The minimum wage increases, though long overdue, have come at a bad time for a Fiji garment industry that in December 2008 employed an estimated 10,000 workers. Had employers voluntarily increased minimum wages a few years back when their profits soared, Wednesday's increase would have been less than 20%.
Since December there has been a 20% decline in orders, and several factories have reduced their labour force or cut working hours. While further layoffs may not be caused by Wednesday's wage increases, the increases certainly will not help. It's become a damned if you do or damned if you don't situation for employers. Retain today's workforce, with some workers paid more than before (but with many still paid below the poverty line), or cut the workforce leaving those made redundant with no wage income at all. One hopes garment employers (whose relations with their worker has been uneven, to say the least) will do all they can to be fair to their workers, while keeping their factories, if truly sustainable, afloat.
I have received two comments by email on the minimum wage posting. (It's easier for me if comments are added by clicking "comment" at the bottom of posts.)
The first was from 'Bhaiya':
"I hope that Bainimarama doesn’t buckle to employers’ insider lobbying yet again! Fr. Barr has done a lot of work on this and a number of ‘progressive employers’ have accepted that wages in Fiji need to be increased. The background on the [garment] industry is important. Many fly-by-night operators set up factories, made their money and took off, sometimes not paying the workers their wages! There were several cases of workers turning up to work to find the factory gates closed."[My encyclopaedic atlas, see picture side bar, has a section on most industries, including garments and clothing.]
The second comment sent via Wages Council Chairperson Fr Barr was from Mark Halabe of Mark One Apparel Ltd. markoneapparel@hotmail.com
Mark Halabe's Feedback (1-7) and My Replies (in red)
Thank you for the email and the attached article. Please allow me to make some brief comments:
1. Wages Council may have not have been active, but unions have, wages were increased over the last 3 years so it's not true that all workers had no wage increases.
Croz: Did all or any minimum wage garment workers receive increases? The increase (20%) is high compared with most other industries. This is presumably because "high" is needed to compensate for exceptionally "low."
2. There is a 15% withholding tax when repatriating profits, (as for all export income industries).
Croz: Now, but not when the TFF and TFZ's were introduced or for some years afterwards. There are, of course, many ways to send money overseas untaxed, some of them legal. Local dividends were capped at 15%, half of the "normal" rate.
3. Government provided or heavily subsidized infrastructure, is not true! (for the garment industry????)
Croz: Was there really no infrastructure at the Valelevu TFZ when Mark One Apparel moved in? Or no tax concessions against infrastructural costs?
4. Cost of manufacture is still a critical factor when marketing Fiji as a competitor to Asia, even as we fulfill Walsh's wish list!
Croz: Fiji's garment industry, as presently structured, can only compete against Asia in "short runs" and quick delivery to Australian and NZ markets. The "wish list" is mainly Australia/SPARTECA's, not mine. See link on post. Economist Prof. Ron Duncan was made similar comments. He said "Despite a 17.5% price advantage over imports, the industry is still shrinking." See Fiji Times. I recall you agreed with some of his argument. Also see Storey reference* below.
5. Over the last 20 years less than 1% of gross income equated to profit, not a great investment, nor a great incentive to keep investing in Fiji.
Croz: Clearly unprofitable. But this is not due to high wages or unsympathetic governments. The industry has not adapted sufficiently to changing circumstances in terms of upskilling, plant, products, and markets. Again, these are not my thoughts but those of experts.
6. Since we last met all of my predictions have unfortunately come true, we are now down to less than 300 staff from (700 in 2007).
7. This year has been the worst in 20 years for Mark One and the industry, with little or no signs of improvement.
We reap what we sew (pun intended). This wage increase will only bring less and will not stimulate the economy as you [Fr Barr] have predicted. Time will tell and I hope for the sake of the Fiji economy that I am wrong."
Croz: I sympathize, I truly do because your reputation is as an honest and fair employer (certainly compared with many others as 'Bhaiya' observed, above), but as noted in the post, it is the nature of capitalism that non-competitive businesses collapse. If low wages only produced 1% gross income equating to profit, far more than low wages are needed to make the industry profitable.
Finally, Some Arithmetic
You were reported in the Fiji Times (10 Dec.) as saying the 20% increase would mean an extra cost of $300,000 a year to Mark One Apparel. I have some difficulty with this figure. There will, of course, be a "carry through effect" to some workers who are paid above the minimum wage, but if we take the $1.48 to $1.78 minimum wage increase as typical , we have an increase of 30 cents an hour (and those on $1.25 will receive only 25 cents), or $13.20 for a 44-hour week, and $673.20 for a 51-week year.
