Editorial | Neita wrong on minimum pay

It is not obvious what is the real mischief that Ian Neita and the Jamaica Chamber of Commerce (JCC) want to address with the call for the Government to end the practice of establishing a national minimum wage, except to be slaves to an extreme economic orthodoxy.

Mr Neita is the executive director of Yello Media, which produces Yellow Page publications in Jamaica and the rest of the English-speaking Caribbean. In November, he was elected president of the JCC, one of Jamaica’s leading business organisations. Last week, Mr Neita made his first major policy pronouncement as head of the Chamber.

By establishing a minimum wage, Mr Neita said, the Government was interfering with the free market, by which we suppose he means disrupting the laws of supply and demand and tilting the invisible hand that sets prices.

“We believe the free market needs to set rates,” he said. “It’s important because, once you start to interfere with businesses by telling them what they need to pay or what they need to charge, you are disrupting the flow of competition.”

Added Mr Neita: “Once you start to get involved in setting wages, you are interfering with employment, because a company has a finite amount to spend on labour and, if they say you have to pay more, you may end up having to employ less, and you disrupt the whole dynamic of a free-market system. But the cost of underpaying your employees is extremely high. You might think you are saving money, but you are fostering low productivity.”

This newspaper wishes to make one important declaration, before touching on other elements of Mr Neita’s unprovoked statement.

First, The Gleaner is committed to the principle of free enterprise and the primacy of markets, even as we understand that markets sometimes need a helping hand, particularly in protecting the welfare of society’s most vulnerable.

CLARIFY POSITION

With respect to Mr Neita’s statement, it would be useful if he and the Chamber clarify if they prefer that the Government repeal the Minimum Wage Act, under which it periodically appoints an advisory commission to recommend the minimum wage to be paid in the economy generally, or to a class of workers.

Or, it might be that the Chamber believes the law should be allowed to fall into abeyance, leaving the current minimum wage in force in perpetuity, rather than engineering a clean policy break with the past. That would be the easier politics.

There are other significant contexts against which Mr Neita’s call ought to be considered. Jamaica’s minimum wage is $7,000 a week, set in 2018. Many workers are paid at that rate, or not much above it. A review should begin soon.

Poverty in Jamaica, measured by people’s ability to consume, including paying for their basic caloric intake, was, on the Government’s accounting, 11 per cent in 2019. But the poverty rate is expected to have risen sharply, given the economic decline since the COVID-19 pandemic. Higher rates of unemployment and underemployment would have been exacerbated by the salary cuts many workers faced during the recession, and the spike in inflation that has accompanied the economy’s nascent recovery.

Even before these developments, anyone would have been hard-pressed to claim $7,000 per week to be a living wage, notwithstanding a recognition that it is far better than no wage at all.

Mr Neita also argued, during an appearance of TVJ’s ‘Smile Jamaica’ programme, that the Government would do better to pursue policies that expand the economy. He mentioned among the possibilities the reduction of crime and the creative use of tax policies.

“If businesses grow, and new businesses are formed and they begin to employ, investors will have to compete for labour, which will result in more improved wages far beyond the measly amount being offered presently,” the Chamber president said.

POTENTIAL FALLOUT

The bit about the possible impact on jobs and wage rates is, on the face of it, quite sensible. Indeed, the pursuit of economic growth as a means of lifting people’s living standards is an obligation of governments – including Jamaica’s.

But governments globally – those in the United States, Great Britain and Europe among them – appreciate that armies of working poor and widening inequity, which markets may not correct, are not healthy for their societies. It is potentially combustible. That is part of the basis why these governments establish minimum wage levels.

The Jamaican situation adds another dimension to this question and to Mr Neita’s position that markets, solely, should be allowed to set wage rates, with no minimum level of pay established. His assumption is that competition would nonetheless bid rates upwards.

Which, of course, happens in strongly growing economies where labour is short and the demand for workers great. That may well happen, at some point, in Jamaica. But it is far from the circumstance at this time.

What Jamaica has is a vast surplus of labour, a substantial portion of which is compensated at, or not very high above, the minimum wage. The removal of that base rate would more likely drive wages for this group of workers through the floor, without the market’s reference to employers’ ability to pay. The potential fallout from this would exacerbate Jamaica’s already-deep social problems and lead to a country in which it would be even difficult to live.