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“Foreign experts and Minimum Wages in Fiji” (ed. FT 15/6/2019)

16/06/2019

Foreign experts and Minimum Wages in Fiji
Professor Wadan Narsey (ed. in Fiji Times, 15/6/2019)

The Bainimarama Government’s current exercise to determine Minimum Wages for all Fiji necessarily requires answers to some horrendously difficult questions:

* who exactly should make the “determination” or will it be just a “recommendation”?

* how should the exact level of Minimum Wages be determined? (basic cost of living? Basic Needs Poverty Line? What items to cost?)

* which groups of workers should this minimum wages apply to? bottle boys? household workers? casual wage earners? cane cutters? tourism workers?).

* how often should this minimum wages be changed and according to what method, given that wages are continuously eroded by inflation in the cost of living?

* how exactly will these Minimum Wages be enforced throughout Fiji?

* how enforce the Minimum Wages if the employer claims “inability to pay” as they always have, and always will?

The intelligent public can be forgiven for  immediately asking even more pertinent  questions when the Bainimarama Government hired an Australian professor (Dr. Partha Gangopadhyay, Professor of Economics at Western Sydney University) to do this important work.

* why did the Bainimarama Government refuse to consult with one of our local economists at our three universities, when we also remember that not too long ago, Prime Minister Bainimarama was denouncing the Yash Ghai Commission for consulting with “foreigners” in Australia?

* why does the Bainimarama Government refuse, as one progressive employer’s representative (Kelly Hart) advises, to consult with unions and come to some mutual agreement?

* Most importantly, the taxpayers must ask why the Bainimarama Government refuse to use its own historically proven Wages Council mechanisms for a rational, sustainable and ongoing institutional solution which answers virtually all the questions above?

Unfortunately, the intelligent public (and I) became even more worried when Dr. Gangopadhyay began to make known his views based on some “research” he did, as for instance reported in The Fiji Times of 1 June 2019.

Let me state up front where I agree with Dr. Gangopadhyay: that no employer should be legally required to pay a Minimum Wage that genuinely forces the employer to lay off workers, and at the extreme, go out of business.

What is critical however and ignored totally by Dr. Gangopadhyay, is how one determines and who determines that an employer is unable to pay the required wage increase.

Partha’s unfortunate views

Dr. Partha alleges that lowest paid workers are “not affected by food prices”, arguing that having looked at the “actual consumption baskets” (i.e. what people are actually consuming), he concluded that “many food prices remain unchanged” because they are price controlled.

Of course, we can agree that some items consumed by the poor may be price controlled but there are many others which the poor consume, which are not price controlled.

Even the Fiji Bureau of Statistics experts on household income and expenditure, if requested, could have told Dr. Gangopadhyay that many items and brands consumed by the poor are not price controlled, and many do contribute to the increases in the CPI which the poor genuinely feel as the increase in their cost of living.

Dr. Gangopadhyay still pronounces “That is why I am not giving them the full benefit of the cost of living” and that he is why he is “only giving them 50 percent (or 2.6 percent)”.

The intelligent public can well ask: why only 50% of the change in cost of living?

As Fiji Times Letters to the Editor scathingly pointed out:  “I want to invite Dr. Partha to come and stay with me for six months so he can experience the low wages that we earn.. and food prices (we face).   Who brought him?” (writer Allen Lockington).

And who advised Dr. Gangopadhyay to offer what is clearly the usual lazy “compromise figure” (50% of the increase in cost of living) that politicians are renowned for and have always done for forty years? (see more on this below).

One progressive employer’s views

The whole flawed nature of the current process can be seen clearly through the views of one progressive employers’ representative, Kelly Hart, as reported in the Fiji Times (1/6/2019).

She pointed out that her company was already paying $3.70 an hour and even willing to work towards a $4 an hour rate, but her board had instructed her to hold off because “the government has said we don’t have to. This is where Government is holding things back”.

Ms. Hart advised “they need to talk to the unions … to be locked in a room until they reach an agreement that is sustainable for business and effective for workers”.

Perhaps Ms. Hart should have also added also an essential part of the dialogue must be the representatives of the affected employers who would ultimately be required to pay the agreed upon wage increases.

What Ms. Hart may not be aware of is that precisely the mechanism that she was recommending and even more appropriate and sensitive to different industries, was embodied in the reformed Wages Councils mechanisms that had been originated by the SDL Qarase Government but formally established by the post-2006 coup Bainimarama Government around 2008.

