Proposed wage hike would slash jobs

A proposed 61 per cent increase to the minimum wage would almost certainly lead to job losses and the closure of business, the Samoa Association of Manufacturers and Exporters (S.A.M.E) has said.

The Ministry of Commerce, Industry and Labour (M.C.I.L) hired a consultant to research the implications of a wage increase; the conclusion of his report, reported in the Samoa Observer on Monday suggested raising the current $2.30 tala wage to $3.70. 

Combined with a three year plan to get pension fund contributions up to ten percent by 2021, the Association's President, Tagaloa Eddie Wilson, believes the private sector would be unable to absorb such an increase. 

Tagaloa said the Government needs to consider  a “perfectly fair” $3, or delay the second one per cent increase to the Samoa National Provident Fund (S.N.P.F) set for July 2020.

“You are looking at two things being forced to happen at the same time,” he said.

“The concern is that if you are to combine that increase with an increase in minimum wage of this level you are looking at a very difficult situation for the private sector, and it can result in a potential loss of employment.”

Tagaloa is not against a minimum wage increase, but he wants government to ensure private sector can absorb the shock to business.

Tagaloa fears the increases will leave consumers with higher prices, and thus leave Samoa’s businesses unable to compete against cheaper imported goods.

When surveying S.A.M.E. members, Tagaloa found wide agreement that minimum wage does need to increase, but to something closer to $3.

His own calculation of increasing the current rate to meet inflation rates since 2015 (the last time minimum wage was increased) reaches a wage of $2.54.

“Now obviously no one can survive on $2.54,” Tagaloa said. 

He said including a guessed inflation rate of six per cent for January 2020 brings the wage up to $2.70, which is closer to what his organisation considers fair.

The proposed new wage of $3.70 was offered by consultant Vlassis Missos, hired by the Ministry of Commerce, Industry and Labour to investigate increasing minimum wage. (The increase proposed in Dr Missos' report recommended that minimum wage earners be excluded from forthcoming N.P.F. increases). 

He calculated the cost based on inflation, the cost of basic living needs and the value of take home pay after pension and accident compensation payments, which is closer to $2.

In April, the S.N.P.F announced its plan to increase contributions from seven percent to ten by 2021, increasing by one percent each July.

Businesses owners and private sector representatives said there was too little warning or consultation, and pleaded with Government to delay the increase, then just two months away.

Tagaloa said just like then, the consultations on increasing minimum wage have been “insufficient.”

“The problem I have is the timing for the consultation has never been sufficient,” he said.

“When they ask for consultation, somebody has already made up their mind. The responsible thing to do is to look at the overall impact on the private sector.

The Prime Minister, Tuilaepa Dr. Sailele Malielegaoi, has previously said no increase would be made without ensuring private sector could afford it. 

Tagaloa said while he has been fair, Government actions don’t match up.

“He says one thing and his Ministers do another: they increase revenue, they increase tariffs, they increase taxes, all without consultation," he said. 

“On the one hand you have a leader who has a good idea of what needs to be done and on the other hand you have got consultants running around the country making recommendations without proper informed assessments of the impact on private sector."

In May the International Monetary Fund suggested that Samoa should increase its minimum wage to bring it closer to parity to other countries in the region to a level of about $3 tala. 

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