What will a minimum wage achieve?

| 23/09/2011

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.

Category: Viewpoint

Comments (42)

Trackback URL | Comments RSS Feed

  1. Anonymous says:

    agree. lets shut this idea down. people soon start blaming lack of a minimum wage for the crime too. solution looking for a problem. leave this alone.

  2. anon says:

    ezzard wont like this view. but we all entitled to one. i dont think minimum wage wil actually solve anything. but it may hurt the economy especially at this time. bad idea and looks like wrong time to do it too.

    • Anonymous says:

      For once I agree with you.  Minimum wage in a third world country?  Can't work.

  3. noname says:

    Typical American Christian way of looking at things.

    Make everyone and every Government agency follow the laws or face the consequences.

    If you don't do the job you get fired.

    If your not following the rules you get fired.

    If you cheat and steal from someone you go to jail.

    If you follow the rules you get the rewards of your work.

    The rules and laws are there to protect the weaker citizens from the ruthless and immoral.  

  4. Anonymous says:

    To those that say the min wage is about caring and avoiding slavery…..if we introduce this foolish idea and unemployment increases and prices go up as well….would you “care” about that as well? Or are u saying we can think about this in isolation. I bet if we rid ourselves of some of these labour pimps most of the issues would go away. Minimum wage is a sledge hammer looking for a nut to crack.

  5. Anonymous says:

    Hmmmm let’s see….more pay for some. No real positive impact of caymanians. Extra wage just leaves country anyway. I think I agree with the viewpoint based on my direct experience with the job market. But if the country was not messed up in other ways we would not even have to think about this terrible idea.

  6. Anonymous says:

    Minimum wage is Good!

  7. Anonymous says:

    Typical American/Caymanian/christian way of looking at things.

    It is only me me  me and only me.

    If you want to avoid importation of foreign workers, then change the immigration law/work permits.

    If you want to increase profits for businesses then give people money to spend.

    The question about minimum wage is about how much we care for our weaker fellow citizens, not about making profits.

     

    • typical caymanian christian says:

      you people just dont get it do you? you talk about companies making profits as if this was a bad thing. why do you think they are in busines in the first place? do you think that if they dont make profits we will create jobs? if they dont make profits they will close down. we are always so quick to jump on bandwagon to blame "money" profits and big companies for all our social problems. but equally quick to run to them come charity time. many of our issues stem from poor parenting, lack of education and our own personal choices. we are not talking about slavery here…most of these people made their own decision to come here and work and must feel they are better off. sorry to say but you cant now try to argue that minimm wage is here to solve our social issues…it wont and once this law comes into place you will see that thngs only get worse (no matter how "good" the law makes all these moral kings and queens feel)

  8. Anonymous says:

    The minimum wage law is merely window dressing.

     

    If it is enforced, it will be enforced selectively.

     

    This unenforced law will have very little economic or social impact on Cayman.

    • truth says:

      Thats because thats the way its done in Cayman now.  With the hope that the Cayman of the future will have the ability to follow and inforce laws for the betterment of the whole island instead of the priviledged intitled few.  Cayman is still third world but it doesn't have to stay that way.

  9. Just Commentin' says:

    While much attention is given to the "minimum wage" I see no mention of a standard that is becoming increasingly popular as a realistic, reasonable and more moral standard for compensation of workers, this is known as the "living wage".

    The living wage for western and European economies is usually defined as the minimum income necessary for a worker working forty hours a week, with no additional income, to meet basic needs including food, shelter, clothing, utilities, transport, basic education, health care, and recreation.

    Depending on the region or jurisdiction, the living wage may or may not have a good correlation with the minimum wage.

    It would be interesting to know if a living wage study has ever been done for the Cayman Islands.  I have serious reservations that the current minimum wage would meet the criteria of a living wage; If it does not then it simply legitimizes and enshrines in law an immorally deficient wage.

    Another concern of mine is for our brethren on Cayman Brac. Anyone who has ever lived on or visited the Brac knows that the cost of living is significantly higher on the Brac even for a person just getting by with basic necessities like food, housing, utilities and clothing.  On Little Cayman ithe cost of living is even higher.

     

    Certain states in the USA have a higher standard for the state minimum wage than the national minimum wage because of higher costs of living. Certainly the mimimum wage for the Sister Islands should be higher than for Grand Cayman.  (Are you listening JuJu? Your voters may want to know why they are expected to make ends meet on a wage that does not take into account their cost of living and why the Brac is left with the short end of the stick!)

