Businessman warns of possible knock-on effects of minimum wage
Business leaders have given a lukewarm response to the Government’s plans to implement a minimum wage next year.
Jason Hayward, the Minister of Labour, said last week that a minimum wage of between $16 and $16.40 per hour would come into effect next June.
Hospitality workers whose income is a combination of wages and gratuities are to be paid a minimum of between $12 and $12.30 an hour.
Marico Thomas, an entrepreneur who owns a number bars and restaurants, said that the majority of food and beverage outlets would not be affected by the legislation because most employees were already earning similar wages.
Mr Thomas said: “The minimum wage in my opinion, is likely to have a larger impact on restaurants that do not sell alcohol, and do not benefit from the automatic collection of a gratuity.
“Many mom-and-pop restaurants may need to rely more heavily on friends and family to support the business.
“Most all restaurants will have to make adjustments. The effect of the minimum wage will require some change to pay structures and related administrative systems or processes to ensure the minimum guaranteed level of salary are met.”
Mr Thomas said it was a “good thing” that a minimum wage was being introduced as it would give lower earners increased purchasing power.
But he warned: “The impact of the minimum wage will have a ripple effect as wages and salaries of persons on the hierarchal ladder above the minimum wage earner may also need to be adjusted.
“This may create a meaningful impact on the overall cost of labour and the profitability of the business entity.
“To pay for this, many restaurants may need to remove less-profitable items from their menus and increase prices of those remaining.
“As businesses with low margins and low profitability are required to pay more in the absence of increasing their sales, these businesses must try to find other ways to remain viable.”
Mr Thomas said businesses would be under pressure to reduce their costs through increased efficiency, reduced waste and improved staff performance.
He said: “A knock-on effect of this may be a need for higher productivity and efficiency by the workforce and, potentially, a lower tolerance of staff-related norms related to tardiness, absenteeism, insubordination and inefficiency. There also may be a tightening of the belt with an overall lower number of staff employed.
“Ultimately, businesses, including restaurants, will be required to evolve. Prices, staffing levels, business strategies will be examined. For some businesses this activity will be a blessing and for some others it may be the worst and result in closure.
“Overall it is a good thing, and adjustments plus considerations will be required. For our group of companies, we have already commenced analysis and look forward to announcing a move towards applying these rates well in advance of the date required.”
Stephen Todd, the chief executive officer of the Bermuda Hotel Association, said that members had “strong reservations and concerns” regarding the plan, but declined to comment further until after a meeting with Mr Hayward this week.
The opposition One Bermuda Alliance also expressed concern over “problems” that the minimum wage will produce, and questioned the timing of the announcement.
Jarion Richardson, the Shadow Minister of Labour, said: “This is a complex issue when the economy is going well. It’s an incredibly difficult issue when the economy is as bad as it is today.
Jarion Richardson pointed out that when a minimum wage was first put forward by the Wage Commission last year, Jason Hayward said that no action on the recommendation would be taken until the commission had put forward a second recommendation for a living wage. The commission’s work on that report is still going on.
Defending the delay at the time, Mr Hayward said: “The worst thing would be to have a big fight with employers to implement a minimum wage at ‘x rate’ and then come one more year down the line and tell them that we’re shifting that wage to a living wage because that’s what’s recommended in a report.
“What the Government didn’t want to do is move gung-ho with the implementation of a minimum wage rate and then we get a living wage report that is contradictory to the way in which we move and causes us disruption or difficulty to adjust to that.
“What we actually want to see is that if we implement a statutory minimum wage it’s in alignment with a living wage regime so that there’s continuity.”
Mr Richardson suggested that the apparent U-turn was made to bolster support for David Burt, the Premier. Mr Burt could be challenged for the leadership of the Progressive Labour Party at a delegates conference next month.
Mr Richardson said: “There were two parts to the commission’s work – the minimum wage and the livable wage, which hasn’t been completed yet. So why has the Government suddenly backtracked on its earlier decision not to move forward until a living wage recommendation had been made by the commission?
“This is conveniently timed because of the upcoming delegates conference in October, after which the Premier may call an election. It seems awfully convenient.”
Last night Mr Hayward responded: “The Wage Commission has not yet tabled its recommendations for a living wage.
“The report on establishing a minimum wage for Bermuda makes clear the Government’s position and policy intentions. The Ministry of Economy and Labour has determined that it was prudent to move forward with a statutory wage floor while the Living Wage Report is being compiled. This decision has also been supported by the Wage Commission.”
He added: With respect to claims made by the Opposition regarding timing and motive, I can confirm that these assertions are baseless and that establishing a statutory wage floor is in line with the Government’s commitment to producing outcomes that protect the economically vulnerable.“
“We’re concerned that there are considerable problems with the course of action that the Government is taking.
“The first problem is the lack of data. The last labour survey was conducted in 2019 and published in 2020.
“The issue here is to ensure that remuneration levels are maintained at levels where people can afford basic necessities to support themselves.
“Where is the data to address this? How many jobs are impacted?
“We don’t think this is going to work. Not because we’re against a minimum wage but because it is so complex and we haven’t been given the numbers. It’s like math homework – you can’t just come out with a number, you have to show the equations, the workings out, how you got there.”
Mr Richardson said that small businesses would more likely be affected by the minimum wage rather than larger corporations.
He said: “Are they going to be protected? What is strength of economy? Will it be able to provide for increased costs? What will the impact be on the wider economy?”
Mr Richardson also highlighted concerns raised last year by Wage Commission members Robert Stubbs and Chris Furbert.
Mr Richardson said: “According to Mr Stubbs, the minimum wage report was not an accurate reflection of the commission’s deliberations. Have those concerns been addressed?”
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