“The Old Minimum Wages are dead: long live the New Minimum Wage”. 3 October 2013.
Dr Mahendra Reddy has announced his recommendation for a New Minimum Wage of $2.30 per hour for all of Fiji, following his survey of wages in Fiji.
Of course, Fiji’s workers earning below $2.30 per hour (or $92 per week) will be rejoicing in the expectation that their wages will now go up to that level.
Not only the Bainimarama Government but the Employers Federation have come out in support (and that should set off some alarm bells with smart workers).
For the sad reality is that Dr Reddy’s New Minimum Wage recommendation is far worse than the Wages Councils system that had been in operation before it was suspended by the Bainimarama Government.
Dr Reddy strangely informs me that his Report is confidential to the Ministry of Labour, so the public and the workers affected cannot examine the basis of his recommendation.
Nevertheless, I suggest that Dr Reddy’s single Minimum Wage recommendation of $2.30 an hour is seriously deficient for three objective reasons.
First, Dr Reddy chose not to examine and explain why the previous minimum wages system- the Wages Regulation Orders (WROs) issued by the Wages Councils under the chairmanship of Father Kevin Barr, were inappropriate, nor why the Ministry of Labour failed to enforce them.
Dr Reddy boldly decided to reinvent a New Minimum Wages “wheel” without examining or explaining why the previous wheel did not work- extremely “strange” for a senior academic.
Second, Dr Reddy’s recommendation of $2.30 per hour takes no account of the harsh reality that there are certain industries in Fiji whose employers simply do not have the capacity to sustain even $2.30 per hour. These employers will either not pay this minimum wage or go out of business if the attempt is made to force them.
Third, there are industries and employers in Fiji (such as in tourism) who are doing extremely well, and for whom the $2.30 per hour is far too low a minimum wage.
These employers will therefore very conveniently use Dr Reddy’s recommendation of $2.30 an hour to refuse to increase the wages in their sector, even though they can well afford to do so, while remaining profitable and sustainable enterprises.
This new Minimum Wage is therefore just another game that the employers are happy to play along with, in order to delay increasing the wages as long as they can, and by as little as they can get away with.
The public also needs to understand why Father Kevin Barr, who as the Chairman of the Wages Councils was a victim of the employers’ previous games, is strangely supporting Reddy’s new minimum wages.
Conveniently ignoring the previous study?
Dr Reddy himself, (as Head of Economics at USP) helped to launch the previous study (funded by ECREA and done by me) into the minimum wages system operating as the Wages Councils, Just Wages in Fiji: https://narseyonfiji.wordpress.com/2012/03/30/just-wages-for-fiji-lifting-workers-out-of-poverty-ecrea-and-vanuavou-publications-2006/
That study had examined the actual operations of the Wages Councils since 1970, analysed all its failures (largely delaying tactics by employers), and had come up with recommendations which tried to safeguard the interests the employees by implementing annual increases, but also the interests of employers who could not afford to pay the stipulated increases.
Fiji’s economy is characterised by different industries and labour markets, with totally different capacities to pay higher wages: hence the Wages Councils were empowered to set differential rates depending on the “capacity to pay” of employers and industries (some of which are already in decline).
The Wages Councils were also empowered to set differential rates within industries depending on the size of the employers, with small employers being allowed lower minimum wages.
All that any employer genuinely not able to pay the wage increase stipulated by the WROs had to do was to show their audited accounts to the Independent Chairman of the Wages Councils, who was sworn to secrecy not to reveal such accounts to the public or even other members of the Wages Councils.
That ECREA study was accepted and implemented by the Ministry of Labour during the Qarase Government, and also initially accepted by the Bainimarama Regime when it took over in 2006, until certain employers put pressure on an inexperienced Regime.
Why did the Wages Councils “fail”?
The Wages Councils “failed” for two reasons documented by Father Barr: first, not a single employer who claimed “inability to pay” ever showed their accounts to the Chairman of the Wages Councils or even the Minister of Labour; and, second, the inexperienced Bainimarama Government quickly gave in to the pressure from employers, whose goodwill Bainimarama needed.
