Think again, Mr Achong

ON WHAT criteria or calculation is the Minimum Wages Board basing its recommendation for a $27-an-hour minimum wage for workers in the heavy construction industry and related sectors of the economy? We ask the question because an arbitrary and steep increase in the minimum wage for workers in such a vital sector of the economy without a careful study of its impact and viability is likely to do more harm than good. We must express our convern over the Board’s recommendation since the reaction of stakeholders in the energy sector indicates not only a rejection of the entire idea of a minimum wage in this area and how irrelevant it is but also an apparent lack of consultation by members of the Minimum Wages Board. Increasing the minimum wage, no matter how well-intentioned or politically advantageous it may be, cannot be an arbitrary exercise not even at the national level.

The cost of labour is a major factor in the operation of any enterprise and an unexpected increase in this expenditure can trigger off all kinds of counter-productive repercussions including a reduction in the employment of workers, a contraction of the job market, a withdrawal of fringe benefits, an increase in prices to the consumer, a decline in competiveness and profitability, a disincentive to investment and, even in the longer term, a negative impact on the economy as a whole. Several months ago, the Government raised the national minimum wage from seven to eight dollars an hour and while that increase appeared minimal, no assessment has yet been made of its overall impact. The minimum wage proposed by the Board for heavy construction workers, however, appears to be more ill-considered with a greater potential for hurting the economy. Examining both sides of the issue, we tend to be skeptical of the case made out by Labour Minister Larry Achong who had indicated earlier this year that Government was looking to double the minimum wage paid to workers in major energy construction projects from $12 to $24 an hour. The Minister said labour workers on the LNG project were currently paid $16 an hour and noted when the first ammonia plant was being built 20 years ago, labourers were earning $15 an hour.

If that was the whole truth, then it would seem unethical to argue against the increase being recommended. After all, the energy sector is gearing to push the economy into another boom and workers who are helping to lay the infrastructure for such developments should be among the country’s best paid labourers. But it seems there are other important considerations which Mr Achong somehow failed to mention and apparently did not take into account. In response to the Minister, Atlantic LNG officials flatly deny that any of their workers earn basic pay as low as $16 per hour. They explain that wages at the ALNG site are set by a Memorandum of Understanding drawn up by the main contractor and is attached to all contracts awarded. The MOU outlines the minimum levels of wages to be paid in respect of some 27 categories of workers. But, in addition, they paid allowances based on a 50-hour work week ranging from $24.85 per hour in the lowest range to $36.49 in the highest range of “tank welder.” Annual increases in the course of the project also apply.

The ALNG people also argue that there is really no need for a minimum wage in the industry, since market forces have effectively driven up wages in this area to more than 200 percent above the national minimum wage when incentives are considered. Other stakeholders in the industry point out that fixing a minimum wage should be based on sound sensitivity analyses as to what the market can bear and should also be linked to increased productivity and the acquisition of new skills that are knowledge-based and subscribe to energy standards. While setting a reasonable minimum wage for the entire nation may be economically and socially acceptable, jacking up such a wage in the heavy construction industry in an arbitrary fashion can be inimical to the economic interest of the country. Think again Mr Achong.