Don't "pass the buck" on minimum wage — former M.P.
The Government should increase Samoa's minimum wage and not "pass the buck" to the country's private sector.
That is the view of economist and former Member of Parliament, Afualo Dr. Wood Salele, in response to recommendations by the International Monetary Fund (I.M.F.) last month for the Government to raise the minimum wage.
Speaking during an interview with the Samoa Observer, Afualo called on the Government to be bold and make a stand on the issue.
“Whatever the private sector says, the Government cannot hide behind the figures that Samoa has a G.D.P. (Gross Domestic Product) of $2.2.billion,” says the former Tautua M.P.
“Otherwise if this is the case, then the $2.2 billion G.D.P. figure is questionable and it is just a shadow figure to make our economy look good, when in reality it is not the real G.D.P.
“It is much lower.”
Afualo reiterated that instead of the Government “passing the buck to the private sector (on the issue), they should make the decision, considering that people can no longer afford the cost of living”.
“If we do not increase the minimum wage, this problem of dishonesty and inefficiency will not go away,” he added.
In a report released last month, the I.M.F. said Samoa had the lowest minimum wage in the Pacific with its $2.30 tala rate.
The international financial institution's report — which was released after Article IV Consultations with Samoa Government officials in February and March this year — recommended that it is time for Samoa's minimum wage to be increased, due to high levels of unemployment and the large number of informal workers in the country.
Commenting on the I.M.F. report, Afualo said it shows the need for the Government to reconsider its position on the issue.
“The report says that Samoa has the lowest minimum wage in the Pacific and to me it is a dire warning for us,” he said.
“It doesn’t look good for us Samoa. If you look at Kiribati — their economy is a lot smaller than us — but in terms of minimum wage we are lower than them.”
Kiribati has a minimum wage of $3.10 tala.
With this in mind, Afualo said the Government has always denied poverty existed in Samoa, but the situation out in the villages could be different.
He said what he sees right now is poverty in the sense of "income disparity".
“If you take a step out in the village, away from the infrastructure in town, and you will see a lot of people struggling,” he said.
“We are struggling with inequality where the rich is getting richer while the poor is getting poorer.
“That is the kind of poverty we are seeing and it’s getting worse and these are a direct outcome of Government policies.”
Afualo emphasised that there are two ways for the Government to create wealth in Samoa.
First is wealth by increasing expenditure for developments and secondly it is to reduce expenditure and increase revenue.
He warned that the first option often leads to an increase in debts.
In reference to the recently tabled $913.6 million budget, Afualo said it reflected the Government’s intention to increase wealth through expenses, whilst expenditure continues to rise.
He said whether there will be any spontaneous reaction from the developments, it is a guessing game that everyone knows the answer to.
The budget estimate for the current financial year, compared to the previous 2018/2019 financial year, calculated a deficit increase of $3.56 million.
Going back to the minimum wage, Afualo also talked about claims that the increase will have an impact on unskilled workers, who are not needed in work places and the potential of them being made redundant.
In response, Afualo said the claim is “garbage, it has no statistics to validate it and is unfounded”.
He said the statement is one of the many excuses used to suppress workers from getting paid more than the minimum wage.
The former M.P. as an example used retailers in Samoa, who are “taking advantage and manipulating workers by paying them nothing more than the minimum wage”.
“They are getting paid just the minimum wage and it is disgusting,” he said.
“They are manipulating the law by remaining on that peanut low wages, and unless the Government has an honest political will to uplift the standard of living and go above $3 tala, then transparency will be realised for all, not just a few.”
Afualo also criticized businesses for looking at maximizing their profits, instead of having a good heart to support the increase in the minimum wage.
“If you want to achieve profit maximization it should also be fair on the employees,” he said.
“Some do not feel the burden that is felt by the least section of the economy.
“These people are asking for a little more and everyone should get a fair go at life.
“If that is the case then the businesses should request to Government to lower taxes but not suppress (minimum wage) for workers. It is not their fault.”
According to Afualo, businesses and companies should be targeting the Government that is generating the bulk of its revenue from fees and taxes.
“If they want some assistance, they should direct their grievances to Government to lower company tax and other costs, that they are suffering from,” he said.
“It is not the fault of the workers being paid minimum wages, they are not responsible for the low wage and so the buck goes back to Government.
“If the business want help, they should go back to Government who is absorbing most of it.”
Afualo also spoke about the Yazaki Eds company that has closed down and the Government’s claim that increasing the minimum wage would affect investors.
He said there is always a spontaneous reaction to any event that occured and the arrival of Yazaki many years ago is no different.
“What happened to Yazaki is they have left and the human resource has been reallocated to other sectors of the economy,” he explained.
“This is a classic example that the economy can still function and the labour force under Yazaki has been absorbed by other sectors to improve efficiency.
“So I don’t buy that about investors because it is a political argument and as an economist you can only use that as a tool.
“And if the economy is good and improved with a growth in G.D.P. then you cannot suppress the people by just holding on to that (minimum wage).”
Lastly Afualo added, “if you allow the market forces of the supply and demand to determine the market price, then you will see it will solve it for you”.
“If it does not work then Government will intervene with good policy to ensure the market functions well. But if there is too much heavy handed from the Government in operating the market force supply and demand - what happens is it cannot breathe.”
In February this year, Prime Minister, Tuilaepa Dr. Sailele Malielegaoi spoke on the issue of minimum wage and said any plans to increase it, will depend on the ability of the private sector to absorb it.
“Any raise in the minimum wage is dependent on private sector’s ability to absorb it among other related issues,” Tuilaepa said in a press statement at the time.
“In making such a recommendation, the Ministry of Commerce Industry and Labor (M.C.I.L.) take into account what government can afford, and especially the private sector.
“M.C.I.L. also has to consider variables like inflation rates and its effect on disposable incomes.
“The key word here is affordability.”
For instance, said Tuilaepa, the federal minimum wage imposed by the United States Congress in American Samoa some years ago — led to the closing down of the Van Camp fish processing plant there.
“And when the issue resurfaced again, the territories tuna processing industry was at cross roads and threatened to shut down operations in the territory, because the new wages dictated by Uncle Sam would lead to financial chaos for them.
“This is one of the issues that my administration is mindful of whenever there is talk of wages and benefits.”
Tuilaepa also noted that the private sector could not afford the last hourly wage increased approved in 2014 and its implementation was delayed.
“The increase was originally approved for implementation in May 2014,” he said.
“But it was delayed to January 2015 in response to the request by the private sector employers for a grace period for them to embrace the increase to get their financial houses in order to minimize any drastic impact such as lay-offs and redundancies.
“And Government obliged.
“That is how my administration operates based on merits, facts and numbers and not politically infested promises.
“We all want to raise minimum wage but it has to be a measured increase and at a level the private sector can absorb.
“There is no point in raising minimum wage and immediately results in businesses closing down.
“Then all we will get is looking at a bunch of numbers while there are no jobs.”
Back in 2014, Ministry of Commerce Industry and Labor Chief Executive Officer, Pulotu Lyndon Chu Ling said the majority of the private sector members had reservations to increase the minimum wage.
After reviewing the pros and cons of the proposal, a 30 sene per hour increase was agreed upon and implemented.
“For the record, none of the Government workers are being paid under the minimum wage requirement by law,” said Pulotu.
“Latest survey conducted by M.C.I.L. found that about 700 employees representing 6 per cent of Samoa’s working force of 12,000 are paid minimum wages,” says Pulotu.
“To that effect, M.C.I.L. will be conducting a follow-up survey to update the data and revisit a possible increase to the current minimum wage.”