The employers merely asserted that “times were hard”, bypassed the Chairman of the Wages Council, and appealed directly to Khaiyum and Bainimarama. So year after year, Bainimarama postponed the minimum wages stipulated by the WROs, while workers’ real wages declined, eroded by the continuing high inflation.
In my 2009 Reverend Paula Niukula Lecture I had pointed out why Kevin Barr’s efforts as Chairman of the Wages Council, were destined to fail, as a natural outcome of the damaging impact of the 2006 military coup on investment, economic growth, and employers’ strategic reactions to constrained profits. And so it happened.
Bainimarama’s current Minister for Labour (Mr Jone Usamate) who was also present at my Rev. Niukula lecture, conveniently makes no statement about any faults in the Wages Councils system, or Father Barr’s implementation of it as Chairman.
Nor has Usamate made any statement about the underhand tactics and pressure by certain employers on Father Barr and on the Bainimarama government.
Father Barr eventually resigned as Chairman of the Wages Councils, after three years of frustration, accusing the Bainimarama Government of practising “crony capitalism”.
Following Barr’s resignation, the Regime approved just under a half the percentage increases which had been recommended by the WROs, a tactic the employers had used over and over, for thirty years before.
So why is Father Kevin Barr now supportive of Dr Reddy’s recommendation of one minimum wage of $2.30 per hour for all Fiji, even though it is a far inferior mechanism to the ten Wages Council mechanisms available before, under his chairmanship?
Father Barr is unfortunately a foreigner who knows that his previous public criticisms of the Bainimarama Regime’s suspension of the Wages Councils led to him not only hearing some intemperate language (not expected by a cleric) but also a close encounter with expulsion from Fiji. Father Barr desperately wants to live and work in Fiji.
Will the New Minimum Wages work?
Of course, something is better than nothing.
Of course, there will be some employers who will be forced to increase the wages of some workers to $2.30 an hour, and this will be trumpeted in the media with great fanfare.
But the Employers’ Federation have already happily said that most of their employers already pay above $2.30 per hour. They shrewdly and strategically understand that Dr Reddy’s recommendation of a low $2.30 an hour, will enable many very profitable employers in some industries, such as tourism, to withstand any calls by unions for increases in their wages.
But, there are also many employers who will simply not be able to pay even the $2.30 per hour that Dr Reddy is recommending. If any attempt is made to force them to pay under threat of fines or imprisonment, they will simply sack their workers or even close their business.
The bottle collection business and bottle boys are a prime example, but many some small businesses such as restaurants, small garment manufacturers, and hundreds of others, will come under this category.
There will, of course, always be some employers who can afford to pay the stipulated minimum wages, but will, as before, put pressure on Bainimarama to delay its application “until the economy recovers” (it has been a long wait from 2006).
The Ministry of Labour officials will be powerless to enforce even this $2.30 an hour, just as they were when Bainimarama suspended the Wages Councils mechanisms.
So why reinvent wheels?
Some cynics might accuse Dr Mahendra Reddy of egotistic opportunism, in claiming to invent a New Minimum Wages “wheel” when there already existed a more appropriate wheel in the form of 10 differentiated Wages Councils and all that was needed was enforcement by the Ministry of Labour.
Some cynics might also accuse the current Minister of Labour of political opportunism (another candidate for the 2014 elections) when he touts the new Minimum Wages as evidence of his concern for the poorest workers, when he also made no attempt as Minister of Labour to enforce the previous WROs under the Wages Councils.
But there are also other “first in Fiji” games going on currently, such as a new people’s constitutions, true democracy, new political leaders, racial equality for the first time, a Revolutionary New Fiji, etc.
Unfortunately, the New Minimum Wages game, ominously supported by the Employers Federation, is being played out with the livelihoods of Fiji’s poorest non-unionised workers, who have sunk deeper into poverty in the last seven years, and who surely deserve better.
The Old Minimum Wage is dead. Long live the New Minimum Wage.
Post script: On 30 January 2014 (Fiji Times), the Minister of Labour announced a New Minimum Wage of $2.00 per hour to come into effect by March. Usamate said “He said this was a milestone achievement in the history of Fiji as it’s the first ever determination of a national minimum wage covering the formal and informal sectors.” Dr Reddy made no public statement despite a Letter to the Editor requesting a response from him.