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“Minimum Wages: Systemic annual fairness, not election carrots” (ed. in FT 12 March 2022)

12/03/2022

In the last few week and totally out of the blue, the Minister for Economy (Mr Aiyaz Sayed Khaiyum) remembered that the Government had promised in 2018 to review the minimum wages every two years but claimed that COVID had delayed it; and now that Fiji’s borders were opening up they (he) had hired the “same professor from Sydney” to do another review. 

The public might note that the Minister for Labour and Employment who should really be the one driving the Minimum Wage process, is nowhere to be seen or heard.

            So for the second time now, an Australian Associate Professor of Economics at Western Sydney University (Dr. Partha Gangopadhyay) arrived in Fiji to deliver a new national minimum wage for Fiji (more on Dr Partha’s credentials below).

            From his presentations around the country, it seems that Dr Partha is proposing an increase of the national minimum wage from the current $2.65 per hour to between $3.45 and $3.65 per hour. But he noted that the “changes would require a collective decision by the major players involved”. 

So what if the employers yet again refuse to accept the new minimum wages?  Dr Partha gave everybody (except the poor workers) a way out, stating “if a consensus is not reached about the national minimum wage it’s nothing specific to Fiji. It’s more globally related”. So Fiji’s workers will be back to square one, as they have been for thirty years.

            While Dr Partha had concluded “I propose for a review every year..  as per the inflation rate. This is to ensure the real value of the national minimum wage is unchanged  [but] it could be more acceptable to have it reviewed every two years”.  

All workers would be asking: more acceptable to whom?  But more importantly, they should be asking other serious questions:

* will this new minimum wage actually work? (I suggest, no).

* did the last minimum wage set by Dr Partha actually work? (no evidence has ever been offered).

* why should workers depend for their living standards on ad hoc determinations of “minimum wages” which can never be made to work?

* why was the far more effective 10 Wages Councils, industry by industry, abandoned by the Bainimarama Government in 2011?

Will new Minimum Wages work?

First, minimum wages even for unskilled workers take no account of the harsh reality that there are certain industries or sectors in Fiji whose employers simply do not have the capacity to sustain even $3.45 per hour. These employers will simply not pay this minimum wage or go out of business if any attempt is made to force them (who by?).

            Second, there are industries and employers in Fiji who are doing extremely well (even in this COVID period), and who could afford to pay even $3.45 per hour, but will happily pay the lower minimum wage set by government (see the 2019 comment by enlightened employer Ms Hart).

I suggest that any National Minimum Wage is just another game that Fiji’s 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, especially when an “overseas expert” hired by Government says that wage changes must be by “consensus”.

            As the public and Opposition parties ask, is this just an elections gimmick by a government which has ignored declining real wages and increasing poverty for more than a decade?

Dr Partha’s credentials: no locals?

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.

            For the Minister for Economy to hire a foreign “professor” from Sydney might suggest that he would be some kind of expert in the field of labour markets and wage determination. But is he?

            Dr Partha’s biography on the University of Western Sydney website says that he is an “Associate Professor” (one rank lower down from Professor) of Economics, Finance and Property.  On his webpage Dr Partha claims “In my capacity as a professional economist, I have created the current labour market architecture in Fiji“.

            Wow.   Any labour economist worth his/her salt would know that merely declaring one minimum wage for all of Fiji, based on goodness knows what research (no solid data report has ever been issued by him previously), is not creating a “labour market architecture”.

            Indeed, in Dr Partha’s long list of publications on his UWS webpage, there is not a single one on the analysis of any labour markets or any wages determination mechanism in any country in the world, not even Fiji.

            The public can ask: did Dr Partha do a thorough empirical study of wage rates in Fiji industry by industry?

Has Dr Partha looked at any audited accounts of employers who allege they cannot pay the suggested minimum wages?

Has he produced any solid empirical reports of wages paid before and after his determination of the Minimum Wage last time?

I would be pleasantly surprised if he has done any of these three things, and I have written to ask him.

Far more effective Wages Councils

So the media needs to ask Dr Partha: did he bother to read the first real study of the “labour market architecture” and wage determination in Fiji (by a mere local Professor Wadan Narsey) before he began his Minimum Wages exercise?

I remind the Fiji public of the 2005 ECREA-financed 2005 study (Just Wages in Fiji: lifting workers out of poverty) which was launched with glowing words by the then Vice President of Fiji (the late Ratu Joni Madraiwiwi).  You can watch the launching here on Youtube:

            That study pointed out with solid data stretching back thirty years, and reading of all the records of Wages Councils meetings in the Ministry of Labour for thirty years, how workers’ wages had lagged behind the cost of living because employers kept alleging, without any proof that they could not pay the wage increase according to the rate of inflation. Every time, the wage increase granted was much lower than the increase in cost of living as determined by the CPI.