This multiplied by your 300 (and falling) staff results in $201,960, nearly $100,000 less than your figure. Excuse the pun, but that's a lot of bula shirts!
* For a very readable history of the garment industry's ups, downs and futures, read Dr Donovan Storey. Click here.
2 comments:
Democracy as Fairness
It can be reasonably argued that one of the achievements of modernity has been the awareness that democratic institutions most clearly (albeit imperfectly) enshrine and defend human rights, political liberty and economic opportunity. Reasonable people can and do disagree on the success and limitations of the democratic project in each of the above areas of politics, economics and human rights. However even a cursory observation of regimes world-wide would suggest that individuals are better off in societies that embrace some version of democracy and freedom than those that do not.
From a theological perspective the quest for human dignity and freedom is grounded in the doctrine of the Imago Dei, that as human beings we are made in the image of God. Therefore any ideology that attempts to sacrifice the human person on the altar of grand schemes or petty hatreds such as racially motivated policies, ethnic cleansing or sundry other poisonous ideas is manifestly contra to the doctrine of the Imago Dei, and the church at all times in all places must actively resist the project of dehumanization. The idea that ontology is embedded within a transcendent reality is a reminder against the human propensity for cruelty, indignity, injustice, unfairness and dehumanization.
Unfortunately, the most systemic and pervasive effect of dehumanization often occurs within the socio-economic sphere of human existence where the voices of the poor, the old, the uneducated and the weak are either ignored or stifled. Who speaks for the weak, the marginalized or the disenfranchised in our society? I am reminded of this once again when the usual suspects have begun their lobbying against the implementation of the recommended minimum wage in Fiji, at the expense of poor, hardworking people, many of who are merely eking out an existence. The business community in Fiji over the years has actively thwarted any attempts to construct a humane economy through policies amenable to a just and fair society. A simple thing as a minimum wage would at least secure a living wage for workers at the bottom of the socio-economic ladder and vigorous enforcement of laws regulating hours, wages and benefits would minimally ensure that employees were being compensated fairly and equitably. Unemployed CEO’s have fiscal and legal resources to challenge their dismissals over contracts and compensation in a court of law, whereas if a retail worker or a seamstress in a garment factory is not paid for overtime or unfairly dismissed, he or she will not have the resources to seek redress. If the state does not speak for the poor and the weak, who may I ask will?
The notion that democracy is primarily about elections, timetables and travel advisories is reductionist and cynical. The democratic project is winsome and attractive because it resonates with our profound longings for fairness, equity and justice. It is morally imperative that the current government implement and enforce the minimum wage law that will work towards structuring a semblance of justice and fairness for the more vulnerable workers in Fiji. A decent society is only as good as the least of its members and the burden of proof should be upon those who argue that democracy can be anything except fair.
Wadan Narsey has previously pointed out Fiji's lagging performance in wage payments when compared to a linear extrapolation of the kinds of rates paid in the 70's, relative to GDP.
It is a fair comparison. However, the good Professor has uncharacteristically not been able to put two-and-two together in his search for an explanation as to why this has not happened naturally.
The easy whipping boy has been employer pleas of being unable to pay. And it is certainly true there will always be more unwillingness than ability as far as that is concerned.
But why have successive Governments always been so willing to believe them?
Well, you need look no further than Fiji's five coups in 22 years to see why! These coups have put Fiji's economy into intensive care for nearly half that period, I would estimate.
No wonder then that Governments of the day didn't want to risk their economic recoveries with unaffordable wage rises in strained macro-economic conditions.
In order to claw back the lost wages from those lost years of economic growth, the most realistic way would be to to claw the lost GDP growth which would have otherwise underpinned it.
That would be difficult to do even in a normal country. But how do you do that in Fiji when our legion of political cowboys are so willing to execute coups every four years or so?
The only orthodox way of doing this that I know of (short of discovering oil reserves within Fiji's EEZ) is through additional, accelerated and sustained economic growth.
As things stand today though, Fiji's national investment levels are now at historic lows. And the political stability needed for any conducive economic environment is as far away as it was in 2007.
Nominal wage increases will not of themselves bring real GDP growth in that, or any other, environment. It is a misplaced hope therefore to think that it might provide some kind of additional impetus for investment now. It will not!
Meanwhile, devaluation and wage inflation - even the one-off kind that the RBF is hoping for - will mean that nominal wage increases will not bring an equivalent increase in real buying power either. So I fail to see where all your machismo is coming from in this.
The good thing about it though is that we will no longer need to argue about this from next year. Because by that time we will absolutely know what the results of all this will be.
Like Mark, I also pray that you guys are right in this too. I just don't see it coming out of any of the issues that have been discussed here, or in any of your referenced readings. Left field perhaps, then?
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