BMA: Proposed minimum wage will create major headache for small businesses

The proposed minimum wage set to take effect from April 1, will create a major headache for small businesses across the formal and informal sectors, officials have warned.

This caution came as those in the manufacturing and agriculture sectors sounded the alarm of possible devastating knock-on effects, and the Barbados Chamber of Commerce and Industry (BCCI) called for “the difficult conversation” on productivity and efficiency gains and the cost of doing business in Barbados.

Government has indicated that it will be moving ahead with a Minimum Wage Order for a proposed national minimum wage of $8.50 and a minimum wage of $9.25 for security officers, for April 1.

Executive Director of the Barbados Manufacturers’ Association (BMA) Shardae Boyce told reporters that while majority of the association members were already paying “well over the proposed minimum wage”, there were still concerns about a severe impact on their operations to wage increases that will have to take place among other business support organizations who then will be forced to pass on costs.

“Ripple impact may mean different things to different people, but for the manufacturing sector, we partake of services from different sectors who will have to now follow the increase in minimum wage and therefore it is anticipated that cost may be passed on in terms of the services they provide to us,” explained Boyce.

“So obviously, if you are partaking of those services and an increase is implemented, it will automatically affect us in terms of the prices that we have to pay for partaking in those services. So from a manufacturer’s perspective that is how an April 1 implementation will impact us,” she added.

Meanwhile, Chief Executive Officer of the Barbados Agricultural Society (BAS) James Paul said while larger farming companies were already paying the proposed minimum wage or more, the smaller farmers would be the ones to feel the pinch.

“They would have to look at their operations to make sure they comply with the minimum wage. The automatic thing from this though is that there will be a knock-on effect as pointed out. There will have to be some adjustments if they are going to remain competitive,” said Paul.

However, pointing out that farm wages in other countries where Barbados gets some of its food supply were a lot less than in Bridgetown, Paul said this could result in local farmers becoming even less competitive.

“The question of the competitiveness of the prices that we offer here as against imports from CARICOM countries is something that we will be concerned about,” he said, pointing out that in Barbados there were a lot of very small farming operations.

Private sector officials have also raised concerns that business owners in the informal sector would also have a hard time continuing their operations if they were to pay workers more than they currently do.

President of the Barbados Employers’ Confederation (BEC) Yvonne Hall said she anticipates that those in the informal sector who did not pay taxes or National Insurance Scheme (NIS) contributions to be most impacted.

“Right now you have jobs that do not fall under the Shops Act and so you are not breaking any law. But let us be clear, with the introduction of the national minimum wage, no one in Barbados should be working for a wage that is below whatever has been stipulated and specified in the minimum wage. So everyone will be expected to follow that Order and you will literally be in violation if you are paying someone below the national minimum age, whether you are a small farmer or a seamstress or whatever,” warned Hall.

President of the BCCI Tricia Tannis insisted that along with a national minimum wage, which will automatically mean a pay increase for some workers, there should be a renewed national discussion on productivity and efficiency gains, as well as the cost of doing business.

“Those are the ones we do need to move the needle on so that we can create the fiscal space,” said Tannis.

“If we continue to do what we are doing whether it is minimum wage or other costs adjustments without looking essentially at a broader economic challenge, which is that we have costs spiraling out of control, what we will do eventually is create a compounding impact and then be forced to make other adjustments in the future,” she said.

Adding that at some point there will need to be economic adjustments downward, Tannis who was speaking during a media conference on Friday, maintained “Those are the kinds of conversations that we do need to have”.

“Increasing wages is easy, having a national conversation and really trying to move the needle on productivity and efficiency and looking at the structure and cost of doing business that is harder, but we do need to have the hard conversation too. We need to act in the best interest of the jobs that are already there in the market and we have to try to sustain them,” said Tannis.

The business community leader said she did not believe the implementation of a minimum wage at this juncture was in the best interest of entrepreneurs who employed workers, and micro and small business businesses

“We really need to preserve those sectors that are going to be impacted as much as we can,” she said.