Opinion: Bare minimum (wage)

POSTED: 12/4/13 12:16 PM

The bare minimum, as calculated by independent MP Romain Laville, is somewhere around 2,000 guilders a month.

Taking this number as our measuring stick, we arrive at an hourly minimum wage of 11.53 guilders, or $6.45. As the table on this page shows, per January 1 of next year the minimum wage will be $4.78 per hour. Reaching Laville’s bare minimum will therefore require an additional increase of $1.67 per hour – an increase of 34.9 percent.

We are not arguing with Laville’s calculation of that bare minimum, but we think that presenting a number like that is leaving too many uncertain factors out of the equation.

For starters, there is the effect of such an increase on the economy. It will for sure unleash a disastrous wage-price spiral. Prices will go up because businesses have to work a higher payroll into the price of goods and services. That will lead to another demand for higher salaries, because the higher prices cancel out the effect of the increased minimum wage. In the end, an increase of the minimum wage without supporting measures will not do anything for the people whose economic position parliamentarians aim to improve.

There is obviously also the competitive position of St. Maarten in the region to consider.

Another aspect is the effect taxes will have on such an increase in minimum wage. It could very well be that due to the higher wages, minimum wage earners suddenly have to start paying wage taxes. Right now, they only pay social premiums. If they get hit by wage taxes they could very well end up with less money in their pockets.

All this shows that a hike in the minimum wage without supporting measures, especially in the fiscal regime, will most likely not have the desired effect.

This brings us to the point of cost of living. Utilities, rent, food, education and clothing are the most elementary components of these expenditures. Is it possible to bring down the price of electricity and gas? Maybe, but the government is not in a position to order the suppliers of for instance fuel to deliver their product at a price that takes away all profits from them.

That will lead to a situation Venezuela experiences with – believe it or not – toilet paper. The government imposed such a low price on this basic commodity that producers could not make a penny out of it anymore and even had to operate at a loss. So what did they do? They stopped producing, until the government intervened and sent in the army to kick start production at gunpoint.

That is not something we want to be doing with our fuel supply, so there are certainly limits to how far a government is able to go with price measures.

Regulating rent is a complicated affair; the government has something to say about social housing, but intervention in the private sector is a different matter. It can be done, but like anything else, it requires solid legislation – and that takes time.

Controlling food prices is another component. This depends in part on enforcement, but there is also a lot consumers themselves are able to do. They are free to buy what they want.

But before parliament, or the government, takes any decision, there is a desperate need for data. Tons of questions have not been asked and looking at the minimum wage as such –from a one dimensional point of view – harbors the risk that we’re getting our fact wrong.

This is what we need to know (and probably more): how many people are earning minimum wage? How many of these minimum wage earners have only one job? How many households depend on the income from one minimum wage? How much money do immigrant minimum wage earners send back home to support their families?

The answers to these questions will provide an insight into how many workers are really in dire straits with a marginal income. Then we will also get an idea of which measures, other than just increasing the minimum wage across the board, could help these citizens overcome at least part of their economic troubles. Unfortunately, our parliamentarians posed none of these questions yesterday.

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