Just Wages for Fiji [The Fiji Times, 27 July 2006]
EveryFijigovernment for the last thirty five years has been concerned with tackling poverty.
This Report, full of comprehensive data, focuses on the more than twenty thousand (perhaps as many as fifty thousand) workers who are not covered by unions or collective agreements.
Especially to protect this group of workers, every Fiji Government has periodically legislated minimum wages through Wages Regulation Orders, issued by some ten Wages Councils, on an industry by industry basis.
But the Wages Councils, because of systematic weaknesses, have not been effective.
The general trend for thirty five years has been that the workers have been denied full cost of living adjustments, and their real wage, in terms of what money can buy, has suffered a long term decline.
Most of these workers have been falling more and more into poverty, defined as those earning wages below the Basic Needs Poverty Line.
The Report argues that it would not be sensible or practical to legislate one high national minimum wage which tries to take all workers out of poverty.
Some industries inFijimay be able to afford it. But others may collapse and throw thousands of workers out of a job.
Employers should only be asked to pay levels of wages which they can afford to, on a sustainable basis.
But Wages Councils must require employers who claim “inability to pay” the required wage increases, to prove that through the presentation of audited accounts, on a totally confidential basis.
And the whole Wages Council system must be changed to ensure efficiency and timeliness.
Erratic Economic Growth and Increasing Poverty
Decent and just wages depend on the economy growing over time. Unfortunately, relative to countries likeSingapore,Malaysia andMauritius,Fijihas a very poor record of private sector investment, mixed record of economic growth and employment creation.
But there have been some periods of reasonable growth in the economy, and Gross Domestic Product per capita. Some industries have been healthy, while others have languished.
The Report shows that the real incomes of all wage employees have not kept pace with the economy’s Gross Domestic Product per capita, nor with the incomes of others, such as salary earners.
The proportions of all wage earners below the 1997 Basic Needs Poverty Line increased from 31% in 1978 to 69% in 1989 and further to 71% in 1999. Even if we used a Poverty Line some 20% lower, some 55% of all wage earners were below the poverty line in 1999.
This rate of poverty for wage earners may be compared with a (revised) estimate of 29% for theFijipopulation in 1991.
The largest proportion of all wage earners in poverty have been those in the private sector, with Manufacturing, Wholesale and Retail, and Hotels and Restaurants accounting for some 90% of the poverty gap.
But the worst hit group of wage earners have been those covered by the Wages Councils. All the Wages Councils average rates have shown severe deteriorations in the real levels of wages rates (nominal wages adjusted for inflation) to well below even the conservatively estimated Basic Needs Poverty Line by the end of the 1970s. (see the graph).
Why Wages Councils failed
The members of the Wages Councils are all appointed by the Minister of Labour.
There are independent members (one of whom is appointed chairman). employers’ representatives, and workers’ representatives (usually unionists). The Ministry of Labour provides a Secretariat to service the Wages Council.
On the surface it would seem to be a fair structure. But the evidence indicates that the Wages Councils have not worked well, as a system and there is one whole chapter of evidence derived from the Minutes of the Wages Council meetings.
With onerous quorum conditions in place, meetings would often be cancelled or postponed because representatives of employers or workers, or independents, or all of them did not turn up.
There would be long delays before any WROs would be issued. Two, three, sometimes five years would pass by with no changes to the minimum wages.
Adjustments would not be back-dated and “catch-ups” were not allowed. Indeed, there were no consistent criteria applied by any of the Wages Councils.
The representatives of the workers did not have the capacity or the incentive structure to present the best arguments. There was no reward for them personally if they succeeded; no disincentive if they failed to get the best deal.
With all the financial incentives to be tough, most times, employers would refuse to grant the full adjustment, without ever having to provide any credible evidence of their inability to pay the requested adjustments. Most times, when there was no consensus, the independents would side with the employers.
And unfortunately, the Secretariat provided by the Ministry of Labour was not able to present data that could have strengthened the case for the workers. They sometimes lost minutes of meetings. Sometimes WROs would not be gazetted in time.
Most times, the adjustment agreed to was lower than the change in the Consumer Prices Index.
This happened year after year, decade after decade. And the ever-present inflation kept eroding the real value of the minimum wages.
Over the period of thirty five years, the difference to just 20,000 workers alone would cost them some $2.8 billion dollars in today’s currency.
And the failure of the Wages Councils is therefore one key factor explaining the poverty of the lowest paid workers in the country.
The Report recommends that there should be a special Secretariat for Wages Councils set up within the Ministry of Labour, with two new full-time fully-funded senior positions.
First, a post of Wages Council Arbitrator– at the CEO level – who would chair all meetings of all the Wages Councils, hence ensuring consistency and accountability.
There would be a second senior position- the Workers Councilor (Deputy CEO level)- to guide the work of the Secretariat and to argue the best case for the workers.
The employers’ and workers’ representatives would be drawn from the industries and workers concerned. The Minister may appoint independents.
The Wages Council Arbitrator and the Workers’ Councilor shall have full access to all the records of the Ministry of Labour.
Bound by the FIRCA oath of secrecy, only these two senior executives would have the right to see in confidence the audited accounts of employers who claim inability to pay.
Mandatory Meetings and Processes of the Wages Councils
The Wages Council Arbitrator must ensure that that all meetings for all Wages Councils are held, decisions reached, and new WROs are gazetted to become effective by the 1 January of each year.
The meetings shall continue and decisions made by the Wages Council Arbitrator, with or without the presence of employers’ or workers’ representatives, or the Independents. The onus shall be on the representatives to sent replacements.
Should employers’ representatives disagree with the proposed WRO on the basis of “inability to pay”, the onus must be on them to present acceptable evidence on their arguments for a different rate, which should be specified. All such submissions for variations should be presented at the first meetingof the Wages Council concerned.
For sensible decision-making to take place, the Secretariat will have to go through a major data gathering, collating and analyzing exercise to ensure that each Wages Council has all the information they require to make sensible decisions.
Stakeholders must accept that employers cannot pay minimum wages based on purely ethical and moral grounds, and an assessment of what is required for a decent standard of living inFiji, as defined by some Basic Needs Poverty Line.
The capacity of the employer to pay the required rates and sustain his business as a viable entity, making “socially acceptable” rates of profit, has to be an equally important consideration.
Of course, there will be much debate on what constitutes “socially acceptable” rates of profit, given the investments made and the nature of the risks undertaken.
But if employers do have goodwill and a spirit of partnership towards the workers of this country, in good times and bad, then the revamped Wages Council could go a long way to looking after the legitimate interests of both workers and employers.
Ultimately, however, the only long term solution is high levels of investment in WTO-compatible areas, to enable sound economic growth creating jobs in high wage areas.