Historically placed by the World Bank as being in the top ten (10) countries in the world for the highest Gross Domestic Product (GDP) per capita, Bermuda continues to be one of only a handful of countries in the world to have no minimum wage laws set by national law. The majority of countries in the world have either universal minimum wage, set by national law, or partial minimum wage set by industries, region or bargaining agreements, similar to the unions in Bermuda which set wage rates for their members through their collective bargaining agreements.
GDP has always been an indicator of Bermuda’s so-called ‘wealth’ and ‘progress’, however GDP ignores the economic and social welfare of our people and important environmental aspects of our national welfare and future well-being.
GDP focuses on growth, i.e. it doesn’t care if growth is shared or held by a few. The growth of GDP has not delivered real progress for average Bermudians, and we need to look to other indicators to support our community’s social progress.
We are on a precipice. Household debt is rising, and the numbers of families in poverty are growing, with more and more children living in poverty. Families are taking in their relatives who are no longer able to afford rent. Stress levels are increasing. People are hungry and food banks are struggling to cope. People are in crisis, and have been for some time. When people are in crisis they protest, and around the world we have seen evidence of economic protests from Iceland to Brazil to more recently Greece and Spain. Bermudian society has already seen evidence of a growing impatience for the continuing and increasing inequity in our community.
Wages have flat lined or decreased, the cost of living has soared, and everything is more expensive, childcare, energy, clothes, food, and transport. There are growing numbers of Bermudians seeking financial assistance from Government; hardworking Bermudians who have had a job all their lives and supported their families, now find themselves in desperate need. There is a growing gulf between those who are struggling and those who are maintaining or improving their standard of living. It is not only economically unsound but grossly unjust.
Jeremy Warner, assistant editor of the Daily Telegraph, stated: “This is not the way capitalism is meant to work…. The division of spoils has reached a level that, if unaddressed, threatens to be dangerously destabilizing, socially and politically.” Lecturer and Economist Craig Simmons in his presentation at the Bermuda College in July 2014 stated that wealth inequality in Bermuda is the worst it’s been in over a century.
Today we have people who have previously been employed full time, desperate even to get part-time work. Hourly wages begin at $6.00 an hour, even working a 48 hour work week that is barely $15,000 p.a., a farce in a country where the 2000 Census showed households earning below $36,000 p.a. as being poor with 19% living below the poverty line.
The debate that introducing or raising the minimum wage causes unemployment is simply not true. The Center for Economic and Policy Research in their report Why Does the Minimum Wage have No Discernible effect on Employment? (February 2013) states that “The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines… research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage.”
Nobel laureate in economics Paul Krugman wrote in the New York Times 1st December 2013, “When it comes to the minimum wage, we have a number of cases in which a state raised its own minimum wage while a neighboring state did not. If there were anything to the notion that minimum wage increases have negative effects on employment, that result should show up in state-to-state comparisons. It doesn’t.”
In an article in Al Jazeera America 18th June 2014, Amy Bean writes “Minimum wage increases are being enacted in cities across the United States and wherever a hike is proposed, free market conservatives offer the same dire warnings: Raising the minimum wage will increase unemployment, depress growth and hurt workers.” However, proponents of what is now being called a “Living Wage” disagree. In San Jose, California, a municipal living wage was passed in 2012, at a time the federal minimum wage was only $5.15 an hour, increasing it to $9.50 with benefits and $10.75 without. After the measure passed, rather than wilt, business over the next 3 years continued growing at a breakneck pace. Employment surpassed pre-recession levels, and unemployment at the beginning of 2014 was 5.8 percent, lower than in most of the rest of the country. Now there is a push in the region to extend the living wage to cover all county employees and contractors with a proposed minimum wage of $14.79 per hour with benefits or $16.13 per hour without being negotiated.
She goes on to state that economists David Cooper of the Economic Policy Institute and John Schmidt of the Center for Economic Policy Research explain that raising the minimum wage not only increases consumer demand but also leads to increased business efficiency and productivity by reducing employee turnover and its associated training costs. Likewise, economists Arindrajit Dube, T. William Lester and Michael Reich at the University of California at Berkeley, in summarizing the academic literature on the effects of raising the minimum wage, found “no detectable employment losses from the kind of minimum wage increases we have seen in the United States.”
