Mathur concludes her look at the Basic Conditions of Work and Minimum
Wages Bill, 2000 and its possible impacts.
in Britain, Ireland, France and America want to establish or increase
minimum wages. This may not help the working poor. The impact is clear,
however, for the young.
younger than 25, who generally have few skills and little experience, tend
to have much higher unemployment rates than older workers.
France, the unemployment rate for workers under 25 was a shocking 28%.
Minimum wages are one explanation.
OECD study - which considers data for 1975 to 1996 from nine countries,
including America, Japan, France, Spain and the Netherlands - finds that a
10% rise in the minimum wage reduces teenage employment by between 2% and
4% in both high and low minimum-wage countries. (The Economist - June 25,
week we looked at the draft outline of the “Basic Conditions of Work and
Minimum Wages Bill 2000.” It is a ticklish Bill that should be
judiciously considered. Politically, it’s something of a gamble, since
it may hurt the ruling party’s traditional support group, that is, small
business. Equally, it may bring greater benefits to a wider section of the
following is a layperson’s assessment of the draft Bill as it is:
who do not presently work under a union contract will benefit, as the
terms and conditions of the Bill cover most of the areas under standard
industry union contracts. Workers will probably face higher taxes but in
general, the sick leave and other benefits will outweigh these costs.
Government will benefit in two ways. Increased wages (though no figures
have yet been announced) usually mean higher tax returns to the
Government. With their improved reporting systems (a centralised computer
coming online at the end of 2002), the new law should give the Labour
Ministry greater access to information on the small business sector which
is adept at ducking from the Inland Revenue Division and the law insurance
the section dealing with benefits, the Bill is strongly biased in favour
of pension plans. As the insurance companies seek to invest these funds,
there will also be a knock-on effect on various sectors - the stock market
and possibly lower costs to Government’s issuing bonds.
companies, especially those with union contracts, will also be affected.
The new Bill demands all companies meet similar worker-related obligations
as the larger companies, levelling the playing field in this area.
Bill tacitly assumes that the Labour Ministry’s staff will be beefed up
substantially to deal with greater demands. In addition, the Bill gives
this Ministry far greater powers of coercion. There will be a greater
demand for labour relations professionals to deal with complaints.
employers will be the major losers. They will have to deal with increased
costs and more paperwork, making it more difficult to compete with the
larger companies. Despite the fact they employ most of the workers in the
private sector, they are not organised enough to make their representation
Government and other unionised workers are already in receipt of the
ancillary provisions of the Bill, eg sick leave, pension plans, etc, they
will not be getting any additional benefits. However, as consumers, they
will probably have to pay higher costs, as businesses pass these on to
their consumers as higher prices.
of the higher costs of employing staff, smaller employers will cut costs
by laying off casual workers before the legislation comes into effect,
causing a small surge in unemployment figures.
effects on the economy will include increased consumer spending and
increased government revenue in the medium term, only when a new minimum
wage is implemented. The productivity figures will improve as businesses
invest in labour-saving equipment.
the negative side, the costs of complying with the Bill may inject to what
economists refer to as an inflationary surge. Unless there is a
corresponding fall in the value of the dollar, our manufactured export
industries will be less competitive versus the Central and South American
is much more to be said, but these are early days yet.
figure for the new minimum wage is far from being set and I expect much
fine-tuning will take place even before the draft Bill is placed before
the Senate again. (It is now before the Standing Tripartite Committee on
Basic Conditions of Work and Minimum Wages Bill, which affects as much as
80% of our working population, specifically needs to focus on systems of
enforcement without which it will be little more than a piece of paper.
What systems will be put into place to ensure the law is enforced?