The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamians are facing “a very significant” living standards squeeze in the New Year, the FNM’s newly-elected deputy leader warned yesterday, with costs increasing but wages “going the other way”.

K P Turnquest told Tribune Business that while he “didn’t want to cause panic”, the results of the latest wage survey in the hotel and food services industry showed incomes were declining just as Value-Added Tax (VAT) was set to further increase living costs.

The Department of Statistics report said average weekly wages in the Bahamas’ largest private sector industry declined by 11.1 per cent in 2013, compared to the previous year.

It blamed this on a slight, 0.5 per cent decline on the number of persons employed in the sector, but said the weekly wage for male and female employees in the industry declined by $56 and $31, respectively, over 2012 levels.

The Department of Statistics survey findings suggest that Bahamian household incomes, and purchasing power, are already declining at a time when they need it most, with VAT forecast to produce an initial 3-5 per cent spike in the cost of living.

The implication is that Bahamian living standards will suffer, and that VAT and other associated cost increases could push some individuals and families ‘over the edge’.

“That says something very significant about what is happening in terms of the overall economy,” Mr Turnquest told Tribune Business of the Department of Statistics’ findings.

“We have to be concerned. The cost of living is going up, and if wages are going the other way, it will not be long before we have a problem.

“When we talk about adding VAT to the cost of electricity, and adding VAT to the cost of gasoline at the petrol station, all these things are going to be very significant come January 1,” the Opposition’s deputy warned.

“Hotel workers make up the largest block of employment outside the public sector, and if average wages are down, that is going to be a very significant issue for us.

“You’re looking at the potential for a slowdown in the economy, all of which has knock-on effects. I think we have to be concerned.”

Asked by Tribune Business to elaborate on the potential implications for Bahamian businesses and consumers, Mr Turnquest responded: “I want to use the right word; I don’t want there to be panic.

“I have to be cautiously optimistic the Government has got it right, and considered all these risks, but we as consumers and citizens have to be prepared to adjust spending, do monthly accounting and put aside savings - whether it’s 15 per cent, 20 per cent of salaries - to withstand any shocks.

“We must be proactive and we must save. This government ain’t checking for us.”

The Department of Statistics results for the hotel and food services industry, though, may have been skewed by a surprising 38 per cent decline in the weekly wage paid to managerial staff.

This fell by $314, or 38 per cent, year-over-year between 2012 and 2013, dropping from $829 to $515.

Male managers saw a 46 per cent drop, from $914 to $489, a $425 difference, while women suffered a more modest 29 per cent fall from $755 to $539. That is a $216 decline.

Mr Turnquest, meanwhile, pointed to the continued “confusion” over VAT that exists in both the private and public sectors, and among the general public.

The registration process for mandatory VAT-paying businesses continued to be fraught with problems, he said, while education highlighted the confusion surrounding the new tax regime.

Mr Turnquest pointed to letters sent out to C. V. Bethel parents suggesting that VAT would be levied on examination fees, only for the Ministry of Education to rescind this and confirm that an official had issued it in error.

While there may be no VAT levied on high school examination fees, College of the Bahamas (COB) students and their parents have now been informed that the 7.5 per cent levy will be applied to a range of fees and charges.