Archive for September 23rd, 2011

Cayman lifts $9.2B asset freeze says Saudi group

| 23/09/2011 | 0 Comments

(Washington Post): The billionaire founder of one of Saudi Arabia’s largest conglomerates said Thursday an order freezing $9.2 billion of his assets was lifted by a Cayman Islands court, in the latest twist in a legal battle in which another Saudi conglomerate alleges he defrauded it of billions of dollars. Saad Group founder Maan al-Sanea said in an e-mailed statement that the court also ordered that Ahmad Hamad Al-Gosaibi and Brothers Co., or AHAB, cover his legal fees related to the asset freezing order. He also said the court would hold hearings to assess other potential damages.

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What will a minimum wage achieve?

| 23/09/2011 | 42 Comments

The idea behind introducing a minimum wage in Cayman is that it will stop the importation of poverty and enable Caymanians who would not otherwise work for low wages to offer themselves for those jobs, leading to lower unemployment among Caymanians.

Before getting into the intricate details of how a minimum wage is implemented (for example dealing with gratuities, the question of per sector versus across the board minimum wage and the timing, etc) legislators owe it us to answer the basic question of whether this approach has any chance of achieving its objective.

The obvious place to start is with the assumption that many of these imported workers will be replaced by Caymanians, who will step up to do the job for the higher wage.  First, we can reasonably assume that a lot of the jobs in question are of the lesser skilled, or in some cases unskilled, type. Secondly, history and an abundance of anecdotal evidence has shown that there is a minority of Caymanians interested in working in these positions. Therefore, the minimum wage will likely have a very limited impact in attracting Caymanians to do those jobs.

Whether we like it or not, people are entitled to have job preferences and if they have a strong aversion towards certain types of jobs, it will be that much more difficult to convince them to do that job for an additional, say, $2.00 per hour. We cannot ignore social and cultural factors when discussing economic issues.

What all this means is that the minimum wage is unlikely to have any positive impact on the employment of Caymanians and instead will likely only achieve the following:
1. It will lead to higher paying wages for many of the existing imported unskilled workers.
2. It will most certainly lead to an increase in the cost of doing business and inflation to consumers due to its impact on those employers who are now forced to pay higher wages.
3. And finally it will benefit the respective foreign countries with millions of dollars in capital inflows due to the additional funds sent back home by the work permit holders.

In addition, there may be very little success in addressing the issue of importation of poverty because many foreign workers will transfer most of their extra wages back to their homeland instead of staying in a nicer apartment, etc. Again these are personal choices that must be respected as long as they cause no harm to others. 

One positive thing that the minimum wage could achieve is to put pressure on so called indentured labour. But the government and the labour department should be able to identify the key types of jobs where such abuse often occurs and apply more enforcement to address it. For example, labour/immigration officials already have the discretion to make the assessment that a work permit should be denied if they are not comfortable with the proposed wages, number of dependents, standard of accommodation and ability of the worker to live at a reasonable standard in the country. Why can’t they simply enhance that existing ability?

We also need to consider the current challenges facing the immigration department when applying the necessary due diligence during the work permit application. For example, some of these very same low wage employees participate in a ‘scheme’ of pretending that they are being paid high wages so they can get the job in the first place (with the intention of moonlighting later to boost their wages in other ways). In other cases employers are indeed abusing the worker by, for example, promising certain wages and benefits and later reneging on those. But these are the types of issues that the immigration and labour officials should be able to address by applying improved enforcement/assessment mechanisms as well as addressing on a case by case basis.

But let’s face it: there is no genuine reason to think that imposing a minimum wage will stop any of these abuses of the system. In fact we could easily end up with a minimum wage law and the same basket of problems we were attempting to address, while creating one or two additional problems in the process.

A minimum wage will certainly make many of us feel that there is some improved social justice by virtue of the country putting in place a minimum standard for our pay. But we must dig deeper and ask ourselves: is a minimum wage the right blanket solution to achieve our objectives? Considering the issues above, for many of us the answer is, probably not.

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