Economist: Wage increase could cause discontent

UWI economist Dr Vaalmikki Arjoon says the proposed increase in the minimum wage for public sector workers could cause discontent with their counterparts in the private sector.

He made this comment on October 2, in response to Finance Minister Colm Imbert's announcement of this increase in his budget presentation in the House of Representatives on September 30.

Imbert said government is acutely aware of the difficulties endured by people earning the minimum wage.

“Accordingly, while we do not wish to place additional stress on the small business sector at this time while continuing to review the national minimum wage for an increase in subsequent years, we will increase the minimum wage earned by public-sector employees from $20.50 an hour to $22.50 an hour, an increase of $2 per hour, or 9.8 per cent.”

This increase will take effect from November 1.

Imbert said this measure will benefit “5,100 workers at MTS, 6,900 workers in Cepep and 6,200 workers in URP, among other minimum-wage workers in the public sector.”

He identified security guards and janitors as the MTS workers who will benefit.

“This will put as much as $500 per month of additional tax-free income into the pockets of this very hardworking group of workers, depending on the hours worked.”

In a statement sent to Newsday via WhatsApp, Arjoon said, "The increase in the minimum wage of $2 may cause some persons from the private sector earning minimum wage to attempt to find jobs in the public service - more so for those who received less hours after last year’s increase was implemented."

He recalled that while last year's increase in the minimum wages across the board increased "the purchasing power for many, some entities in the private sector were unable to cope with the increased wage bill and therefore lessened the working hours for some employees."

In last year's budget, Imbert announced an increase in the minimum wage from $17.50 to $20.50 per hour.

He said that measure would benefit approximately 190,000 people in the workforce.

That measure took effect on January 1.

Arjoon said, "It’s possible that some of these workers may attempt to switch to the public service to benefit from the higher wage bill, increasing job competitiveness for minimum wage positions in the public service."

He added, "However, while these positions will provide some increase in their purchasing power, especially for those working fewer hours in the private sector, there needs to be vacancies to hire these workers.

"It may also mean that some workers in the private sector will grow discontent and demand an increase in hourly pay to $22.50 from their employers."