EX­PLOR­ING NEW AV­ENUES IN THE MIN­I­MUM WAGE DE­BATE

The Star (St. Lucia) - Business Week - - NEWS - BY ED KENNEDY, STAR BUSINESSWEEK COR­RE­SPON­DENT

Telling the story of eco­nomic growth and work­ers’ rights through­out the Caribbean would not be pos­si­ble without a spe­cial men­tion of the push for a higher min­i­mum wage. Along­side see­ing an in­crease in in­come, many min­i­mum wage work­ers (and their trade union rep­re­sen­ta­tives) have so of­ten framed a lift in the min­i­mum wage as a clear-cut vic­tory of David over Go­liath.

Any in­roads made that ad­vance work­ers’ rights and lift liv­ing con­di­tions are some­thing to cel­e­brate, but the min­i­mum wage de­bate has of­ten been a light­ning rod lo­cally and glob­ally for crit­i­cism.

Past bat­tles may have been con­signed to his­tory but we now have the great­est rich-poor gap in our global econ­omy since the Gilded Age of the early 20th cen­tury. Re­cent years have seen es­pe­cially odor­ous rev­e­la­tions come out, in the Par­adise and Panama Pa­pers leaks, about how some of the world’s most af­flu­ent use Caribbean domi­ciles to grow and re­tain their wealth so it’s a fit­ting time to re­visit the min­i­mum wage de­bate, and ex­plore the con­tem­po­rary per­spec­tives to it.

NEW PUSH IN THE NEW WORLD?

Late De­cem­ber saw Mex­ico’s wage com­mis­sion in­di­cate they would hike the na­tion’s min­i­mum wage to around US$5 per day, rep­re­sent­ing a 16% in­crease, fol­low­ing through on the new Pres­i­dent of Mex­ico An­dres Manuel Lopez Obrador’s pre­elec­tion push for a wage hike.

This news is not only no­table for Mex­ico, but for what it will spur in wider North and Latin Amer­ica. For the United States and Canada, the im­pact could be quite di­rect. To what ex­tent will a lift in min­i­mum wages im­pact the long-term at­trac­tive­ness of the new NAFTA deal to busi­ness?

For Latin Amer­ica, the de­bate will be broader, but potentially span a far greater scope, for within the de­bate around min­i­mum wages is not just a re­flec­tion on per­son­nel costs in busi­ness, but a con­ver­sa­tion sur­round­ing the broader progress and ad­vance­ment of economies and so­ci­eties. In the United States, the min­i­mum wage is a hotly con­tested po­lit­i­cal battleground in a na­tion that has achieved sta­ble eco­nomic growth for gen­er­a­tions.

MAX­IMIS­ING THE MIN­I­MUM

Through­out the Caribbean, the chron­i­cles of the labour move­ment and trade union­ism have seen the min­i­mum wage is­sue sewn into the fab­ric of historic and con­tem­po­rary pushes for worker ad­vance­ment, of­ten­times as a cen­tral is­sue of dis­pute.

The push for a higher min­i­mum wage is an en­dur­ing trend in the dy­nam­ics of Latin Amer­ica’s busi­ness com­mu­nity. While the earnest ef­forts seek­ing to raise the min­i­mum wage to lift the liv­ing stan­dards of the econ­omy’s low­est paid work­ers is surely ad­mirable, his­tor­i­cally re­search has shown that higher min­i­mum wages have not al­ways trans­lated to higher liv­ing stan­dards.

This is de­spite the ex­pe­ri­ence of na­tions like Hon­duras, where a lift in min­i­mum wages did thank­fully re­sult in a re­duc­tion of ex­treme poverty, but also an un­even spread of suc­cess. Put sim­ply, those who main­tain that a min­i­mum wage would de­liver wide­spread so­cial ben­e­fits have found their ad­vo­cacy can run aground once the re­al­world ap­pli­ca­tion be­gins.

Of­ten­times a legally-man­dated min­i­mum wage has not had the de­sired ef­fect. In­stead of se­cur­ing a good wage for a worker that would cover their liv­ing ex­penses, it has in­stead pro­vided an av­enue for em­ploy­ers to place an ar­ti­fi­cial bar­rier sur­round­ing the low­est wage they are per­mit­ted to pay.

