Use G.D.P. to calculate minimum wage

By Sapeer Mayron ,

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CALCULATIONS: Professor says minimum wage should be calculated according to G.D.P.

CALCULATIONS: Professor says minimum wage should be calculated according to G.D.P. (Photo: Samoa Observer)

An economics professor says ideally, minimum wages should be calculated, according to the gross domestic product (G.D.P.) of a country.

The professor, who would rather not be named when discussing the issue, said everyone deserves a share of Samoa’s earnings and this can be done by looking at the country’s G.D.P per capita.

With a G.D.P of over $2 billion tala, a “fair” minimum wage could look more like T$5.40, according to the professor’s theory.

“Suppose that per person that is your share of the wealth of the nation,” he said.

“That is how economists look at it.”

Samoa’s GDP is T$2,232 billion, according to the World Bank, with a population of 196,440 (in 2017). If everyone was paid their “share of the wealth,” they would earn T$11,362 per annum, or $5.40 per hour. 

“I’m talking about how we arrive at an acceptable minimum wage,” added the professor.

“There is a political intervention that controls it but if we use the economy, the figures we have without a political arm then the minimum wage should be between 3 and 5 tala,” he estimated (from a rounded G.D.P of two billion and a population of 200,000 people).

The Government has a moral responsibility to fairly distribute the G.D.P to all citizens, he said.

G.D.P per capita does not represent personal income, but the sum of all financial activity in a year divided by the population. But the professor believes it shows how far Samoa is from paying people what they deserve.

Tupa’i Saleimoa Va’ai, president of the Samoa Hotels Association and manager of Vaimoana Seaside Lodge, said that figure could put most companies out of business, but he agreed with the principal behind it.  

“Of course there is a need for Government to look at distribution of wealth,” he said.

“I’m not sure the merits of that [calculation], especially for a country that is just coming out of its development stages.”

He said progressive tax policies, which tax the richer differently than the poor, are just some ways governments address wealth distribution, and that possibly more could be done.

But Tupa’i said the costs of living – one of the driving motivations to increase minimum wage – differ greatly between urban and rural villages.

“From my personal view, I see the costs of living in the villages are a lot easier than of course, living in the urban areas,” he said.

In rural Samoa, citizens aren’t pressured with costs of rent, mortgages or the costs of food, which can be grown.

“The only thing that is driving up the cost of living in most of those areas is the creature comforts that everybody wants, like the big plasma screen TV in the middle of the nice open fale,” Tupa’i said.

“Of course, you don’t want to deny anybody that sort of luxury or pleasures of life, but when you look at the cost of living for somebody in the urban versus the rural areas, it’s completely different.”

© Samoa Observer 2016

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