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News Report: PLP's Minimum Wage Hike 'Economic Suicide'

By NEIL HARTNELL - Tribune Business Editor, Tuesday, March 9, 2021

The Progressive Liberal Party's (PLP) plan to increase the minimum wage by $40 per week was yesterday branded "economic suicide" by the private sector's top labour specialist.

Peter Goudie, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) labour division head, told Tribune Business that the Opposition's proposal would deter hiring by businesses "who are barely holding on" and may even result in fresh terminations due to the associated increase in labour costs.

Arguing against the imposition of a fresh private sector burden when companies "are shutting down almost every day" due to COVID-19's economic devastation, Mr Goudie described the PLP pledge of a $250 private sector minimum wage as "a political manoevere by the Opposition party that's desperate to try and win seats" in the upcoming general election.

Chester Cooper, the Opposition's deputy leader, justified the party's proposed 19 percent minimum wage increase on the basis that Bahamian workers require a "livable wage" given the ever-increasing cost of living so that they can "live with dignity".

“We looked at what happened when the previous PLP administration increased the minimum wage by 40 percent,” he said. “We are comfortable that what will happen as a result is small businesses will have more money, the economy will grow, there is more money in circulation, the Government will in fact receive some taxes back as a result of more money in circulation, (and there will be) more money in spending by the persons with $250."

This stance, though, was comprehensively rejected by Mr Goudie, who told this newspaper: "They said that the last time we increased the minimum wage there didn't appear to be any economic shock waves, but that increase was not done in the middle of a pandemic or aftermath of a Category Five hurricane.

"I just think increasing the minimum wage right now would be economic suicide. We have got businesses shutting down almost every day and they want to increase the minimum wage. Chester [Cooper] is supposed to be a very smart businessman, but sometimes you have got to wonder......."

Mr Cooper, who prior to his election as Exuma's MP in 2017 was the principal of BAF Financial, the insurance and financial services provider, is also a past president of the Bahamas Chamber of Commerce.

"I just think it would be economic suicide," Mr Goudie reiterated of a minimum wage increase now. "This country is in big trouble. If you are going to increase my costs of doing business, and I'm struggling as is, I'm just going to cut more. We all have to survive somehow....

"We know people want the minimum wage looked at, but it's not economically feasible right now. I just get upset. If you increase it to $250 it's a 19 percent increase. You've got people in the private sector who are barely hanging on to to their businesses right now, and you want to put a 19 percent increase on the minimum wage?"

Mr Goudie, who is one of the key private sector representatives on the National Tripartite Council, the body that deals with all labour-related matters in The Bahamas, said the US Congress last week set a precedent by shutting down the bid by Senator Bernie Sanders and other left-leaning Democrats to increase the federal minimum wage to $15 per hour.

"Think about that one. The largest economy in the world shut down a minimum wage increase," he added, while questioning what the impact on the Bahamian government's payroll would be if the PLP sought to increase the public sector minimum wage of $220 per hour.

"You want to put more money in the Government's coffers, but how are you going to do that when you increase the minimum wage?" Mr Goudie asked "It's a political manoevere. It's a political manoevere by the Opposition party that's desperate to try and win seats."

The minimum wage has only seen one increase since it was first introduced in The Bahamas in 2002. That occurred under the last Christie administration in the aftermath of VAT's 2015 introduction, and was designed to help offset the rise in living costs produced by the then-new tax.

However, the 40 percent increase from $150 per week to $210 per week is understood to have been backed by rigorous analysis undertaken by the National Tripartite Council, the body responsible for addressing all labour-related matters, and others.

"I was one of the people who did all that research and empirical analysis," Mr Goudie added. "It hadn't been done for a long time, and we know that the minimum wage we set then was above the poverty level." He said a "livable wage", as called for by the PLP, was not the same as the minimum wage, and argued that it was virtually impossible to agree on a definition of the former.

Robert Farquharson, the National Tripartite Council's chair, said a minimum wage review is already on its "agenda" currently. Declining to comment directly on the PLP proposal, or which direction the Council's assessment may take, he added that any increase must be supported by sound economic and labour market data.

"I believe any increase in the minimum wage should be preceded by investigation and recommendation from the National Tripartite Council as was done with the previous increase," Mr Farquharson said. "The National Tripartite Council does have the recommendation to review the present minimum wage on its agenda, but we haven't taken it up as yet.

"Obviously we have to do the necessary comparisons with the increase in inflation and cost of living. We'll make a recommendation to the Government based on the available data."

While any increase will doubtless be welcomed by minimum wage workers, its implementation in COVID-19's immediate aftermath represents a further burden for those many businesses struggling to survive. It would act as a marginal increase in labour costs that could disincentivise firms from hiring, a move that would especially impact younger workers, and even spark some to lay-off.

Bernard Evans, the National Congress of Trade Unions (NCTU) president, welcomed the PLP's pledge to increase the minimum wage while acknowledging that The Bahamas is in "political silly season and a lot of promises are made".

He also pointed out that the minimum wage was different from a livable wage, adding that research by the trade unions some nine years ago had shown that the latter should be pegged at $475 per week for a family with two children so that they could cover rent/mortgage and utility costs.

With that figure more than double the present minimum wage, Mr Evans agreed that the gap between the two cannot be bridged overnight but said it "can be done incrementally to get us to a place where families are not trapped and marginalised by a minimum wage that renders them handicapped when it comes to earning a living in this country".

"I don't think we should have a minimum wage; we should do away with a minimum wage and move to a livable wage," the NCTU chief told this newspaper, adding that too many Bahamians were working two to three jobs just to make ends meet.

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