Eradicating poverty: are we on the right track?

The government has come forward with various measures such as Negative Income Tax and minimum wage to combat poverty and narrow the gap between the different social classes. Recently, it has been announced that for the year 2018, the wage compensation will be Rs 360 for all workers. Will these measures eradicate poverty? 

Anishah Aujayeb-Gopal : “Negative Income Tax will work for Mauritius”

Anishah argues that the government has come up with certain measures recently, which may seem to be an attempt to please the masses more than having a long term and overall beneficial effect.

“Introducing a minimum wage and a wage compensation of Rs 360 will not  offset poverty because of the adverse effect these  will have on companies and employers. A pay raise may sound compassionate, but it is not a sustainable option. Once a minimum wage is passed, the cost of producing goods made by unskilled labour will increase. Once the price of labour goes up, producers will turn to machines to replace labour. This eventually will lead to a hike in unemployment of unskilled workers and consequently not affect the poverty rate.”

For her, the only step into truly addressing poverty might be through the Negative Income Tax. “It might lead to a more harmonised standard of living amongst the population and reduce the administrative costs of the country’s tax system. It has worked in other countries and there is no reason why it should not work in Mauritius.”

 Maoomar Hoota : “It will not solve the issue of poverty”

Maoomar Hoota believes that the measures announced will not solve the issue of poverty. Firstly, he argues that the Negative Income Tax (NIT) is a tool which will not help the lower classes to move up the social ladder.

“In fact Government obtains more income from indirect tax, that is VAT, compared to corporate tax, which brings in millions. The tax system itself is a huge burden on poor citizens compared to the wealthy, since the lower classes are those who suffer more from VAT. Therefore the Negative Income Tax takes money from the poor via VAT and gives them back the same via Negative Income Tax.”

He states that the government needs to restructure our economy, to boost up the SME sector, to give the chance for our economy to become a nation of entrepreneurs and it’s only then that the poor will climb up the social ladder.

Keshvin Balloo : “It will have an impact on our economy”

The introduction of the Negative Income Tax (NIT), national wage compensation of Rs 360 and the introduction of the highly anticipated minimum wage (MW) will undeniably impact our economy, says Keshvin.

“It is worthwhile to note that those measures are principally aimed at the less fortunate, and therefore the intended beneficiaries, approximately 160 000 low paid workers. Initially, the NIT, wage compensation and minimum wage will immediately increase the purchasing power of the low-income families. Those households that were living in extreme poverty will, probably for the first time, enjoy some purchasing power. The immediate impact of those measures will help to improve the standard of living of many Mauritians.”

He explains that the interesting part of the minimum wage (MW) is that it will be based on the basic pay and not total earnings. “This will encourage the workers to work more in order to earn more. The Negative Income Tax will induce employers operating under black economy to register their companies, which will bring a fall in the unemployment rate. Therefore, this will generate decent income for poor families that were previously exploited under the informal sector.”

 Soovan Sharma Dookhoo : “We need a productive population”

The different measures have been set to address poverty, highlights Soovan. “The income per head to expenditure per head ratio is a constant hard fought battle. It is to be recalled that the recent appreciation of the Mauritian Rupee against other currencies did not help to counter our balance of trade deficit and decrease the price of competitiveness of our exports. Hereunder, our exporters will compete ferociously to maintain their exports simultaneously. It goes without saying that a minimum wage level is beneficial to the community into addressing poverty but likewise, we need further measures so as to boost business activities which will be maintaining a sound economic condition.”

According to him, to bridge the gap between the rich and the poor, besides income, we need a productive population. “If each working individual puts in his efforts, we will be a reference for Africa. Mauritius is already a reference in the fields of free health care and education because its population strives to succeed and the same people are the catalyst to keep poverty to a minimum level.”