Opportunities for the Government and Opposition – the Minimum Wage Act and reducing income inequality
Ahead of its 2016 Annual Meeting in Washington DC, the World Bank called for a new push to tackle inequality after warning that the gap between rich and poor risks thwarting its ambition of eliminating extreme poverty by 2030.
Of note, in a World Bank ranking of 141 countries, Jamaica is ranked at number 106, with only 35 countries more unequal than Jamaica.
The University of the West Indies economist Dr Andre Haughton argues that Jamaican government policy directs resources towards supporting firms rather than supporting households; this trickle-down approach is a source of inequality in Jamaica, so much so that over the years, up front and in your face Jamaican government policy has increased inequality, which suits those in power.
Nowadays Jamaica’s inequality seems normal, but only because we have got used to it, just like we have got used to our yearly 4th highest murder rate per capita in the world.
Jamaica’s inequality ranking shows clearly why we are where we are, a country on the edge of a cliff, with successive administrations doing very little to alleviate the conditions of those on minimum wage.
The review for an increase in the minimum wage [National Minimum Wage Act; National Minimum Wage Act (Industrial Security Guards)] is one of the greatest opportunities for the JLP government to show the poor in Jamaica, and the world at large, that we are serious about reducing this inequality. After all, when in opposition the now Minister of Finance had stated clearly that it would go to JMD$8,200 for a 40-hour week, representing a JMD$2000 per week uptick. NOTE, minimum wage was last raised at the beginning of 2016 and nearly 2 years later the people of Jamaica are still waiting. In the meantime everyone has seen and felt the increases in the cost of living. Not only that, but the Poverty Index stated that 21% of our people live below the poverty line [just over JMD$3,100.00 per week].
For this administration to accept the flawed [YES, they are flawed] recommendations of the minimum wage review committee for an increase of only JMD$434 per week [JMD$86.80 per day – not even one way bus fare], would demonstrate clearly their actual lack of caring/compassion for those on the minimum wage, and show a self-centred desire to ensure that they can continue to have their army of helpers, gardeners, nannies, cheap workers et al.
One of the JLP’s tactics at the last elections was the tax break [I will not discuss the “no new taxes” promise here]. At the end of the day the tax break actually benefited less than 300,000 [actual data shows 251,792] working people. Yet a just and fair increase in the minimum wage would benefit over 500,000 people easily, improving the lot of the marginalised in our split society.
And for the PNP opposition? Your silence on what the review committee has proposed in the mainstream media is deafening. You need to wheel and come again, and do so quickly. Your history is the party of the poor, for the poor and with the poor. Your lack of public communication to date on the review and recommendation of a JMD$434 per week increase will effectively help to keep the people in poverty, those same people whose rights you claim to champion; thus you are supporting and perpetuating the income inequality that exists in Jamaica.
And before I hear that an increase of JMD$2000 per week in the national minimum wage will create unemployment, I state without hesitation or apology that this is a fallacy, regardless who you are – whether economist, financial guru, believer in market forces, supporter of state intervention, owner of a security company or a householder.
A fair & just increase in the minimum wage will create greater consumption, productivity and a boost in morale and self-worth. What it will also create is a slightly better off population, some who will be able to work 4 days a week instead of 5.
Raising the Minimum Wage Boosts the Economy
• Raising the minimum wage does not kill jobs. Leading US economists have found that increases in the minimum wage have no discernible effect on employment, including employment in high-impact sectors like restaurants and retail.
• Recent experience in US cities that have raised their minimum wages provides further support. San Francisco increased its tipped minimum wage to USD$12.25, before tips, and experienced positive job growth in the leisure and hospitality industry the following year.
• Raising the minimum wage increases consumer spending and boosts the economy. In the US a study by Doug Hall and David Cooper estimated that a USD$2.55 increase in the minimum wage would increase the earnings of low-wage workers by USD$40 billion and result in a significant increase in GDP and employment.
• A raise in the minimum wage predominantly benefits low-wage workers, precisely those most likely to put additional income directly back into the economy, kick starting a virtuous cycle of greater demand for goods and services, job growth, and increased productivity.
What does it mean?
For households, you may have to reduce your helper’s/gardener’s/nanny’s hours/days per week while ensuring they are no worse off than before, without the raise making you miss your monthly car payments/supermarket shopping trips/bar bill payments/extra curricular activities/holidays etc.
For firms utilising security personnel, ensure you only use registered security companies [registered by the Private Security Regulation Authority], and understand that a good and decently paid guard will have far more interest in the security and safety of your employees, contractors, visitors and assets than one who is struggling to make ends meet.
For those who have not read Maslow’s Hierarchy of Needs, please feel free to Google and learn. His pyramid is below, where too many people sit in the larger red base.
The argument that a JMD$2,000 increase will create unemployment is also one perpetuated by the registered security companies, who are already under siege from the many illegal and unregistered cheap firms operating in the industry, firms who do not even pay the present minimum wage or the legislated allowances.
As someone who has worked in the security world for the last 22 years, it may create temporary unemployment [I should say temporary contract breaks/shortened hours per week, as security officers are for the most part individually contracted to their security firm and are not employees]. One of the resources that short sighted companies cut after a wage increase is security. But the cut is short lived, as shortly after a minimum wage increase and the corresponding reduction in security personnel, most firms go back to the numbers that are adequate and effective for their operation. Or they suffer from losses far greater than if they had kept the right numbers of personnel.
And thus, both the JLP Government and the PNP Opposition have a great opportunity:
- To show Jamaica that it really is prosperity for all and not just for a few;
- To push for a greater equality of income for some of the marginalised in our society.
What will it be?