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Why the minimum is never enough

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Hubert Edwards

In the final of a three-part series, Hubert Edwards argues that the minimum wage must be part of a broader discussion on raising productivity and lifting Bahamians out of poverty . . .

Given all the issues raised, whether you agree or not with increasing the minimum wage you will undoubtedly agree that the matter goes far beyond the obvious. My intention is not to lobby for an increase, though you would by now accurately conclude that I am not against such a move. What I seek to demonstrate is the need to be more fundamental in our discussions on matters with economic implications. The issues are always nuanced and never simply black and white. As long as we continue to see and debate problems in the abstract, we will miss opportunities for more sustained solutions. The reason for this is simple. Problem definition holds significant importance in broadening the impact and the value we can derive from any challenge. The individual who wishes to learn to ride a bike because he no longer wishes to walk long distances is solving a fundamentally different problem than another who wishes to do so to maintain a healthy lifestyle, be environmentally friendly and to better enjoy the coastline view. Both will eventually learn to ride, but their focus for doing so is different. The same is true for the minimum wage argument. We should not simply be seeking increased pay for individuals but creating a more facilitative environment for economic mobility and wealth creation. We should be focused on solving two connected issues - a low minimum wage and low productivity.

The Bahamas currently enjoys a relatively low level of employee productivity, and does not compare well with Caribbean peers or on the wider global scene. Many argue that, relative to the cost of living, the minimum wage, too, is very low. But the minimum wage in The Bahamas compares very favourably with regional peers, and is superior in most instances. The civil service, for example, an area that receives a higher minimum wage than their private sector counterparts, experiences a very low level of productivity as noted by a recent report. However, these two measures have an important difference. The minimum wage is absolute while productivity is an average. One could argue that failing to increase (or having a low level of) the former punishes those who operate at the highest levels on the productivity scale, but functionally find themselves in circumstances they cannot extricate themselves from in favour of better employment. There are factors which cause some people to become stuck in a cycle of poverty and economic immobility.

We should see that the potential for broader gains lies in fixing both. One is much easier to fix than the other is. One has the power to incentivise the other. The focus must be to work in our various spheres on improving training and productivity. However, the policy discussion must connect the dots on this and therefore manage prevailing sentiments. Let us have a national thrust to improve human development and productivity. Let us build into the national strategy the means of doing so, for example by leveraging the Bahamas Technical and Vocational Institute (BTVI) more; encouraging and incentivising night school for high school diplomas,; putting government support behind businesses to facilitate apprenticeship; incentivising companies on training and employee development; and using fiscal policy to encourage this. Let us usher in a new era where there is a national renaissance, and a seismic shift in rewarding a real strategic and deliberate thrust to build a culture of meritocracy.

The reasons for going beyond simple consideration of an increase in the minimum wage are many. Poor people stuck in survival mode do not generally dream and work in ways that improve national capacity. The problem to be solved is more than giving up a few more dollars; it is strategising and building a cohesive plan, and implementing viable treatments, geared at unleashing national potential. The individual who can better afford to spend on more education, or take on a productive endeavour, becomes a more productive citizen. With critical mass, the community and The Bahamas can change radically. Greater national income could ultimately lead to a lower cost of living and greater benefits for all in the long run. I understand there is a downside to this argument, but let us think in terms of the single mother who works day in and day out, struggling to make ends meet. Her salvation lies not in earning an increased minimum wage, but in the ability to pull herself up beyond the confines of her existing routine. I have heard persons propose that it is best to allow the market to drive the rate of pay. If only life was that simple. There are persons who must be protected, and there are those being exploited daily and living horrid lives because others refuse to pay them their worth. In some ways, the minimum wage is designed to do just that, but we must be consistently thinking higher and thinking about how to change fortunes. I readily anticipate some will counter that persons must do better for themselves, and get new skills. But the practicality of that must be considered. Without a different look at the problem, the right solutions will never be derived. To be clear, I support the idea of persons putting in the effort to lift themselves up but with the caveat that until the environment is right there is work to be done. Let us not limit the thinking to simply increasing wages, which is not likely to result in any significant change, but rather to improving a person’s ability to live a decent life.

