STATEMENT BY DEPUTY PREMIER AND MINISTER FOR NATURAL RESOURCES AND LABOUR
DR. THE HONOURABLE KEDRICK D. PICKERING
AT THE FOURTH SITTING OF THE FIRST SESSION OF THE
THIRD HOUSE OF ASSEMBLY
MONDAY, NOVEMBER 2, 2015
“Increasing the Territory’s Minimum Wage”
Madame Speaker, under the Minimum Wage Order made on November 6, 1979, the minimum wage payable for employment in the Territory was set at $10 per day and on 1st June, 1994 it moved to $3.00 per hour. In 1999, after recommendations made by the Minimum Wage Advisory Committee (appointed on 29th August, 1997) the minimum wage was established at $4.00 per hour. Over the past few years the issues affecting remuneration and conditions of employment have been the subject of steady vigorous public dialogue. In an effort to address this very important socio-economic issue, on 3rd September, 2014, the Minimum Wage Advisory Committee was approved by Cabinet and in November 2014 pursuant to powers conferred on me as Minister for Natural Resources and Labour by section 38 (1) of the Labour Code, 2010 the committee was appointed.
The Committee was chaired and co-chaired by Mr. Simon Potter and Mrs. Benedicta Samuels-Richardson, respectively. In addition to the Chair and Co-chair, the Committee had fifteen (15) other members selected from central Government, employers and employees, the Virgin Islands Christian Council, youths, the construction industry, the hospitality industry and small and medium size enterprises. Worthy of note is the fact that the current minimum wage has been in effect for more than a decade; however, in determining what can be considered a fair minimum wage, the Committee was asked to consider the economy and how it has changed over the last decade.
Madame Speaker, after a period of sluggish performance, the Territory’s economy returned to positive growth in 2013, signalling the resurgence of economic activity. The size of the economy grew from $909.4 to $923.2 million. This increase was driven by growth in the hotel and restaurant, and transport and communication sectors; this was accompanied by sustained performance of the Territory’s financial services sector.
Madam Speaker, more than perhaps any other economic indicator, performance of the labour market signals the level of economic development and in turn the status of the standard of living for the majority of residents in any society. At the end of 2013 the number of employed persons was approximately 18,247. In the medium term, it is expected that employment levels will increase to almost 19,000 employed persons by the year 2017. Growth in employment levels will be a function of expanding opportunities in financial services, tourism and construction industries.
Madame Speaker, the Territory’s work force is very diverse. According to the Central Statistics Office (CSO), in 2013 there were 18,809 persons were employed in the Territory. This number represented persons from one hundred and twenty-nine (129) countries. The CSO data also reveals that the majority of the workforce is between the ages of 30-49. Additionally, also indicated by the data is the fact that the greatest number of employees at minimum wage is under the age of 29. Interestingly, this statistic is similar to what is found in other countries where this age group usually fills entry-level jobs or is made up of individuals who have not attained the necessary skills to warrant higher paying jobs.
Despite the existence of a legally established minimum wage, 85.7% of the businesses surveyed indicated that they do not pay any of their employees at the minimum wage level. This sentiment of the business community was further buttressed when almost 96% stated that the minimum wage should be increased from its current level of $4.00 per hour. The results of the survey further revealed that a range of $4.50 - $10.00 per hour was suggested with approximately 33% of the businesses suggesting $5.00 and another 33% suggesting $6.00 per hour. A very important point to note is that 80.0% of the businesses surveyed indicated that there would be no negative reaction from them if there were to be an increase in the minimum wage. Also indicated by the research, almost 50% of the household’s monthly expenditure goes towards housing and utilities. Expenditure on food, which is the second highest, accounts for 14.4% of the total expenditure. Following were transportation and communication with 9.2% and 8.7% of total expenditure respectively. Total household expenditure is estimated at about one thousand sixteen hundred thirty-four ($1,634) dollars per month.
Madame Speaker, on July 21, 2015 the Minimum Wage Advisory Committee submitted its report after roughly eight (8) months of research and consultation. The revised minimum wage as proposed by the committee took into consideration the following factors:
- the employers’ ability to pay a higher minimum wage;
- the impact this will have on the economy as a whole;
- the ability of families to provide the basic necessities such as food, clothing, housing and medical care for their families;
- economic conditions in the Territory, including job growth, and the unemployment rate;
- the cost of living, including tax levels and average household expenditure;
- the characteristics of minimum wage earners, industry and employer size;
- the overall impact of a minimum wage increase on businesses;
- trends and developments related to minimum wage in other jurisdictions;
- results from public consultations/meetings and relevant Government Departments;
- average wage in the Territory; and
- the Territory’s inflation rate.
The Minimum Wage Advisory Committee was also asked to investigate whether or not the minimum wage should be set at the same level for all employees or whether the minimum wage should be set by category of employees. That is to say, should the minimum wage for a service clerk be the same as the minimum wage for a construction worker. The committee decided in the end to recommend a single minimum wage and allow the market forces set the minimum in specific sectors of the economy.
While there are benefits to an increase in the minimum wage such as:
- Economic Stimulus;
- Decreased Turnover Rate; and
- Reduced Expense for Social Programmes.
There are also disadvantages
- Price increase; and
- Fewer hiring.
Madame Speaker based on the committee’s report there seems to be unanimity from all sectors of the community that the minimum wage needs to be increased. Therefore, reinforced by this consensus, the Committee has recommended an upward adjustment in the minimum wage from the current $4.00 per hour to $6.00 per hour. This moves the Territory from the lowest of the Overseas Territories in this region to just below Turks and Caicos which is currently set at US$6.25 per hour.
This recommendation was informed by a broad spectrum of factors which influence economic conditions within the Territory. Those factors include:
- job growth and unemployment rates;
- the cost of living (including tax levels and average household expenditures);
- analysis of information obtained from public consultations and from relevant Government Departments and statutory bodies;
- the average wage in the Territory;
- the Consumer Price Index (CPI); and
- the Territory’s inflation rate.
The committee also made other useful recommendations which include:
- that the minimum wage rate be reviewed at least every five (5) years;
- that the minimum wage be introduce within a reasonable time; and
- that the Labour Department be provided with adequate resources to ensure compliance.
Madame Speaker, I take this opportunity once again to say a heartfelt thank you:
- to the Chairman of the Committee, Mr. Simon Potter and his committee members;
- to the business community for cooperating with the Committee and for remunerating employees at a rate that they thought was fair in absence of a legally established minimum;
- to the community at large for coming out to the various town hall meetings, and calling in on the various radio and television shows. The information provided during these sessions made this a very worthwhile exercise; and
- to the public servants who supported the committee in researching information needed for this exercise.