The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government must not cause businesses "to retreat" by rushing into a public sector minimum wage increase that fuels salary pressures throughout the economy, a top executive warned last night.

Gowon Bowe, Fidelity Bank (Bahamas) chief financial officer, told Tribune Business that such a move could not be implemented "in a vacuum" and required extensive consultation between the government, private sector and the trade unions at the National Tripartite Council (NTC).

Pointing out that a "consensus" among all Council members was reached prior to the private sector minimum wage's sole increase in 2015, Mr Bowe reiterated that Hurricane Dorian's $3.4bn blow to the Bahamian economy had made it even more vital that all sides are on "the same page".

He also urged the government, and other Tripartite Council members, to activate the mechanism put in place in 2015 whereby the minimum wage was to be reviewed every two years to determine whether it was adequately providing sufficient income when measured against cost of living increases.

Two such reviews should have occurred by now, and Mr Bowe said he "fully trusts" that Dr Hubert Minnis and his administration will not seek to increase the minimum wage - public sector, private sector or both - without conducting the necessary economic impact studies and stakeholder consultations.

"I believe that, ultimately, this is not a decision to be taken in a vacuum," he told Tribune Business. "We have the National Tripartite Council, and I fully trust he [Dr Minnis] will be using that mechanism to take a fully holistic look with empirical analyses."

Mr Bowe added that the 2015 minimum wage increase, implemented under the former Christie administration, had "buy-in with all three parties in agreement" and a consensus was reached despite their different perspectives.

"Given the impact of Hurricane Dorian and the state of the economy, we don't want businesses to be retreating; we want them to continue to be investing," the Fidelity executive urged. "I fully trust the prime minister's statement will not be taken in a vacuum and will be fully discussed with members of the National Tripartite Council.

"It would not be wise at this point in time if it was a unilateral decision. It has to be a collective decision with businesses in the impacted islands, and businesses in the unimpacted islands that are trying to pick up the slack.

"It's important we're all on the same page and that businesses are not retreating and continuing to invest." Many observers have interpreted Dr Minnis's vague remarks of a public sector minimum wage increase as an attempt to appease trade unions who have become increasingly vociferous in their demands for increased salaries and benefits to match cost of living increases.

No details have been provided, and other Cabinet ministers referred The Tribune amongst each other when specifics were sought. The issue has also yet to be discussed at the National Tripartite Council, this newspaper understands, which is the body created to address all labour-related matters in The Bahamas.

However, John Pinder, director of labour, yesterday said internal discussions had focused on increasing the public sector minimum wage from the present $210 per week to between $300 to $350 - in increase of between 42.9 percent and 66.7 percent. This is similar to what Obie Ferguson, the Trades Union Congress (TUC) leader, demanded earlier this year.

Taking the lower $300 threshold, and Mr Pinder's estimation that 2,000 or 10 percent of the Bahamas Public Services Union's (BPSU) 20,000 members will benefit, this translates into an annual $4,680 increase for every minimum wage worker and adds around $9.36m to the Government's yearly payroll.

However, Mr Pinder said any minimum wage increase in the public sector was designed to force the private sector to follow suit. Should the Government do it for one group, the pressure from other public sector unions and private sector employees to follow suit is almost guaranteed even though the Prime Minister said there are no moves afoot to raise the private sector minimum wage.

Mr Bowe, meanwhile, urged the Government to use the mechanism put in place in 2015 where future minimum wage increases were indexed to a twice-yearly review that benchmarked this against cost of living increases.

He called on all parties to abide by this agreement, adding: "While not at the forefront of all sides' minds, it's certainly not something to turn away from."

The first, and last, increase in the private sector minimum wage occurred in mid-2015 in a bid to cushion the impact of Value-Added Tax's (VAT) introduction - and associated cost of living increases - on low income earners.

The 40 percent rise from $150 to $210 per week was the first such occurrence since the minimum wage was introduced by law in The Bahamas in 2002. Pressure for further increases has come at regular intervals due to The Bahamas' economic difficulties over the past decade, especially when factors such as the VAT rate rise to 12 percent reduce household purchasing power.

Many Bahamians argue that $210 per week, or $840 per month, is not a "liveable" wage and it is impossible to make ends meet with such an income - especially if the worker has a family to support - given the constant rise in the cost of living.

However, minimum wage increases come with other consequences. They inevitably increase employer costs, especially marginal labour expenses, which can result in companies laying-off staff or becoming reluctant to take on new hires.

Given that those earning minimum wage salaries tend to be young workers, such as school leavers, just entering the workforce, any reluctance by employers to hire at an increased salary could create barriers to entering the world of work. There is also a social cost to this, as young, unskilled minimum wage earners are often those responsible for the current level of crime.

Companies could also choose to pass increased minimum wage costs on to consumers, raising the cost of living, while any increase in salary at the workforce's lower end can result in greater expectations for a rise among higher-salaried workers - leading to cost-push inflation.