Cer­tainly an in­di­vid­ual can­not be paid less than that wage legally, but they may be hes­i­tant to ask for more, es­pe­cially given that the min­i­mum wage is of­ten ap­pli­ca­ble only to salaried work­ers.

Late De­cem­ber saw Mex­ico’s wage com­mis­sion in­di­cate they would hike the na­tion’s min­i­mum wage to around US$5 per day, rep­re­sent­ing a 16% in­crease, fol­low­ing through on the new Pres­i­dent of Mex­ico An­dres Manuel Lopez Obrador’s pre-elec­tion push for a wage hike

Con­trac­tors, free­lancers, and ca­sual staff (though def­i­ni­tions can vary from one Caribbean na­tion to an­other, each of these roles are sim­i­lar) can com­monly be paid at rates out­side the min­i­mum wage cal­cu­lus. Some­times this can be higher but, equally, it can be lower.

For de­vel­op­ing na­tions — of which there are over 150 world­wide — a rise in the min­i­mum wage has been an in­di­ca­tor of a more promis­ing eco­nomic fu­ture, and also of a so­ci­ety achiev­ing greater so­cial co­he­sion when it comes to pol­i­tics and pol­icy mak­ing. We are now en­coun­ter­ing a growth in voices ad­vo­cat­ing for al­ter­na­tives.

AL­TER­NA­TIVES TO THE MIN­I­MUM WAGE MEA­SURE­MENT

While a rise in the min­i­mum wage can bring ad­di­tional in­come to a per­son, it can also re­sult in bracket creep: the oc­cur­rence whereby a (rel­a­tively) small in­crease in some­one’s earn­ings re­sults in a shift into the next in­come tax bracket. While the in­di­vid­ual does earn more each year, they ac­tu­ally have less money in their pocket due to pay­ing more taxes.

In re­cent years econ­o­mists have sug­gested that the ef­forts to raise a min­i­mum wage should be redi­rected to a tax break, like an Earned In­come Tax Credit (EITC). In­stead of a di­rect raise in the min­i­mum wage, there would be a re­duc­tion in the taxes that an in­di­vid­ual on a lower wage pays. This would negate the bracket creep prob­lem al­to­gether.

Be­yond tax cred­its there is also a grow­ing push around the world for the con­cept of a ba­sic in­come — one that would pro­vide a guar­an­teed min­i­mum in­come to all cit­i­zens of a na­tion, go­ing be­yond the scope of so­cial se­cu­rity pro­grammes like pen­sions that ex­ist for se­nior cit­i­zens and those with a dis­abil­ity.

While such an idea of all cit­i­zens hav­ing a ba­sic in­come may at first seem like pie in the sky to fans of limited govern­ment, it has (some­what sur­pris­ingly) a strong ad­vo­cacy among many busi­ness cir­cles. The rea­son­ing is that a ba­sic in­come would em­power en­trepreneurs, cur­rently spend­ing most of their work­ing hours in a job they have no plans to con­tinue, to de­vote them­selves more fully to their own ven­ture. This would free up their cur­rent job for an­other worker, with the prospect that their new busi­ness would cre­ate more (and higher pay­ing) jobs in the fu­ture.

The ba­sic in­come de­bate has been es­pe­cially vivid as it is not just jobs of min­i­mum wage work­ers that are set to dis­ap­pear should we see a greater adop­tion of A.I and au­to­ma­tion in our work­force, but also the jobs of many mid­dle and high­in­come earn­ers.

Cer­tainly re­train­ing may be eas­ier for the lat­ter groups than the for­mer, but this trend is set to make an im­pact so­ci­ety­wide. It is one for which all na­tions must plan as, in an era of au­to­ma­tion, there will be a grow­ing chal­lenge to main­tain not just min­i­mum wage jobs, but em­ploy­ment across the whole econ­omy.

A coali­tion of Mex­i­can fam­i­lies protest in Mex­ico City for higher min­i­mum wages dur­ing the term of Pres­i­dent Ni­eto

In many de­vel­oped economies, a rise in the min­i­mum wage rate has been in­dica­tive of brighter eco­nomic fu­ture, but rais­ing the min­i­mum wage it­self does not guar­an­tee a brighter eco­nomic fu­ture, ce­teris paribus

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