If you look at this from a different perspective, giving that individual a few more dollars may facilitate the ability to do more for one’s self, but it is not likely to be of sufficiently significant impact. Having regard for our discussion to this point, and the challenges highlighted, we must certainly ask the question raised earlier: How do we facilitate positive changes in the personal economy of citizens such that the individual becomes more capable of being self-sufficient and able to create wealth, thereby helping to drive the economy? The Bahamas has some unique challenges that cannot be solved by money alone. The economic indicators of being a wealthy country are significantly skewed against lower wage earners, while the gaps between the cost of living and income potential for many are too wide. Economic growth is too weak to counteract this, and systemically shift the fortunes of these persons. A more defined and clinical effort is needed at the individual level, but this must be broad-based enough to influence a critical mass large enough so that the difference can be felt nationally.

Against the backdrop of this discussion, I propose that as a country we take the following approach:

  • Rethink the approach to the conversation when discussing the minimum wage. Great care should be taken to frame the conversation not simply in terms of what will accrue to the individual in dollar value, but rather in the wider context of the potential economic impact on The Bahamas and benefits for the productive sector. The discussion should not be framed narrowly and strictly in terms of the need for an increase, but rather on how any shift can be leveraged to facilitate growth.

  • Rethink the effort to create value for the targeted individuals to ensure that ultimately they are given the best opportunity for growth. The focus should be centred on creating a culture of high national productivity, which serves as a driver for national economic growth and, in turn, serves as the engine for driving up wages. Within the context of this discussion, there must be a clear focus on solving the productivity challenges across all sectors with the public sector taking a more definitive lead.

  • View the post COVID-19 recovery not simply in macroeconomic terms. Understand that the desire for resilience, and being in the best position to mitigate vulnerabilities, starts with the collective financial and economic strength of the citizen. Policy positions, therefore, in the face of limited options must have an impact that is more indigenous. The drive for individual and collective productivity, and for advancing human capital development, should be linked to supporting and enabling entrepreneurial efforts designed to advance the level of participation by regular citizens and small business entrepreneurs to the highest possible level. This would create wider and deeper economies around individuals and businesses through local investment and entrepreneurial activities, which has been historically challenging.

Conclusions

The solutions to the many issues faced by The Bahamas are complex. In this piece, we sought to shed some light on how we approach discussions on solutions and to warn against the urge to narrow the assessment and analysis too soon. If as a country we shift the thinking away from solely focusing on financial metrics, in this case a minimum wage, we can see how the root cause of problems can be addressed. The sustainable solution for low income earners is the enhancement of their ability to create wealth, thereby breaking generational cycles of poverty. The conversations must identify the high potential for economic scarring post-COVID, and consider how the vulnerable low income earning population, as well as other persons, will be affected. Now is the time to go well beyond the minimum. This ‘going beyond’ is not simply in terms of a dollar amount, but involves serious policies, initiatives and programmes. These policies, initiatives and programmes must be fundamentally designed to facilitate persons, causing the country as a collective to more actively and easily answer: How do we facilitate positive changes in the personal economy of citizens such that the individual becomes more capable of being self-sufficient, is able to create wealth, and is thereby able to help to drive the national economy forward? I believe the answer lies in going beyond simple financial treatments.

Comments

FreeUs242 1 year, 9 months ago

The Government don't care to raise our wages, they're too busy traveling and gaining more political attention instead of tackling proverty and crime. How much money do they make on a weekly base just sitting up in an office having tea parties. The unemployment is rising from Hotels closing and leaving many without work.

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bahamianson 1 year, 9 months ago

Poverty is a mindset . People need to be taught how to budget and prioritize their spending also . If people get a raise, they will look for something to spend it on.

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FreeUs242 1 year, 9 months ago

I agree, but some jobs don't increase their staff pay over a long period of time or not even at all. Some people still finding jobs paying below minimum wage because that is the only job that is accessible to feed their families. The Government should know well enough by increasing VAT on the struggling citizens trying to survive their cruel tax system, to also consider boosting bahamian minimum wage to adjust to the increase. We can all profit from the Land. Some ppl to high minded and corrupt to help their own ppl.

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FreeUs242 1 year, 9 months ago

When they decided to become LEADERS, it is their job on making it a better place by uplifting the people in it. Without the votes, maybe they would have been just like me and you. Always be honest and humble when you get in power because it is the same ppl that put you there.

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