  10. Anonymous says:

    Apparently none of you understand that this is going to make many jobs cease to exist.

    • Henry says:

      Please feel free to elaborate Mr Expert…..

    • Anonymous says:

      You mean like the ones that shouldn't exist?  Yes we all understand this.  Apparently you do not care.   And we all understand this.

    • Anonymous says:

      I agree. Take the car wash for example. It would mean that prices would have to increase to a point where customers won't find it acceptable. No customers, no business, no jobs.   

  11. Anonymous says:

    immigration should stop giving permist to persons who don't give enough evidence that they will live in decent accomodations or employers who give unrealistic explanation about how much construction  "work" they will actually be doing so they can hire peoplewho then go work for 2 or 3 other employers. we need to police these people better for sure. i don't beleive in abuse either but we do need to have better enforcement of this. new wage will not achieve anything for caymanians anyway

    • Anonymous says:

      That would take real work.  Never gonna happen.

    • Anonymous says:

      Unfortunately, a number of these "labour pimps" work in the immigration department so who is going to police that.

  12. Shock and Awe says:

    I can see many business owners bemoaning the proposal of a minimum wage based on their previous profit margins but the reality is a $5.00 minimum wage is really a pittance given the average cost of living on Cayman.

    It is a strange place also with the many uber-wealthy part-time residents who are not really aware of what it takes to live full time on the island. Let's face it the work permit system allows imported foreign workers to do many of the menial jobs necessary to support the lifestyles of those making a lot more. They may have some guiltly feelings but can rest easy knowing they can leave and at the same time many local prices are based on their level of consumption and what they can afford. After they have left those prices don't come down. The minimum wage is supposed to address this and it is not a matter of whether foreign workers will send more money home because I am certain they are not rolling in it. Far from it. It is a moral obligation for a country to allow citizens whether imported or not to live in some degree of dignity. If this has to be legislated through a paltry minimum wage so be it. Now go back to Palm Springs or Miami or wherever and count your blessings.

  13. keep cost low says:

    the chamber should speak up about this because if they introduce it it will kill busines (and I mean small business)

    • Anonymous says:

      No one in Cayman should be working for less than $5 per hour.  If your business goes down, it is only your loss and that of your foreign slaves. You didn't hire Caymanians so the money was leaving the Island.  No one should make a living from slavery.

    • Anonymous says:

      The chamber don’t care,it is all for big business,check it out.

  14. Anon says:

    i agree with this view. politicians are selling this as soemthing good they are delivering but we will not get rid of any of the issues we are currently facing. only work permit holders will benefit and they will send the cash back home. if govt want to help they should come down hard on people when they apply for the permits to make sure the person wil be getting a decent salary that looks reasonable. but why subject the whole country to a minimum wage to adress that?? sledge hammer to crack nut.

  15. Anonymous says:

    the potential negative impacts are real. look at what happens when othere countries go down this road. a minimum wage can lead to even more unemployment, just do some research and you will see.

    • Anonymous says:

      Which countries?  Large overpopulated countries that were not importing slave labour.  They had native slaves.  Cayman cannot be compared.  Our slave labour is imported and only the employer benefits because he doesn't hire Caymanians so the empoyees send their money out of the country while they live in sub-standard conditions creating more slums.  Cayman does not need this – alot of poverty to make a businessman rich. 

      For all you thumb downers, some Caymanians are smart and some are not, just like the people in your country and it's mostly xpats/status holders in our over crowded public schools and recipients of welfare.  We don't need to import welfare recipients.

      • Anonymous says:

        And What’s the point of referring to “status holders” in the schools? U trying to say they are not caymanians…typical..and that my friends is why cayman is going down the drain. Keep that attitude up and you will end up with your island on your own..just like u want it…let’s see how u like that scenario..

  16. anonymous says:

    good viewpoint. we are fooling oursleves if we think the minimum wage will anything but makes feel good. i beleive it will actually harm the economy.

  17. Adam Smith says:

    It will result in :

    1) Higher costs of living.

    2) Less competitive tourism.

    3) The short and long term loss of jobs.

    That is all.

    • Anonymous says:

      For you.  What about those who are working for minimum and below wages?  You don't care but many do.  Thank you for showing us where you stand.

