Awaiting the National Minimum Wage

National minimum wage is a property right to people’s labour. Undervaluing that property – paying below a minimum level would be a theft of property

The National Wage Consultative Council (Council) has been set up with the primary and eye-catching function of recommending to the Minister (Ministry of Labour, Industrial Relations, Employment & Training) a national minimum wage that may be introduced for the lowest paid workers. The Minister may make regulations to implement the recommendation of the Council, reject the recommendation or make other regulations as he thinks fit.

There are other important functions of the Council but the public and the unions seem to be more interested in the recommendations in respect of the national minimum wage. Let’s not be naïve to believe that the minimum wage is being set for the first time here. Far from it. The National Remuneration Board (NRB) a quasi-judicial body established under the Employment Relations Act, makes recommendations to the Minister regarding minimum remuneration in the private sector. These recommendations are decreed as Remuneration Order [RO] Regulations. Presently, there are some 30 distinct ROs covering nearly 300,000 workers, with minimum wages set for each category in different sectors.

The national minimum wage to be set by the Council has a different story. It is the lowest wage that is legally to be paid to workers. It can be a monthly wage or a rate per hour. In normal circumstances workers do not sell their labour below that price floor. The national minimum wage is established to prevent any exploitation of the workers by the employer, company, entrepreneur, organisation or owner. It has an economic impact. It affects the person, the employer and the economy at large. Furthermore once set, the minimum wage erodes with time and inflation. Though not a living wage (a wage on which a worker and his family can live off), the minimum wage (that covers basic costs required for a dignified, healthy life) has to be kept current by keeping pace with inflation.

Unions push for a higher minimum wage to improve living standards for the working class and to reduce inequality, while employers push back out of fear that their businesses will flounder with increasing labour costs. Though in the equation the low-wage workers today, compared to those decades ago, are more educated, tech- savvy and more productive and the economic pie has expanded greatly, yet these low-wage workers are making less (relatively) today than similar workers did several decades ago. Trends like this make unions cry for higher minimum wages.

The impact of a high minimum wage is disparate. While some employers cut jobs in response to a minimum-wage increase, others find in that an opportunity to fill the vacancies with a higher wage floor, attract experienced people, reduce turnover and retain competencies.

Studies have revealed that when minimum wage is set at a moderate level, it has little or no effect on employment. However, there is a sort of dependency that creeps in among workers with a high minimum wage. Mobility of labour is interfered with, people stick to the high minimum wage job and become content with it and make no effort to move upwards in the economic hierarchy. This type of behaviour impedes learning and in the long run makes labour force become obsolete. It also defeats a decried principle that it is necessary to pay people poorly in order to motivate them to move up. The counter argument is that people do attempt to get higher paying jobs when they are available, even if their pay is not poor. They stay in the minimum wage job simply because they are not able to find a better paid job. Another economic concern with increase in the minimum wage is that it increases spending and precipitates artificial inflation.

Setting the national minimum wage cannot be viewed as an adjustment variable of the production costs nor a coercive power of the Government. It is a property right to people’s labour. And undervaluing that property – paying below a minimum level would be a theft of property (labour).

Let’s wait for a fair and equitable national minimum wage.