#BTColumn – Minimum wage blunder

Disclaimer: The views and opinions expressed by this author are their own and do not represent the official position of the Barbados Today.

by Dr Derek Alleyne

It was predictable that Prime Minister Mottley would have jumped on what she calls opposition to her promise to have basic wage legislation by April. It has become part of the course to expect any voice dissenting from her dictates to receive some hasty, usually off point, response.

Ms Mottley finds it unbelievable that anyone would oppose the setting of a basic wage, and no matter how I searched no evidence of opposition to the basic wage was found.

The response to Mottley’s dictate from Opposition Senator Franklyn amounted to a conclusion that Mottley was all talk. Comments by Dr Howard requested proper analysis before implementation.

The NUPW President McDowall supported it and introduced the concept of a living wage and his call for a Prices and Income Policy was echoed by the President of the Private Sector Association, Edward Clarke. Chairman of the Chamber of Commerce Trisha Tannis was debating a new rate and so too was Economist Jeremy Stephens.

Sometime during the St. George North by-election, I urged a debate on the promised minimum wage and as reported in a daily newspaper, the minimum wage discussion has been around for a long time. What people find coincidental was the timing of the announcement of the coming legislation. It appeared to most people as a response to the impasse with G4S.

The last administration had designed a framework for discussions to take place between the social partners, and my information is that the cabinet paper has been catching dust on some table in the Ministry of Labour.

Caught in a dilemma, Mottley conveniently pulls out the basic wage talk and then expects the rest of Barbados to stay silent because she has spoken.

I trust not the words but the actions of men and women and Mottley strengthens my belief in that dictum.

Setting minimum wage levels is not an easy sell but requires careful analysis, for it can have both negative and positive effects on the economy. Azar et al.  A 2019 research paper entitled Minimum Wage Employment Effects and Labour Market Concentration noted that “many papers document the employment effect of the minimum wage – Neumark and Wascher (1992); Card and Krueger (1994); Dube, Lester and Reich (2010a); Meer and West (2016); Jardim et al. (2018); Clemens and Wither (2019); Cengiz, et al. (2019), to name only a few. They further contend that despite the volume of work there is still considerable debate about whether there is, in fact, an appreciable dis-employment effect of the minimum wage, with many studies finding null results while many others indeed show a negative employment effect of varying intensity.

Hong Soon Kim & Soo Cheong Jang in a paper entitled Minimum Wage Increase and Firm Productivity:  Evidence from the Restaurant Industry Using Equity Theory and Fair-wage Hypothesis, investigated the relationship between the federal minimum wage and restaurant productivity. They found that increasing the federal minimum wage immediately enhances restaurant productivity for up to two years.

Further, the results showed both full-service restaurants and low-wage restaurants benefit from the positive effect, while there was no significant effect on limited-service restaurants and high-wage restaurants.

The results suggest that restaurants should cope with minimum wage policies by focusing on implementing initiatives that can maximize enhanced work efforts and productivity.

The results further highlighted that restaurants should consider either continuously raising wage levels or raising them every two years to consistently obtain enhanced motivation and productivity.

All progressive Barbadians would welcome a basic wage. But given the PM’s seeming propensity to engage mouth before brain, they will require greater insights into the issue. What are the costs and benefits, will it be national, sectoral, and what monitoring mechanisms will be employed? These are all critical issues.

In addition, at the last meeting of the Social Partners, a call was made by the PM for a committee to address a Prices and Income Protocol. Is another committee of the social partners to be instituted to join the scores of other committees from which not a peep has been heard?

If the draft legislation had been discussed with the Social Partners, thewn opposition or critical assessment would not now be possible. That is why I believe it was a knee jerk reaction to the impasse and not a carefully analysed policy intervention.

Dr Derek Alleyne is a trade unionist, social commentator and member of the Democratic Labour Party.