In January 2014, in a letter released by the Economic Policy Institute, seven recipients of the Nobel Prize in Economic Sciences were among 75 economists endorsing an increase in the minimum wage for U.S. workers. “They said “the weight” of economic research shows higher pay doesn’t lead to fewer jobs. Past increases in hourly pay have had “little or no negative effect on the employment of minimum wage workers, even during times of weakness in the labor market,” the economists wrote. “A minimum wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings.”
A frequent argument against a living wage is that it would cause businesses to fail, unemployment to rise and prices increase. In an article in the Huffington Post author Sean McElwee wrote on the 8th August 2013, “We must ask ourselves do we want to live in a society where the poorest working people cannot afford to purchase basic necessities. Or, put differently, should a business that cannot afford to pay its workers enough to survive be allowed to exist, grow and prosper? Just like in the past when society decided that it was no longer acceptable to employ child labour, pay women too little, or allow dangerous work conditions, this is just one more decision on that path.”
In other words the people’s taxes are underwriting the failure of local business to pay a living wage. Creating a living wage makes the entire character of the economy change. As people make more money, they spend more, they pay more in taxes and they no longer need financial assistance.
The 2013 Bermuda Employment Survey shows that the bottom 5% of job holders (22,540 jobs) who worked 35 hours or more per week earn $21,000 p.a. or less. The bottom 10% earn $33,000 or less, and the bottom 20% earn $42,000 or less.
The poverty line is established using the methodology of Timothy Smeeding, a highly respected international economist, who states that households earning 50% or less of the total median household income are below the poverty line. The 2000 Census Report showed that 19% of Bermudian households were living below the poverty line, and were earning less than $35,831 p.a. That was before the economic downturn. In the 2008 Low Income Thresholds: A Study of Bermuda Households in Need report, the Relative Low Income Threshold was $41,132 p.a. The 2010 census shows that households earning less than $52,000 p.a. were below the poverty line, and based on the inflation rate since 2010 these figures translate into a likely poverty line of $56,000 p.a. in 2014.
In the U.S. 14.5% of U.S. households – nearly 49 million Americans, including 15.9 million children – struggle to put food on the table due to the prevalence of poverty. In Bermuda according to our census statistics more than 20% of our working population struggles to do the same!
Rather than one well paying, full time job with benefits, many Bermudians are cobbling together a patchwork of low paying, part-time positions, often being provided with no benefits, and working themselves into the grave to do it. Three generations of a family living together are becoming commonplace, and often only one individual has work, with families reduced to deciding between electricity, food or medicine. As long as an adult in Bermuda is working a full-time job, yet can’t eat, pay the rent or utilities and clothe themselves, we are failing as a society and our government is failing us.
When workers prosper, so do communities and businesses. Fair wages are essential to the common good of society, and Bermuda’s leaders should not hesitate in ensuring those who are struggling in this climate must have the opportunity to earn a living wage. There are strong economic reasons for a living wage. And there are even stronger moral ones. We should not be proud that we live in a country where more than 20% of our full-time workers struggle to meet their basic needs. Employers exploiting workers at wages so low as to be incapable of meeting the bare cost of living is not only detrimental to the health and wellbeing of workers, but is unjust and unfair and, unless dealt with, that unfairness will build tensions and frictions that will bring our society to breaking point. A strong and healthy society is one where everyone feels appreciated and fairly remunerated. A living wage would benefit us all in creating a stronger and happier country.
Many view the living wage question as being more a political than an economic issue; however it is ultimately about the sort of society people want to live in. With the income gap widening, and an increasing number of Bermudians failing to make ends meet, the Government must listen to the concerns of the people and move towards introducing a living wage. Failure to do so will see our society continue to struggle and its social fabric breakdown.
CURB not only sees this as a racial justice issue for Black Bermudians who, due to the legacy of slavery, segregation and post-segregation discrimination and prejudice are disproportionately represented in the lower-paying jobs in our society, but also sees the introduction of a living wage as a social justice issue for all, in particular women who are predominantly the head of single-parent households, and the elderly who represent a high number of those living in poverty.
CURB believes in the dignity of labour. Those who work should have enough money to eat, live comfortably and enjoy time off. We argue that there is a moral and economic imperative in instituting a living wage. We call on Bermuda’s political leaders to open a national conversation about low pay by creating a bi-partisan task-force on living costs with a view to recommending policies that include a living wage and/or payroll tax relief for those earning less than $40,000 p.a., to ensure that no Bermudian is left behind.
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