Minimum Wage: Part of the New Normal

In a few weeks from now the government intends to introduce what could be one of the most significant pieces of legislation in the current session of Parliament. In line with its electoral promise, it will introduce a bill to set a framework for the enforcement of minimum wages in Mauritius. As for any major change this will certainly be contested by many quarters, albeit for what could be genuine concerns about the very survival of some enterprises.

Producers such as the small cane planters and numerous small and micro enterprises would face existential threats. Transitional measures will have to be considered for such cases but in our view the government should forge ahead in its determination. The introduction of a minimum wage is a long overdue measure in the socio-economic development path of our country.

There are many reasons which militate for the implementation of a minimum wage at this stage of our economic development. First among these is demographics. With a declining workforce and its corollary an ageing population, Mauritius, in opposition to its economic competitors in Africa and Asia, has to deal with a dilemma which is usually faced by developed and mature countries. Shortage of wage labour in certain sectors of activity coupled with high levels of unemployment statistics may baffle many observers. While there is some truth in the claim about the mismatch between the required competencies and the available labour force, one may have to look further at what is a more subjective factor.

In fact one of the most pernicious effects of the infamous “middle income trap” in which countries like Mauritius are entangled — with a per capita income of around USD10,000 and most of the trappings of the consumerist society looking increasingly accessible to large sections of the population — the disparity between aspirations, especially among the young, and the opportunities to satisfy those is growing to untenable levels. The increase in petty crimes and growing social dysfunctions which we have been witnessing over the recent decades are certainly not foreign to this situation.

The second important consideration is about choice in a situation in which doing nothing is definitely not an option. The new paradigm is all about survival in competitive world markets on the basis of efficiency and productivity, which themselves often rest on a new culture of enterprise.

“Adapt or perish”, the motto which is so often used rather lightly, might in this case be much closer to reality. Our capacity to build on our existing assets and resources and innovate not only through investments in more productive systems and equipment but also in smarter organizational structures and new enterprise culture – including the sensitive issue of diversity — is therefore one of the essential planks of such adaptation. The introduction of a minimum wage regime can definitely act as a catalyst in this direction.

By modifying the factor costs mix it will be a powerful signal to entrepreneurs that the schema of recourse to “cheap labour” as a competitive advantage is a thing of the past and that investments in more productive systems based on technology and innovation for the production of more value added products is the way of the future.

Increased productivity is a function of both measures taken within enterprises and the general environment in which companies operate. In this domain signals are often as important as action. Business facilitation measures are part of the efforts to increase productivity by reducing the bureaucratic hurdles, so that the time between business decision-making and implementation is reduced to its strict minimum. In this connection finding the right economic model is equally cogent.

Official figures have shown that Mauritius has not been spared from one of the worst trends in the global economy – namely the ever increasing gap between the richest and poorest sections of the population. The rhetoric about “economic democratisation” repeated over and over during the past decade, as the population has come to discover, has remained only that – rhetoric. The decision to introduce guaranteed minimum wage would ensure that people who are willing to work would know that, regardless of what job a person is employed at, a democratically and fairly determined basic income would always be available. This guaranteed minimum wage should to the extent possible be sufficient to satisfy the typical individual’s minimum subsistence needs. This measure will constitute a real qualitative leap in our model of socio-economic democracy and demonstrate our firm and honest intention of implementing substantive action on the “eradication of poverty” agenda.

Minimum wage laws are powerful but admittedly blunt instruments. One must expect resistance to change as always happens when the conventional wisdom is challenged. Government will need to be alert to this fact and, as was said above, in some cases there will be genuine concerns. Accompanying measures will need to be devised to find solutions to these cases as well as to provide an appropriate package of support – fiscal incentives and appropriate stimulus measures come to mind here.

When it comes to changing the behaviour of chief executives, though, there is nothing more powerful than the action of peers. Government is presently involved in a communication exercise with the private sector representatives about “business facilitation.” It should seize the opportunity to engage with them on this issue and reach a workable and acceptable modus operandi for an early and smooth implementation of this truly radical step.

It is perhaps appropriate to mention that in the US – a bastion of business conservatism – there has recently been a “mini revolution” on the issue of “minimum wage” as a response to the spreading campaign against the greed and insensitivity of business tycoons to the plight of their employees. It started with Aetna CEO Mark Bertolini in January this year who decided voluntarily to impose a wage floor of $16 per hour at his insurance company – a move that immediately impacted 5,700 workers. It was, according to business analysts, “arguably the most visible wage hike by a chief executive since 1914, when Henry Ford doubled his assembly line workers’ pay to $5 a day.”

Who will be the first Mauritian who will emulate Bertolini? That is the question.

  • Published in print edition on 16 October 2015

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