The Tribune

In the first of a three-part series, Hubert Edwards argues that the debate over increasing the Bahamian minimum wage needs to be better directed and focused . . .

According to a 2020 survey, The Bahamas is the fourth most expensive country in the world to live in, with a cost of living index standing at 100.68 and purchasing power of 71.40. The three countries ranking ahead of The Bahamas are Iceland (123.96 and 87.85); Switzerland (131.39 and 126.15) and Norway (113.70 and 107.95). Luxembourg follows The Bahamas as one of the top five, with this country more expensive to live than New York - albeit rents are cheaper here and taxes much more favourable.

Iceland has no official minimum wage. However, there is a benchmarked salary of approximately $2,720 per month or $540 per week. I suspect this is highly influenced by professional salaries. In Switzerland, the minimum wage that was determined in November 2020 is $25 per hour, which translates to around $3,800 per month or $760 per week. Norway has no official minimum wage either but, as an example, a hospitality worker makes on average $19.50 per hour while cleaning staff make $22 per hour. Comparatively, the rates are significantly higher than those in The Bahamas and, other than being in the same high cost country category, the economic fundamentals are significantly different. This information, though, provides context as it shows in absolute terms the gap between the cost of living and earning potential for those at society’s lowest levels. It is the issue of how we can reduce the impact of this gap, knowing that wages will never approach the levels cited here, with which this column is most concerned.

In conversation with a leading public figure recently, the question was raised: “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 collectively helping to drive the economy?” I believe this is a powerful notion on which to think about economic growth and development; the advancement of citizens and national building. When it comes to the minimum wage, viewing the topic through this lens forces persons to accept and appreciate the need to humanise the issue and its attendant problems and challenges. How do we think, and engage, beyond the usual chatter to understand that the ability to become better is what is most important in changing lives and shifting generational trends.

It is often sage advice that admonishes if you are to achieve anything of significance you have to do more than the minimum. Those who go the extra mile realise massive successes. Both are true, and as a country we must move beyond the minimum wage debate, make the necessary corrections and look at other important fundamentals which will improve the lives of those meandering at or below the poverty line. It requires no analysis to conclude that any reasonable increase, one that on balance takes into account the interests of employers and employees, will never change the fortunes of a significant number of persons. In a country listed as having the sixth most expensive city (for our purposes the entire country), $210 per week or any new number - even after a nominal increase - is simply not sufficient to facilitate a reasonable standard of living. With a stated per capita income of around $32,000, the Bahamian minimum wage produces $11,000 in annual income - just over one-third of the average. The comparison provides a compelling nudge towards a minimum wage increase. I support an increase in the current level of minimum wage for reasons beyond persons just having more money to spend, but as part of a broader national approach that ultimately benefits all and the country.

The new normal is already here

I believe that the rest of 2021, and leading into 2022, will be characterised by unprecedented levels of volatility and uncertainty. Additionally, I am convinced that this period, and even beyond, will feature a significant level of economic scarring where individuals suffer the lingering effects of the global COVID downturn. The Bahamian economy continues to show small signs of coming back to life, but a large part of this is psychological given where the world is with vaccinations and the possibilities this presents for significantly changing the pandemic’s trajectory.

However, there is no doubt that over the last year many individuals and businesses have taken a significant economic hit. Unemployment is at an all-time high; many workers have been furloughed for long periods; government social support has been at record levels; Parliament has suspended the automatic trigger for redundancy payments; and there are many companies haemorrhaging cash and liquidity. The truth is that despite the positive outlook, the true extent of the COVID hurt is not yet truly evident. This certainly provides an interesting backdrop for discussing multiple social issues including poverty, economic inequality and creating wealth.

The extent of the hurt is expected to emerge in the now-fabled “new normal”. This, a period of sustained uncertainty and volatility characterised by the adoption of technology and innovation, an ever-shrinking global community and new opportunities, will lead to creative disruption and, in some cases, destruction of employment. That new normal is here, and the table has been perfectly set for a potentially challenging period. With significantly weakened fiscal fundamentals, driven largely by a bulging national debt, there are many structural headwinds for The Bahamas to grapple with. In an environment where, for the first time, the historical composition of foreign and domestic debt could flip amid reduced national income, the possibility of significant adverse pressure on low income earners is extremely high. It is in this environment that we now have a raging debate about the pros and cons of increasing the minimum wage. At a time when the country is in arguably its worst-ever economic states, the spotlight has been turned to the question of whether low income earners are earning enough and if it should it be raised and to what extent. Should there be an even broader consideration of a ‘living wage’ and not just a minimum wage? Issues and questions such as these always arise during times of significant economic upheaval. From a pure human point of view, I am and will always remain a staunch proponent of the need to pay special attention to the advancement of low income earners. There are, however, wider national implications as to why one would wish to align with any progression in the personal economic well-being of individuals.

On the other hand, there are people who strongly argue that any increase in the minimum wage will be detrimental to The Bahamas. One would have to be very naive to think there will be no negative effects from such a change. Proponents point to the cost of living impact given that the additional cost will simply be passed on to the consumer. Some point to attendant stress placed on workers as companies adjust with reduced days or hours to compensate for or eliminate the subsequent increase in costs, resulting in workers simply working harder and being disadvantaged. Some see the issue as a political talking point ahead of the upcoming general election.

Realise that there are also persons who take the view there should be no minimum wage at all. Let the free market decide, they say. Let the individual’s ambition to grow push them to areas where wages and salaries are high. Create a shortage of workers in the low income earning segment of the market and wages will increase. It is essentially a debate that is poorly premised, and one that is likely to run like two locomotives on parallel tracks; they may come close but the two shall never meet. It is my considered opinion that the present conversation is being directed in the wrong way. It is not simply raising or not raising the minimum wage. The issue is larger, and is pregnant for a more refined and fundamental conversation. Even in the absence of economic upheaval, the issues are critical. In our assessment, we must be always mindful of the perennial structural challenges experienced by The Bahamas and the effect this has for those living on the margins. Let us consider the effects of the COVID crisis and the reasons why it should cause the current arguments to be rearranged.

To be continued.........