Putting the record straight: Minimum wage, free tertiary education, pension increase and the Workers Rights Bill

(Published in MTimes 30 08 2019)

There has been recently lots of chest-thumping by government on its so-called pro-poor, pro-worker measures. Let us examine how much of the rhetoric is matched by facts.

Minimum wage:The minimum wage for both the public and private sectors was introduced in January 2018. Among the 400,000 full-time employees, only around 125,000 receive less than the minimum wage. Of the 111,300 full-time workers and 9300 part-time workers in the different sectors of the economy, the main beneficiaries of the minimum wage have been the textile workers who saw their basic wages increase by more than 11% on average. 

But when we look at the average monthly earnings (which include wages, overtime, productivity bonuses, commissions, travelling allowances, attendance bonuses, housing and rent allowances and other regular cash payments), we note an average increase of only 4.7% which is only marginally higher than that of the previous year. Thus, in terms of earnings, we cannot say that the textile worker who has obtained the most substantial increase in terms of minimum wage compensation is much better off that what he would have obtained going by the trend of growth in earnings. 

Why? One possible explanation is that employment in the sector is being negatively impacted with the implementation of the minimum wage that has led to the closure of some eight textile firms. The impact could have been worse if some of the enterprises did not opt for orders with higher margins, where possible, and for the abolition of overtime. 

Thus, the increase in minimum wage has not been really beneficial for the workers. On the contrary, it has led to increasing risks for workers losing their jobs as the rising labour costs have, to some extent, undermined the international competitive advantage of the textile industry which experienced a high negative growth of -6.8 in 2018 and is expected to continue declining by -1.4% in 2019.

The minimum wage should have been awarded on a phased basis giving time to the textile sub-sector of the Export Oriented Enterprises to adjust and boost productivity. The textile sector operates in a highly competitive world market. For the flagship textile companies, they can to a large extent absorb the increases in costs through new orders, higher prices of their products or increases in labour productivity. The small enterprises  are mostly price-takers and they have little choice but to wind up if they are not given enough time to adjust. 

Now whatever little gains that have been obtained by workers will be eroded by the inflationary pressures that will be unleashed by the accommodating monetary policies of a government rushing to the rescue of the economic elite via lower repo rate, depreciation of the rupee, lower corporate taxes, freight subsidies and other incentives.

Generous pension increases:The generous old-age pension (BRP) increases have led to pension spending pressures which are  contributing to an explosive BRP path under both the baseline and active scenarios of the projected expenditures . Government has no choice but to take measures to ensure the long-term financial sustainability of the pension system for future generations while providing for a decent, adequate and secured pension income for pensioners so that they do not fall into poverty. 

It has instead chosen crowd-pleasing packages and handouts in successive budgets shying away from the need for a bold reform of the pension system that would have secured less drastic future changes and fairer outcomes. But with the projected decline in the workforce and an increase in dependency ratio, the increase in pensions spending will pose fiscal risks or crowd out other priority expenditures. Sooner or later, we will have to confront the hard choices that we have not prepared ourselves for. Is such economic irresponsibility means being pro-worker?

Free tertiary education:A populist measure that was not well thought through and discussed with all stakeholders. New opportunities, collapsing boundaries, unpredictability, technology and changing attitudes are redefining the academic, social and industrial ecosystems today. We must give ourselves the means to open these avenues and boulevards of knowledge and windows of opportunities for the next generation. But all these have a cost -- the cost of building universities of the future that inspire and engage the young to embrace technology creatively and whole-heartedly; the cost of providing students with access to the power of quantum computing, artificial intelligence, robotics, and big data and these have to be second nature to them. 

Technology through AI and computers shall be the learning platforms for our local universities. We will be needing more and more of public money to fund all these endeavours and to be truly innovative. Are you being pro-poor when you are jeopardizing the universities of the future and future R&D? We could have opted for enlightened ways of according free facilities to the needy while charging those who can afford to pay. 

The Workers’ Rights Bill:The pro-workers stance of the present regime is just for the gallery, élection oblige. Behind the scene the corporates have been dictating , after midnight, the necessary amendments that had to be brought to the Workers’ Rights bill. These amendments called into question everything that had been agreed so far with the workers. The unions have qualified the amendments as “laké ferblan”, which  will deprive the 360,000 private sector employees governed by the existing 30 Remunerations Orders (ROs) the benefits of the new law. Moreover, as some trade unionists have pointed out, the new law has codified the intentions of the 2008 law but it will not necessarily be a good law in the long run, because it makes work precarious and seasonal. But once the hurdle of the elections is over, the political and economic elite will shack up to clear some of the remaining irritants or plainly postpone its proclamation to the Greek calends.

This confirms the perception that this government is all hype, dangling all kinds of unrealistic promises in the air while failing to deliver on the ground and lacking the gumption to take bold measures and stand up to the corporates in the interest of workers. Their credibility is very low. People have no more faith in their promises. The country urgently needs a strong alternative. 

2Prakash Neerohoo and Raj Ramlugun

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1Asif Jeetun

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