Dr. Gangopadhyay ignores Fiji’s industrial history

Sadly, Dr. Gangopadhyay ignores the importance of four fundamental institutional processes which the Fiji  Government has already used previously, not too long ago.

First, the level of Minimum Wages must be determined as an ongoing sustainable annual exercise conducted jointly by representatives of employers and unions with a neutral government referee, and not left to an ad hoc review mechanisms every few years by some ad hoc expert (foreign or local).

It is irrelevant of Dr. Gangopadhyay to complain (FT 1/6/2019) that the “unions stopped communicating with me… I have been trying to show them what exactly is poverty because they have no idea… a hundred thousand families are suffering and we need to act fast”.

Oh really? How utterly ridiculous that an ad hoc foreign adviser should expect local unions to “communicate” with him in order to agree on some clearly compromise level of minimum wages which is barely a half of what the cost of living changes indicated.

There is no mention made by Dr. Gangopadhyay of the virtual absence of employers’ representatives and government in the national negotiations, although he personally may have been in communication with all three parties for his consultancy exercise.

Second, Dr. Gangopadhyay totally ignores that the most important criterion behind the minimum wage determination should be some “socially acceptable decent cost of living” taken together with the “capacity of employers to pay”.

Third, this Minimum Wage determination cannot be applied indiscriminately as a sledge hammer to the whole economy, but  ought to be done on an industry by industry basis, as determined by an independent body using truthful audited company accounts of the employers concerned.  Different industries (like tourism and garments) can have totally different capacities to pay particular levels of Minimum Wages.

So clearly, high levels of Minimum Wages cannot apply to the thousands of small informal sector employers who would not even be monitored by Fiji Revenue and Customs Authority, and it would be a costly and logistical nightmare to attempt this in any case.

Fourth, Dr. Gangopadhyay totally ignores that just a few years ago, the Bainimarama Government had already established such a neutral tripartite mechanism (Wages Councils) which had operated reasonably well, but had been frustrated in its work.

The 2007 Reform of Wages Councils

In 2005, ECREA (CEO Chauntelle Khan and Father Kevin Barr) were deeply concerned that workers’ wages (both union and non-union) were grossly failing to keep pace with inflation in the cost of living, and thousands of workers (especially non-unionized) were falling into poverty.

ECREA commissioned me to do a thorough study of wages determination under the existing Wages Councils and the SDL Qarase Government and the then Minister of Labor (Kenneth Zinck) gave me full access to Ministry of Labour files on the minutes of evidence of all the Wages Councils that had been in operation for the previous thirty years.

Dr. Partha Gangopadhyay (and Ms. Kelly Hart and journalists writing on the current problem of minimum wages) might wish to read my full report (Just Wages for Fiji) which was published jointly with ECREA and freely available here:

https://narseyonfiji.wordpress.com/2012/03/30/just-wages-for-fiji-lifting-workers-out-of-poverty-ecrea-and-vanuavou-publications-2006/.

Rather than quote the massive amount of statistics covering thirty years of wages by various sectors, I give just an extract from the Foreword independently written by the late Ratu Joni Madraiwiwi (then Vice President of Fiji) who accurately stated:

“the role of the Government is critical…  for the provision of equity and fairness because it is supposed to represent the national interest. 

     What emerges from this research is that a significant factor in creating present levels of hardship and want is the failure of the Wages Councils mechanisms to maintain the value of wages.  … Because the wages rates set initially started from a very low base, … with additional disadvantages of only partial adjustments and long delays.

     What is proposed is full and confidential disclosure of financial records in the Wages Councils to allow exhaustive deliberations to take place (on) ability to pay arguments … There is no suggestion of setting remuneration rates that employers are unable to afford or sustain. 

     The secretariat also needs to be strengthened and better resourced to implement more effectively its analytical and supervisory roles. … the Wages Councils in their current form presently function erratically and disadvantage the employees in the industries they cover.”

[For those who are not inclined to read long reports, I will soon put on Youtube a video clip of Ratu Joni Madraiwiwi speaking at that Report Launch at USP].

