath the poverty line. A perennial top five country with the highest cost of living in recent years. A nearly 93 percent increase in inflation since 2002 when the minimum wage was $150 and a steep increase since the Minnis administration raised VAT from 7.5 percent to 12 percent last year.
Taking these numbers into account, one may say there is a very compelling argument for the government increasing the minimum wage. However, there is still another side to this coin and we must be mindful that timing is everything.
There are no doubt scores of Bahamians barely getting by and the government should take measures to ease the burden on average citizens. Still, such a move should be approached logically and methodically.
To paraphrase scientist Sir Isaac Newton: “For every action, there’s a reaction.” Indisputably, there are implications if the government was seriously considering an increase in the minimum wage.
Chief among them would be the effect on the small business environment, which the government holds as an area of focus through its small business development and ease of doing business initiatives. Still facing challenges in this arena, the government would essentially be cutting off its nose to spite its face.
The recent decrease in unemployment from 10.7 percent to 9.5 percent has been a positive sign for the Bahamian economy.
Surely, we should all be grateful to see more Bahamians getting back to work and the economy turning around. However, we are not where we want to be just yet, as there is still some distance to go to ensure more people can support their families and the economy is performing at its best. Moreover, it is no secret an increase in the minimum wage may backfire in a number of ways in the business community.
For one, to offset the increase in wages, businesses will likely hike up prices – absorbing the additional increment and taking us back to square one. Second, when employers feel the pinch of statutorily having to pay their employees more, it oftentimes leads to decreased hours and lay-offs. Such implications add more complexity to this discussion.
Businesspeople have already been speaking out. Private sector representative of the National Tripartite Council Peter Goudie unabashedly said the “last thing” the business community wants to do is increase the cost of business in the country. Undoubtedly, based on the pressure the government faces from the electorate to do just the opposite, this places them in an uncomfortable position.
The populace has on many occasions railed against successive administrations to enact policies and create an environment where the country’s main economic driver can thrive and in effect, with businesses being able to hire more people, the unemployment rate would be lowered.
Sharing similar sentiments, Chamber of Commerce CEO Jeffrey Beckles said: “The subject of increases in salaries in relation to minimum wage can’t be taken in isolation.”
He added: “Considerations have to be taken in to context with the medium and long-term impact on companies,” and questioned if companies already fighting to survive would be able to handle another increase in such a short time span.
The likelihood is probably not.
In an argument such as this one, with stakeholders having diametrically opposed views, perhaps we must consider if there is a right or wrong side in this debate. Rather, it may really come down to an issue of timing.
Thus, when we ask the question: “Should the minimum wage be raised?” The answer is unequivocally, yes. Should it be raised right now? Perhaps not.
Unfortunately, the reality is that it can potentially do far more damage than good. And in such a fragile economic state where we’re still in recovery mode, it may be more prudent to stand pat and trust the process.
While there may be a lot of noise coming from constituents, the government cannot afford to get it wrong on this.
They need not pander to the Bahamian people. They need to be direct, but also must help to fill the knowledge gap.
Hopefully, the government can collaborate with Central Bank and the business community to undertake a mass public education exercise on this issue so Bahamians can become more informed. More importantly, the must come up with a plan on how to revisit this in the near future.
Information may not pay bills or fill hungry bellies, but a plan can at least provide reassurance and hope.