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Government aims to raise the Minimum wage to $500 for a 40-hour work-week, but how long would that take to get there?

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by Kevon Browne

St. Kitts and Nevis (WINN) – The government is working to make the Minimum wage in St. Kitts and Nevis $500 a week for a 40-hour workweek sometime in the future.

“We want to get to the best wage for our people, and we had said that 500 per week is an area, and how we are going to build that out over time is what we are discussing. We had agreed already that there should be… an increase around this time which we are working on, and we are working to get the best. But it will not stop there – it will go up until we get to where we want [it to be],” – Prime Minister, Hon. Dr Terrance Drew, during the July 21 broadcast of The Roundtable.

Prime Minister Drew says Cabinet understands that several economic factors will affect that goal. Thus an incremental approach to eventually achieving the $12.50 hourly minimum wage rate may be the approach government will take.

“We are going to put a committee together that is going to be a standing committee. That committee has to review the wage situation in St. Kitts and report to the Cabinet on a regular basis; we’re going to set up the frequency of that. But in the issue of minimum wage, there is also the cost of living. We have put together a committee to deal with the cost of living and inflation, and we’ve taken some positions – positions to cut energy costs so it wouldn’t go into the cost of the end product. We have also done concession, we have capped the freight at 2019 levels, and we are looking at other measures we might have to undertake.”

Accountant and social commentator Schneidman Warner clarifies that the Federation does not have a minimum wage but a minimum wage rate. 

Thus 500 a week only applies to those who work a 40-hour work week. 

Warner raised concerns about the effect of a rise in pay rate on the St. Kitts-Nevis economy. 

“One must then take into consideration what effect it will have on the overall economy. The state is the largest employer in the country, and therefore, what effect that will have on the increase in the state’s payroll and likewise other things? If you carry up the minimum wage, right now we have a $3,000 threshold[ per household] for qualifying for this supplemental – which I think is $500 a month – if the minimum wage was to be increased, that threshold would have to be increased as well… when the minimum wage was $9, 3,000 was the threshold – you carry up the minimum wage to a higher number that threshold must also now be increased in order for you to qualify because you now have more money in your pocket… it’s possible that the $500 supplement would [have to be increased] in order for you to keep things [in] the same proportion. Those are just some of the effects that one has to consider.”

Other issues include what would be necessary in the realm of concessions to get businesses to buy into the increase in the rate without a hike in prices at the cash register.

Outside of the apparent economic implication that naturally, prices would rise when a populace has more spending power, external shocks could still affect the price of goods and services, as seen with the COVID-19 pandemic’s effect on the supply chain and the Russia/Ukraine war, which is ongoing.

Russia recently backed out of the Black Sea Grain deal, which allowed grain from Ukraine to enter the global market at a reasonable rate. However, with Russia’s barring of cargo vessels from the Black Sea, the price of wheat, grains and rice, which are shipped from Ukraine through the Black Sea, might skyrocket as they become scarce, or the routes to get those goods into the global market cost more at the ports.

One exogenous shock St. Kitts and Nevis is still recovering from is the COVID-19 pandemic.

According to the Prime Minister, on several occasions, the Federation’s economic recovery was slowed because of our late start in opening the country entirely and stripping away travel restrictions imposed by the COVID-19 pandemic.

Increasing the minimum wage rate at this point in the Federation’s economic recovery might prove more difficult than one would anticipate.

However, the Prime Minister said the government is committed to increasing the minimum wage rate in some capacity before the end of 2023.

Other concerns arise in discussing the Minimum wage rate increase, for example, social assistance programs. When one considers who qualifies for social assistance programs, would the government change to criteria for acceptance in some programs based on the increase in minimum wage rate, or would the requirements remain the same for programs such as the Poverty Alleviation Program (PAP)?

Suppose the criteria remain the same for the PAP, where households making  $3,000 monthly or less are applicable. In that case, the number of people on the program may go down, and thus the $250 million the government annually spends on social assistance programs would also decrease.

As one of its mandates, the government desires to wean people off of those programs to become sustainably independent contributors to society and free some government funds for investments in other development avenues.

Much about the proposed wage rate increase and its positive and negative impacts remain suppositions, and nothing can be determined until data is presented and analysed, the proposed rate increase is implemented, and the fallout is observed in the future.

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