The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Private sector leaders yesterday branded the Government’s plans to increase the minimum wage as “dangerous” and “ludicrous”, warning that it risked increasing unemployment and further undermining the Bahamas’ cost competitiveness.

Robert Myers, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) newly-elected chairman, told Tribune Business that the country needed to avoid “cutting off its nose to spite its face” where the minimum wage issue was concerned.

While an increase in the $150 weekly/$4 per hour private sector minimum would boost living standards for workers at the bottom of the job market, Mr Myers said it might force businesses to lay-off other employees and cause the Bahamas to lose market share in sectors that compete internationally.

He warned that it was “dangerous” for the Christie administration to promise a minimum wage increase without any empirical data to assess the consequences, especially given that business operating costs in the Bahamas were already too high.

He was backed by Peter Goudie, head of the BCCEC”s employment and labour division, who warned that the timing for the proposed minimum wage increase was “all wrong”.

This, the former City Markets human resources chief said, was because the private sector was already facing Value-Added Tax (VAT) and a multitude of other initiatives that all threatened to increase costs and impair competitiveness - with the precise impacts unknown.

“I can’t see how they can be talking about increasing the minimum wage when the country is still reeling from the recession,” Mr Goudie told Tribune Business.

“They’re increasing our costs through VAT; we have the possibility that they will bring in National Health Insurance, and we don’t know how much that will increase our costs.

“We have this outstanding pensions Bill that they’re thinking of reading again, and we don’t know how much that will increase our costs. They’re talking about all sorts of changes to the Employment Act which we objected to back in 2012.

“Who’s going to pay for all this? They’re pricing us out of the region. If you keep increasing our costs, we’ve got to keep driving up prices to pay for it. If we drive up prices, how are we going to properly compete against Jamaica, the Dominican Republic and Mexico. It’s ludicrous.”

Messrs Goudie and Myers were reacting after Shane Gibson, minister of labour and national insurance, used his Labour Day address to call for employers and unions to submit proposals for an increase in the minimum wage before year-end.

Mr Gibson also backed trade union calls for the creation of a National Redundancy Fund, which would compensate Bahamian workers “who are made redundant by dishonest employers or by employers who are unable to make redundancy payments”.

Mr Myers, though, explained that the minimum wage increase plan had to be set in context against all the “soft labour costs and labour burden” faced by Bahamian employers.

These costs included National Insurance Board (NIB) contributions, the possible NHI scheme, and a whole host of benefits such as pensions, health insurance, vacation pay and statutory requirements such as redundancy pay.

“We are very concerned about our regional and local competitiveness,” Mr Myers told Tribune Business. “We can’t put ourselves in a position where we are all enjoying a greater and higher standard of living, but cut off our nose to spite our face and lose our ability to compete regionally.

“It doesn’t matter what we pay ourselves if we lose business, and it [a minimum wage rise] has the potential to drive unemployment up. Everyone gets paid a bit more, but there are fewer jobs. I’d rather have jobs and make ends meet than have no job. The cost of doing business here is already too high.”

A minimum wage increase inevitably raised the marginal costs of employment (hiring), and could mean employers hire less or shrink their workforces in response.

If this happens, the very people a minimum wage increase is designed to protect - those at the bottom of the labour market - will be impacted most.

“Anything with high labour is going to be hit, and hit hard,” Mr Myers said, naming the tourism, construction and services industries as those particularly vulnerable to a minimum wage increase. Others include gas stations, retail stores and fast-food restaurants.

“All these things they are dreaming up have a very significant effect on the cost of labour,” Mr Myers told Tribune Business. “It’s not the minimum wage; it’s the other take home stuff. Even productivity has an effect on the cost of labour.”

Mr Myers said the tourism industry, in particular, had already lost market share to rival destinations, and a decline in Bahamian gross domestic product (GDP) that was induced by a minimum wage rise and other increased business costs would benefit no one.

The BCCEC chairman added that the private sector would be working with the International Labour Organisation (ILO) and international Employers Confederation to produce statistical data and analysis on a proposed minimum wage increase, adopting the approach it had employed on tax/fiscal reform.

Among the issues likely to be studied are Bahamian wage rates in comparison to the rest of the Caribbean, and the “labour burden as a percentage of pay”.

“Just to say these things without understanding where we sit in the region as far as the competitiveness of wage costs is dangerous,” Mr Myers told Tribune Business.

Mr Goudie, meanwhile, said the vast majority of working Bahamians were already earning more than the minimum wage, meaning any increase was unlikely to help them.

“We can’t pay more for the same stuff,” Mr Goudie told this newspaper. “We’ve got so many people unemployed, it’s going to make it harder and harder for people at that level to get a job.

“I don’t know why they’re talking about it right now. The timing is all wrong. They’re increasing so many costs, I don’t know where they’re going.

“I don’t understand why they want to do this stuff when they know everybody is hurting and trying to make ends meet. If the economy was booming and hopping along, maybe it would be time to look at it,” he added.

“But this is no time to be looking at foolishness like this, when we’ve got VAT coming and don’t know the actual impact. Asking us to make recommendations to increase the minimum wage, My God, it’s just the wrong time.”