Launching of Just Wages by the late Ratu Joni Madrwaiwiwiand the late Father Kevin Barr at USP ISAS Lecture Theater

            The ECREA study recommended that there be separate Wages Councils for different industries, but with one Chairman, empowered to set different minimum wages (Wages Regulation Orders or WROs) depending on the conditions within the industry.  There were also empowered to set differential rates within industries depending on the size of the employers, with small employers being allowed lower minimum wages.

Part of the audience at the launching

            Above all there was a real protection for employers who were genuinely not able to pay the wage increase stipulated by the WROs. All they had to do was to show their audited accounts to the Independent Chairman of the Wages Councils or the Minister of Labour, who were sworn to secrecy not to reveal such accounts to the public or even other members of the Wages Councils.

            The ECREA study was accepted and implemented by the Ministry of Labor during the Qarase Government, and also initially accepted by the military Bainimarama Government when it took over in 2006.

            It resulted in the far more effective 10 Wages Councils, industry by industry, under the passionate chairmanship of the late Father Kevin Barr.

But they were so effective that the employers successfully lobbied for them to be stifled and not implemented, year after year.   And in 2011, they were eventually abolished and replaced by one Minimum Wage.

The killing of the 10 Wages Council

Fiji will remember that the late Father Barr sadly related on Fiji TV that he had not even been consulted on the decision and he publicly lashed out at Bainimarama’s “crony capitalism”. He was then abused over the phone by a very powerful person and informed that his Fiji resident visa was not going to be renewed and that he had better start packing.

            Father Barr explained that the Wages Councils were killed for two reasons. First, not a single employer who claimed “inability to pay” ever showed their accounts to him or even the Minister of Labor as they were entitle to.

Second, the Bainimarama Government quickly gave in to the pressure from employers who just kept asserting that “times were hard”, as they had done for the previous thirty years.

So when the Bainimarama Government’s own Minister with a PhD in Economics (Dr Mahendra Reddy) in 2013 allegedly “scientifically” set the Minimum Wages at $2.32 per hour, even that low level was opposed by employers and not implemented.

Eventually in 2014 another Minister (Usamate) set the minimum wages at an even lower $2.00 per hour, with totally unknown impact.

Dr Partha’s First Go

The Fiji public should remember how Dr Partha first set Minimum Wages in Fiji after “consultations” around the country.

            He had then alleged that lowest paid workers were “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.

            Even the Fiji Bureau of Statistics experts on household income and expenditure 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.

            But Dr. Gangopadhyay pronounced “That is why I am not giving them the full benefit of the cost of living” but “only giving them 50 percent (or 2.6 percent)”.

            The intelligent public can well ask: what is the great science behind awarding only 50% of the increase in in cost of living, (or simply a cosmetic lazy compromise)? Was that not yet again reducing the workers’ real wages because the increase was half that of the cost of living?

            Indeed, one progressive employer (Kelly Hart) said 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” (The Fiji Times 1 June 2019). Ms. Hart sensibly advised that all the parties need to “be locked in a room until they reach an agreement that is sustainable for business and effective for workers”.

            Which was precisely the mechanism at the heart of the 10 Wages Councils which operated under one Chairman supported by the Ministry of Labour technical staff and FBS cost of living data.

            But that sensible mechanism was abolished by the Bainimarama Government in 2011, under pressure from the ruthless employers.

Reinventing a square wheel

There has never been any report backed solidly by industry wide wages data, by either Dr Partha or Government, on how successful (or unsuccessful) his first Minimum Wage has been.

            So once more in 2022, and again after a series of “consultations” around the country and “expertly” observing “the increased rural poverty” and the global effects of COVID, Dr Partha is planning to recommend a new National Minimum Wage of between $3.45 to $3.65 per hour.

Employers will be so happy that Dr Partha has announced that even this Minimum Wage will be by “consensus between all the parties”. Ha ha ha.

The employers, who are the only party that really matters (not Government), are already digging their heels in knowing that there is no systematic mechanism to enforce whatever Minimum Wage Dr Partha plucks out of thin air.  They also know that they can hold out for another review in two years time.

Of course, Dr Partha will be so pleased to be once again paid consultancy fees to return in 2024 to advise on new Minimum Wages, since there is apparently no local economist in Government or the universities to do this onerous task of “consulting” around the country, get the changes in CPI from the FBS, and recommend a fraction of that change. How tough is that job? To earn what consultancy fee?

            But unions, workers and voters at the next elections can ask the Opposition Parties if they have any plans to revive the 10 (or more as was once recommended) systematic Wages Councils which can quietly operate year after year, to regularly adjust workers’ minimum wages, industry by industry, employer by employer, based on the capacity of employers to pay as shown by their audited accounts, so that the wages of the poorest workers can keep up with the cost of living (CPI).

            But oh dear, then there would be no need for any “overseas professor” ot be brought in at great expense, even if every two years. There would also be no need for any intervention by any strutting Minister of Economy who can pretend to throw elections carrots at gullible voters.

Perhaps voters are not gullible as the Minister thinks?

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