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Chamber submits position paper on minimum wage

Chamber submits position paper on minimum wage

Following extensive member consultation through surveys, discussions and focus groups, the Chamber of Commerce published a position paper on the minimum wage which is being used as a basis for Immediate Past President Shomari Scott’s representation on the Minimum Wage Advisory Committee (MWAC).

The Position Paper supports a minimum wage increase to between CI$7.50 and CI$8.00 per hour. The Chamber urges the Government to conduct an economic analysis to evaluate the impact of any increase in the minimum wage. The analysis should outline the social and business ramifications that support any proposed increase in the minimum wage, including the impact on different categories of employers. The assessment should also include the impact of an adjustment to the minimum wage on entry-level jobs for young people.

The analysis should also include an assessment of the likely impact on inflation and should include the resources the government intends to direct at enforcement and should include input from the Ministry of Labour and Pensions, WORC and the Economics and Statistics Office showing that the long-term benefits of any increase outweigh the costs and risks.  

The Chamber distinguishes the concept of ‘minimum wage’ (meaning, the legal compensation floor fixed by the government) and ‘living wage,’ which is the theoretical minimum compensation amount that would allow a person to live comfortably but very modestly, based on their family size and other relevant factors.

One of the arguments in favor of an increase is that it would improve conditions among low-paid and unskilled workers, providing them with increased disposable income to better cope with the increased cost of living since the implementation of the minimum wage act in 2016. An increase also increases the attractiveness of jobs to Caymanians who may otherwise remain unemployed. Also, given the Cayman Islands’ high degree of reliance on work permit holders from developing countries, the failure to raise the minimum wage means that some employers offer wages below the level Caymanians and permanent residents would consider acceptable, resulting in a segment of work permit holders living in what most Caymanians and permanent residents would consider substandard conditions.

On the other hand, many Caymanian-owned small and micro businesses that are still recovering from the effects of Covid-19 may struggle to implement any increases. In sectors where market forces do not allow increased costs to be passed on to customers, the viability of some of these businesses may be threatened. Those businesses that are unable to absorb increased labor costs may be forced to reduce their numbers of staff, leading to redundancies along with diminished employment opportunities, resulting in adverse conditions for staff that are retained.

The Position Paper also makes the point that, since most workers who are likely to benefit for the adjustment of the minimum wage are work permit holders, any increase would disproportionately benefit non-Caymanians, while the likely downside in terms of increasing prices and goods and services would affect all residents equally. This is exacerbated by the common knowledge that many work permit holders send their funds home, preventing the additional wages from benefitting the local economy.  

All industry sectors were represented in the Chamber Survey. In response to the question on whether minimum wage should be varied by industry sector, 30 of the 78 respondents to the question supported this, while 38 disagreed.  Only 14 of the 78 respondents reported paying staff less than CI$10.00 an hour.

Many respondents noted that their businesses would begin to be impacted if the minimum wage rate were to be increased to more than CI$8.00. One retail business that employs 10 workers said “Increasing the minimum wage by between one and two dollars wouldn’t affect me, since I am already paying around eight dollars per hour. But if it went to nine or ten dollars that would be too much. That would affect everything. I would not reduce staff because I already have a minimum staff…I feel the minimum wage is too low right now and must increase, but not to between nine and ten dollars.

Another small janitorial business said, “CI$ 8.00 an hour would be OK. 9 dollars would impact on the prices and would mean I would have to reduce staff. But six dollars is too low”.

The manager of a medium-sized cleaning company said that they will offer Caymanians a higher wage than they offer to work-permit holders, but this strategy has a limited success rate: “The reason for not attracting Caymanians is the nature of the job, not the wages that are paid. Our company, like many others, will offer Caymanians a much higher wage to be more attractive. But this has a very limited success rate…” Our prices are based on labour costs. The impact on our business would cause a substantial increase in our prices. The increased wage will only affect the wages of our ‘guest” workers who send most of their earnings back to their home country.”

The Chamber supports an adjustment of the minimum wage but urges the Government to evaluate the economic impact of increasing the rate to ensure that the adjustment does not contribute to an increase in the cost of living of residents.

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