I have to commend highly the Minimum Wage Advisory Committee (MWAC) who, headed by chair Lemuel Hurlston, produced a most detailed report and one of the best I have read.

Although the report is over 200 pages long it is all relevant. This is unlike some recent ones that have cost the country thousands of dollars and although comprising the equivalent number of pages, 80% however is devoted to the history of the Cayman Islands, its climate and a socio economic impact analysis copied from other sources by someone sitting at a desk! Hallo EY. Didn’t yours cost us $150.000?

A great deal of work and time went into this study and reasons were given for the Committee’s conclusions based on different scenarios.

Over 70% of persons living here on work permits are going to be affected if the government accepts all the findings of the MWAC report.

At the press conference last Thursday Premier Alden McLaughlin and Labour Minister Tara Rivers both said they would be advising their government colleagues to back the minimum wage figure recommended in the Report. This is $6 per hour for everyone.

Whilst Hurlston said he expected a lot of people will think the $6 figure is too low I am sure there will be an equal amount that will say it is too high!

Especially as it will be Caymanians that will have to cough up the annual $17 million increase with household workers costing domestic employers an extra $10 million and the business sector paying over $7 million!

And your food and drink I expect is going to cost you more too, because as well as domestic workers being the largest group that will benefit from the increase, the next largest is staff working in hotels, bars and restaurants. Only 25% of the hourly $6 rate can be made up from gratuities or accommodation for live-in helpers.

The MWAC said well over 90% of the persons who came to the local meetings and/or provided input data supported the concept of a minimum wage. However, Hurlston said the public spoke largely about a “living wage, which is not enforceable by law and there is no agreed formula”.

The premier said, “There has been considerable concern that we have imported poverty and we know that we have imported very low paid labour. We can imagine the conditions that some people live in where they are sleeping in shifts and sharing the same beds. Those conditions have not served Cayman well and do not bode well for the future; we need to change that.”

“We can’t just look at the $10 million, we must look at all of the social conditions,” he added.

McLaughlin has invited feedback before Cabinet makes a decision. It is expected the decision will be made during the budget session of the Legislative Assembly in May.

However, the EY Report I mentioned in passing that informed government how to scale down the Civil Service won’t be implemented for another 12 months we have heard. An announcement is due on Monday.

If it helps some recent studies have confirmed that implementing a minimum wage does NOT reduce employment.

In a 2013 survey by the University of Chicago’s Booth School of Business leading economists agreed by a nearly 4 to 1 margin that the benefits of raising and indexing the minimum wage outweigh the costs.

From http://www.raisetheminimumwage.com/pages/job-loss

“Summary: Reviews the past two decades of research on the impact of minimum wage increases on employment: this study concludes that the weight of the evidence points to little or no effect of minimum wage increases on job growth. The study also finds that a review of the minimum wage literature commonly cited by minimum wage opponents is flawed because it is subjective, relies in large part on studies of wage increases in foreign countries, and fails to consider the most sophisticated and recent minimum wage studies.
“Paul Krugman, Princeton University, February 2013: “Now, you might argue that even if the current minimum wage seems low, raising it would cost jobs. But there’s evidence on that question — lots and lots of evidence, because the minimum wage is one of the most studied issues in all of economics. U.S. experience, it turns out, offers many ‘natural experiments’ here, in which one state raises its minimum wage while others do not. And while there are dissenters, as there always are, the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment.”’
“Bloomberg News, April 2012: “[A] wave of new economic research is disproving those arguments about job losses and youth employment. Previous studies tended not to control for regional economic trends that were already affecting employment levels, such as a manufacturing-dependent state that was shedding jobs. The new research looks at micro-level employment patterns for a more accurate employment picture. The studies find minimum-wage increases even provide an economic boost, albeit a small one, as strapped workers immediately spend their raises.”’

Of course there are the opposite studies.

On the American Action Forum website an article by Ben Gitis shows the opposite. Entitled “How Minimum Wage Increased Unemployment and Reduced Job Creation in 2013” it says nineteen states enforced minimum wages above the federal minimum of $7.25 per hour and thirty-one had minimum wages equal to $7.25 in 2013. Using various charts the analysis found “In 2013, a $1 increase in the minimum wage was associated with a 1.48 percentage point increase in the unemployment rate, a 0.18 percentage point decrease in the net job growth rate, a 4.67 percentage point increase in the teenage unemployment rate, and a 4.01 percentage point decrease in the teenage net job growth rate. Consequently, high state minimum wages increased unemployment by 747,700 workers and reduced job growth by 83,300 jobs.

The article concludes:
“The results indicate that when holding education constant and taking into account all 50 states, increasing the minimum wage actually has a devastating impact on job markets in the United States. Not only is there evidence that total unemployment rates increase and job creation decreases, but there is also substantial evidence that teenagers suffer the most. With the national teenage unemployment rate persistently above 20 percent, increasing the minimum wage is the last thing the future of this country needs.”
SOURCE: http://americanactionforum.org/research/how-minimum-wage-increased-unemployment-and-reduced-job-creation-in-2013

I am of the opinion yes we do need a minimum wage as low wage earners would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the poverty threshold.

BUT….

Some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall.

Some would argue they were better off being paid $3 an hour than not receiving anything.