Starting March 1, every employee in the Cayman Islands must, by law, be paid at least $6 per hour. We don’t anticipate much cheering in the streets from the formerly underpaid — and we certainly don’t expect the new minimum wage to bring about any broad economic benefits over the long run.
However, we do credit Premier Alden McLaughlin and his Progressives government for stating a policy goal, pursuing it and achieving it, in a transparent manner. We reserve special applause for retired Deputy Governor Lemuel Hurlston for chairing the Minimum Wage Advisory Committee, which produced an unflinching report exposing an epidemic of mistreated workers in our country.
As we wrote in an editorial last April, “The injustices the committee documents have not been perpetrated by cold, profit-calculating companies, but by individual Cayman households (our country’s “moms” and “pops”) who employ Jamaican and Filipino domestic workers.”
(Note: As so often occurs with this sort of social injustice, it is a small minority of people who perpetrate the vast majority of the sins … with their behavior enabled by “cultural norms” and a complicit system.)
What the new minimum wage will do is to provide a specific remedy for a particular issue — that is, people being paid less than $6 per hour. And, yes, perhaps the most positive thing about the new minimum wage is that it, unlike some of our existing legislation, applies evenly to all classes of employees, including nannies, “helpers” and other domestic workers.
The new minimum wage does contain one logical exemption, for employees who receive gratuities, work on commission or receive “in kind” contributions such as lodging. For those employees, the base minimum wage will be $4.50 per hour.
In case you don’t have a calculator at hand, the $6 per hour wage is equivalent to $240 per week (assuming 40 hours of work per week), about $1,040 per month and $12,480 per year.
For some workers, the new wage will represent an immediate and much-needed pay hike. Generally speaking, the positive practical effects of such boosts don’t typically last for long. There’s one reason for that: Inflation … otherwise known as increases in the cost of living, which will be driven upward as a result of employers having to increase their payroll expenses to cover the new minimum wage.
Admittedly, the inflationary impacts of Cayman’s new minimum wage may not be pronounced, given the relatively small size of the affected workforce, and the relatively small dollar amount.
Hamster-wheel cycles of minimum wage boosts and inflation are far more obvious when they are distributed across a huge nation such as the United States.
In 1950, the U.S. federal minimum wage was 50 cents per hour. Today it stands at US$7.25 per hour. (That’s 14.5 times as much.) Yet, in terms of “today’s dollars,” 50 cents in 1950 would be worth US$7.35 today … meaning that in practical terms, the U.S. minimum wage has actually fallen in value over the past 65 years. Where did all that “extra money” go? Again: Inflation.
Now, Democratic presidential candidate Bernie Sanders has proposed a dramatic increase in the U.S. federal minimum wage to US$15 per hour. As a political promise from a card-carrying socialist running a populist campaign, it’s a potential enticement to starry-eyed voters. As actual economic policy, however, it’s at best an ineffective measure, and at worst a disruptive disaster.
The key lesson here is that governments are simply unable to manipulate the private sector into better health by issuing edicts on salaries and employment. (Oh, but if it were so easy!)
It’s a point that our government should take to heart before hastily passing into law the Labour Relations Bill — the first draft of which was an abysmal, assault-on-business atrocity, and the most recent version of which remains suspiciously unpresented for public inspection.
The Progressives can celebrate a small victory with the implementation of the new minimum wage. They would do well to leave well enough alone.