But the photos I post here of the book launch and the USP Panel Discussion show clearly the involvement of PS Labor (Taito), GS FPSA (Rajeshwar Singh), Felix Anthony and vibrant USP commmunity.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The basic institutional processes required

Just as pertinent for the current review of the national Minimum Wages for Fiji, my Report had recommended the thorough overhaul of the Wages Councils with the following essentials:

* the WROs (or minimum wages for each industry) which had to be differentiated industry because different industries (such as tourism and garments) had different capacities to pay at particular times:

* each Wages Council MUST have the appropriate representatives of employers, large and small (who usually face different financial constraints)

* each Wages Council MUST have the appropriate representatives of the workers, not necessarily the unions who the historical minutes of previous meetings showed clearly were sometimes more than willing to compromise the interests of non-non-unionized workers (the intelligent reader might ponder on this apparent conundrum, which has a common sense answer);

* that each Wages Council MUST meet regularly every year and MUST make their wage determinations (and not allow delays);

* that for each WRO, there must be some specified and constant reference (not necessarily equality) to the Basic Needs Poverty Line used by the Fiji Bureau of Statistics for its estimation of the incidence of poverty in Fiji;

* that each Wages Council must have the technical backup of the professional Ministry of Labor staff who would be tasked with keeping track of labor conditions in their area of responsibility (including wages being paid and not paid).

* any group of employers pleading incapacity to pay a particular recommended increase in wages MUST present audited company accounts, in confidence to the Chairman of the Wages Councils, who could also obtain (again in confidence) the advice of FRCA from their company tax records.

Bainimarama’s Wages Councils and Barr

To its great credit then, the Bainimarama Government continued the process that the Qarase Government had started and appointed the progressive and active Father Kevin Barr as Chairman of all the Wages Councils, which began to meet regularly and began to issue the Wages Regulations Orders (WROs).

While there were many companies who complied (usually expatriate), sadly there were a number of very profitable companies (usually local) who fought tooth and nail against Father Barr’s WROs and refused to present their audited accounts to the Chairman of the Wages Councils, even in confidence.

Many of these guilty companies were out to squeeze as much profits out of Fiji as they could, especially when hanging over their heads was the constant threat of devaluation of the Fiji dollar (as had occurred after every military coup).

Some very large employers even called me personally to try and curb Father Barr, and my refusal to do so made me even more unpopular in my Gujarati community, which had for decades disliked my pro-labour work.

Eventually, some of these employers managed to obtain the support of powerful forces in the Bainimarama Government, and Kevin Barr’s WROs kept getting delayed year after year, or were just stopped from being implemented.

When a frustrated Father Barr publicly lashed out at what he called the government’s “crony capitalism”, he was told in rather rough terms by a very powerful person that his Fiji resident visa was not going to be renewed and he had better make plans to leave.

Despite the fact that the Bainimarama Government has hired many foreigners as Permanent Secretaries and Board  Members,  “foreigners” like Father Barr, despite his commendable work on housing and incomes for the poor, can be forgiven for not today reminding the Bainimarama Government of their backflips on industrial policy, as clearly explained above.

But it is a pity that Fiji’s unionists also decline to remind the Bainimarama Government that they should remember the history of their past errors in industrial relations and minimum wage determination in Fiji, if they are not to be condemned to repeat them.

Foreign and local academic advisers

It is dismaying to me that employers’ organizations do not advocate Fiji’s previously successful examples of industrial relations such as the Wages Councils and even older Tripartite Forum, possibly because it required them to be publicly accountable through audited company accounts.

Of course, most employers are happy the way things are: with ad hoc determinations by paid consultants, so that wages always lag behind the cost of living, with only partial adjustment to inflation as they had been for thirty years (just like the 50% as currently being recommended by Dr Partha).

It is dismaying that the Bainimarama Government refuses to hire one of the many local economists at our three universities in Fiji or even from the many economists in various arms of Government (Planning Office, Finance, RBF) to offer their objective and neutral advice on the issue of minimum wages in Fiji.

Sadly, they also refuse to create and strengthen a local capacity which would be there for government, employers and unions to use year after year, but then government would be locally accountable, instead of having a paid foreign consultant who will eventually disappear over the horizon with his fees, never to be heard of again.

It is dismaying that Fiji economists do not even remind the Fiji public (and Dr. Gangopadhyay) of the Wages Council work that has been done previously by one Fiji economist in collaboration with the Fiji Government (Qarase’s and Bainimarama’s), their Ministries of Labour, and NGOs like ECREA, and receiving the public stamp of approval by Fiji’s wisest statesman in recent years, the late Ratu Joni Madraiwiwi, Vice President of Fiji.

But I suspect that the absence of reputable local economists is not the reason why the Bainimarama Government declines to hire local economists to do the Minimum Wages review that they commissioned a foreigner to do.

I can leave the last word to an unknown Malvin Chand (FT letter writer 3/6/2019) who not only cheekily asked which economics courses Professor and Dr. Partha Gangopadhyay had himself studied, but more pertinently observed that “we have a consultant procured and paid for by government touting the government line…. singing to the tune of whoever paid the piper.”

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