Should Bermuda have a minimum wage? (Update)

The Bermuda Sun revealed a week ago that there were more than 1,000 full-time workers on the island who earn less than $21,000 a year.

According to the Department of Statistics the average workweek is 35 hours, so that divided into the $21,000 works out to $11.50 an hour. Many of those job holders actually make less than that.

Is it time Bermuda seriously consider adopting a minimum wage? And if yes, how much should it be?

Craig Simmons, lecturer in economics at Bermuda College, said a minimum wage is not necessarily the way Bermuda should go.

“As an alternative, I would suggest that there be some sort of payroll tax relief for people earning under $30,000 a year. That might be a better way to approach the problem.”

He said those workers could expect their take-home pay to increase by five or six per cent. Employers would have a greater incentive to create jobs for people in that particular bracket so the true increase in salary might even be higher.

“The problem I have with minimum wage is telling people that they can’t work for less. And there are people out there who are willing to work for less so what right does the state have to stop them from doing that?

“The minimum wage is really targeted at the unskilled and the young. Is that really the best way to help them?”

Mr Simmons said it isn’t clear that the minimum wage would help the more than 1,000 workers earning less than $21,000 a year.

“Let’s say the minimum wage was set at $15. Employers would now have an incentive to find other ways to fill those positions.”

He said they could opt for using more machinery or technology and eliminate jobs, which would be counterproductive to what is trying to be accomplished.

“There would be fewer people employed. There will be a push back from employers.”

Cordell Riley, owner of Profiles of Bermuda and a former Government statistician, told the Bermuda Sun: “The time may well have come to give consideration to a minimum wage. With employment continuing to rise, there has been downward pressure on wages.  

“Some reports are that wages have fallen below $7 an hour in some cases, lower than the minimum wage in the US.  People are willing to work for these wages as some money is better than none at all.  

“However, it doesn’t appear that the reduction of costs from those wages is being passed on to the public. I do believe having a legal minimal wage could result in less abuse to workers and result in increased levels of employment for Bermudians.

“Perhaps it is time for Government to convene a task-force on living costs, with a view to recommending policies, which may included a minimum wage, to ensure that no Bermudian is left behind.”

Of those more than 1,000 full-time workers who make less than $21,000 a year, around 700 were Bermuda and 300 were non-Bermudian.

Mr Riley added: “Non-Bermudian workers are an easy target but in this climate, as mentioned above, Bermudian workers are unlikely to complain in the face of job losses. So it is likely that more Bermudians are being exploited.”

He said “it would be very difficult to survive on $400 per week” based on a $21,000 income.

“At the very low end of accommodation, if someone was able to find a studio for $1,000 per month, that’s $250 per week. That only leaves $150 for all other expenses. It would be most difficult to leave in Bermuda for that amount.”

Former independent political candidate and worker’s advocate, Jonathan Starling said a minimum wage in Bermuda “is long overdue.  I was extremely disappointed that the PLP failed to develop this when in power.  The UK introduced a minimum wage in the early years of the Blair Labour Government — commissioning a panel to investigate this issue and its pros and cons.

“We could follow their model quite easily, as well as learning from its failures or successes to improve it here. In particu

lar, and this is something that’s been building in the UK, is the campaign to make sue the minimum wage is also a ‘living wage’.  In fact, I had that in my 2012 election platform — “Institute a mandatory minimum living wage”.

Mr Starling said a Bermuda minimum wage could be adopted on the basis of the UK Living Wage Foundation on this issue.

(See here: http://www.livingwage.org.uk/what-living-wage)

“Except I think it should be mandatory and not voluntary.  It should be calculated on the basic cost of living in Bermuda.  

“At a pinch, and without doing the necessary calculations, I’d say a living minimum wage here should be at least two thirds of the national median wage — which would be roughly $40k a year, or, based on a 37.5 hour work week, about $20.50 an hour.”

