Fiji needs a living wage

By Professor Biman Prasad

Leader of the National Federation Party

The government should not use scare-mongering tactics to defend its $2.68 per hour minimum wage. Fear tactics is what this government is good at – first as a military regime and then after it was elected in 2014.

Government Ministers Aiyaz Sayed-Khaiyum and Jone Usamate are trying to shoot down the National Federation Party’s vision for a $5 an hour living wage. We want Fiji’s poorest paid workers to see clearly when they too will be able to share in the economic growth that the government boasts it has achieved.

If you listen to what the people are saying, one of their biggest concerns is the cost of living.  Prices are rising beyond their incomes. So FRCS officials and the Commerce Commission around the country fining businesses and trying to control prices.  But of course costs will rise. Many of those costs are beyond Fiji’s control.

The problem is not that prices are rising. It is that incomes are NOT rising. There is no point having economic growth if it will only benefit the rich. But, by keeping the minimum wage at $2.68, even while prices are rising, that is what the Government has done.

The Government keeps saying that a $5 per hour living wage cannot be done and will cause massive unemployment. They say many employers and small businesses cannot afford to pay the $5 an hour. This is ironic, coming from a “control freak” government hell-bent on squeezing every last cent it can from businesses of all sizes in taxes, stamp duty and fines.

 

Why the need for a living wage

Fiji needs a decent and meaningful living wage more than ever before. A ‘living wage’ is the amount a worker needs to make ends meet if he or she works full time, based on the cost of living. The cost of living includes costs of food, housing, energy and transport, etc.

Experience elsewhere has shown that whenever a minimum living wage is suggested, conservative governments and business quickly use job losses and inflation as an excuse to reject it. But that is not what happens when those wages are implemented. In fact international evidence shows that there is hardly any link between the rise in minimum wages and employment growth or employment loss. The idea of a living wage is social. It is about reducing inequality. It is about looking after those who are at the mercy of their employers.

The opponents of a ‘living wage’ do not have a real economic argument to oppose it.  Business benefits from paying employees a living wage.  Better paid employees have better health, better morale, better productivity and greater loyalty to their employers. They have more money to spend on goods and services – and that is also good for business.

The NFP’s proposal for a $5 an hour living wage is a decent and well thought out proposal based on the cost of living now prevalent in Fiji. A $5 per hour minimum living wage will just be a catch-up on the rise in the cost of living rise over the last 10 years.

 

Misplaced views

Between 2006 and 2017 prices for food, heating and light have gone up by more than 65%.  Transport costs have gone up by a similar amount.   From 2006 the minimum wage did not increase much at all, until 2016, when it went from $2.32 to $2.68.  

So, for all the talk of economic growth, the burden of that growth has been carried by the poorest people.

The government’s claim of a social wage is also misplaced. Given the rise in the cost of food and other basic utilities, subsidies on water and electricity, free medicine and increase in social welfare allowance is just a very small and partial relief to a large majority of working population in this country.  Free education and free medicine policies have been beset by failures in any case.

The way in which the new minimum wage of $2.68 has been determined is flawed. It assumes that the subsidies that government provides to families are enough to compensate for low wages paid by employers.

You cannot have a minimum or living wage that is too low. If it is too low – as it is now – that just means that the government is using the law to keep costs low for businesses. We all know that the Bainimarama government reduced company taxes from 28% to 20%. That put much more profit in the hands of employers. Yet employers who make reasonable profits refuse to pay living wages. For example, we still have garment factories in Fiji which pay less than the national minimum wages. A garment factory worker in Nasinu who has worked for 18 years is on an hourly wage of $2.35.

There is clearly enough money to go around.  The government has repeatedly cut income tax in successive budgets and increased the tax-free thresholds.

But income tax cuts benefit the richest people the most. Poor people, including low-paid workers, earn below the tax threshold. They pay no tax. So tax cuts do not benefit them. They pay no tax to cut!

But the tax cuts in the last Budget meant that Cabinet Ministers will now receive an extra $6,000 in their bank accounts each year.  That is about the same as the entire annual salary of a minimum-waged worker.

 

We will do it 

The dignity and welfare of workers in Fiji can only be improved through the implementation of a decent minimum living wage. If elected to government the NFP will push for a $5 per hour minimum living wage. Our package will be well designed, implemented over time and carefully managed to look after the interests of every one including employers, particularly small businesses.  We understand the concerns about getting young people into the workforce and the special circumstances of domestic workers.  We will consult widely on these concerns.

Nor will we forget people who are self-employed – contractors, farmers and market vendors and small enterprise owners.  We will abolish the unnecessary rules and restrictions that stop them from achieving their full potential. We will actively support those with the courage and commitment to go into business for themselves.

The business community is already reeling under high cost of doing business as a result of government policies and laws. It should not fear the implementation of the minimum living wage.

  • Professor Biman Prasad is the Leader of the National Federation Party. The views expressed here are his own and not of this newspaper

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(This article was published in The Fiji Times on 28th October, 2017)