    • Anonymous says:

      This is about making sure that we dont have slavery like conditions here in these islands. Even the $5 per hour minimum wage most view as not enough, at the very least it is extremely difficult to live in the Cayman Islands on those wages.

      Will it have adverse affects. Certainly but if this country views itself even in the slighest as being either christian or even moral then this is a must.

      PS it is not only Caymanians that are paying these very low wages so dont make it a national issue in that sense. And furthermore, if we are looking and saying people are coming from abroad to work for these low wages it is important to realize that they probably would not have gotten the job if they did not except those wages.

      For the young couples with children looking for helpers life just got more difficult.

  18. Anonymous says:

    It is a feel good move for the most part.  The only thing it will accomplish (and rightfully so) is to NOT allow Caymanians to pay foreign workers less than $5 to care for their kids (who by the way are probably the ones invovled with crime due to non parental support).

  19. Chris says:

    While the jury may be out on if a minimum wage is against the principal of the market economy or if it is counter to capitalism, in a civilised 21st century society we could unanimously agree that each working person needs a minimum amount of money to survive on.

    What will a miminim wage achieve?

    Not economic prosperity, not greater employment or productivity but moral peace.

    And it is worth every penny of it.

    • Anonymous says:

      The fact that many Caymanians do not have the capacity to understand this explains a lot of Caymans other major problems.  Being able to see the value in another human being is neccesary for a healthy society.  Obviously teaching this has not been been a priority here for a long time if ever.  As this is the basis of most christian teachings it also shows that Caymans christian churces seem to have a different basis like take care of yourself over others hence the "nation building" payoffs.  The results of this are easy to see all over the island.  Hopefully the next generation learns from the mistakes of the current one.

  20. Anonymous says:

    OMG so instead you would like everybody to just except less pay like their doing now. So no trickle down economics according to you? How do you know? Are you a foreigner? Have you ever lived  in a foreign country ? 

    Well lets pretend you are living in a foreign country and you are getting 3.00 per hour as a waiter or waitress. While in country they decide to create a minimum wage of 5.00 per hour. It shouldn't include your tips because thats seasonal. You now have 88.00 extra per week. There are 7-8 workers in your rest. Thats approximately  2,816 per month extra your rest. is paying out . Thats not a lot of money. Most owners pay taxes, US. or Canada here in cayman. They get an exemption of 90, 000 per year that they don't have to pay anything on first so the extra is covered. 

    You now have the ability to send extra money home but in most cases. You are going to spend it on yourself because its extra .Trickle down economics

  21. Anonymous says:

    Wow 101, I bet you also believe that the abolition of slavery had an adverse effect on the economy. I like your style though, don't discuss the real issue if you can distract them with somrthing else.

    • Anonymous says:

      re-read your post!….hypocrisy of the highest order…… maybe you should try and discuss the 'real issue'

    • dude says:

      the viewpoint actually acknowledges that there are problems to address and says that there may be other ways to address them. the point is that a minimum wage is not the right solution. and u comparing the minimum wage to slavery is way off. talk about being off topic?

  22. truth says:

    Your probably right.  Minimum wage will not directly help Caymanians so why do it right?  This is Cayman the land of all for Caymanians and nothing for anyone else right?  The rights of anyone other than a Caymanian should not even be contemplated on this island country right?  If this is true(and its looking more and more like it is)  Then God help Cayman if and when it ever needs the help of others.  Considering your views of helping others do you think you will get it?  for most of us the answer is, probably not.

  23. Just Commentin' says:

    I agree with your "…probably not."

    One potentially negative result that bears serious consideration is that the minimum wage will attract from poorer countries workers who possess a higher level of skillsets, thus creating increased competition versus Caymanians for certain jobs that prior to a mimimum wage did not pay enough to attract a more skilled expat. Not good.

    • truth says:

      Not good for the lazy Caymanian but good for the island and good for businesses that are for the most part owned by Caymanians.  When the fruits of a country are the reward of work well done it grows a better country.  When it is taken from the country by those who will not do there part to grow the country then the country turns out…. well like Cayman.  It will not be self sustaining and will wither and die.

    • Anonymous says:

      Really!  Those type of business people are already paying less than minimum wage for skilled labour but then those expats were not making any money at home so it is still better than what they had. 

      Don't blame minimum wage for this type of mentality.  No one is forcing you to pay minimum wage to someone who deserves more.  If your employee deserves $20, be accountable for your actions and stop blaming others for your lack of a good conscience.