He said a living wage would lead to “increased productivity by workers, ensuring reduced absenteeism and a higher quality of work, as workers will have a more positive morale at work, feeling that they are getting a fair wage for their labour.  

“It also allows for workers to be able to actually provide for themselves and not rely on subsidies from others, be it the state or family assistance. 

“While the problems of poverty in Bermuda are complex, I believe that providing workers with a fair and living wage is a key part to solving some of these complex problems.  

“I don’t believe it will create extra costs for business — ultimately it would actually benefit businesses through improved work quality, increased staff retention and reduced absenteeism.”

David Petty, who has an economics degree, University of Maine, and is the principal for Somers Drake, told the Bermuda Sun whether or not there should be a minimum wage, the question that has to be asked is what are the obligations of the employer to the employee?

Mr Petty said once that line is drawn, the other side of it becomes the responsibility of the government.

He said: “The employer is paying for a resource and only that resource not anyone else. 

“That is a reasonable expectation as the productivity is only provided by that resource/employee and forms part of and overall business case that is either viable or it is not.

Expecting

“The employer is not expecting to pay for any dependants and has not included them into their business case.

“What do I mean by this? Well, let me put it this way, if you were a budding entrepreneur and you walk into a bank looking for a loan to start your business and present the loan officer with your business case, one of the things they would want to know is what is the full costing for your employees.

“So, if you then responded that you had costed out for 10 employees as well as the combined cost of their 20 children, their three sick relatives and 15 living grandparents who are unable to support themselves fully as their pensions are not adequate, I’m fairly sure the loan officer would turn down your loan application as not being viable and may even suggest you seek some professional advice of various types. 

“In our society, as with most capitalist societies, an employer’s direct obligation is to pay for their employee only. They consider their taxes to government to be their contribution to the support of the remainder of society who cannot support themselves.

“That being the case, if only the individual resource/employee is the measure, should an employer be responsible for the welfare of that employee?

“I suspect most reasonable people would say “yes”.

“As I happen to think of myself as reasonable I agree with this, which means that I believe that there should be a minimum wage that meets the welfare needs of employees. If a business case does not support the paying of such a minimum wage, then I would suggest that that business case is simply not viable.

“As for what the minimum wage should be, I suggest that some simple measures be used.

“There is a time-honoured concept that the cost of housing a person for a month should equal a week’s wage. So what does that cover? What does ‘housing’ of an individual mean?

“As we are considering a “minimum” wage for a single person, we should also consider the “minimum” housing for a single person, which is a room and the use of shared facilities in a residence.

Consideration

“I have spoken with a number of people on low incomes and real estate agents and the current minimum consideration for a single room in a residence is thought to be $500/month.

“It has been suggested that that the cost of accommodation on the island should be two weeks’ wages, but that applies to the cost of an “apartment” as living accommodation, which is not the “minimum” accommodation consideration for comparison for a “minimum” wage. The “minimum” is a room within a residence.

“So, if $500/month is the cost of providing “minimum” accommodation then that should equal a week’s “minimum” wage. Based on a 35-hour week, that equates to $14.29/hour.

“Hence Bermuda’s minimum wage should be set at $14.29/hour. Given that by extrapolation we can assume that the ‘minimum’ cost of living in Bermuda for a single person is at least $500 per week, I would argue that it would be very difficult, if not nigh on impossible, for a single person to survive on $400 per week (gross).

Mr Petty added: “Much of my supposition relies on a scenario where the Bermuda Government collects enough taxes to support those who cannot support themselves, and pays out a portion of those taxes in the form of welfare benefits to support those people, whether they be children, the sick, the homeless, the elderly or others such as prisoners. 

“This is because the reality of business cases in our society only supports the direct cost of a single employee and not that employee’s dependants. The only reason that employers would pay more than minimum wages in such cases is to be able to attract suitably-qualified resources based on competitive employee market forces, not based on cost of living considerations.”