Salary compensation and minimum wage : trade unions welcome Rs 360 offer but reject Rs 8,500

The amount of salary compensation payable as from January 2018 has been officially announced on Wednesday by the Prime Minister. All workers in Mauritius will receive a compensation of Rs 360 ‘across the board’. Trade unions, that had proposed the sum of Rs 450 are more or less satisfied with the decision, but are strongly against the minimum salary set at Rs 8,500.

The tripartite meeting chaired by the Prime Minister Pravind Jugnauth concluded smoothly with the announcement of the salary compensation of Rs 360, with trade unions agreeing to the proposal almost unanimously. This contrasted with the tumultuous meeting of the National Wage Consultative Council, where trade union leaders effected a ‘walk-out’ to protest against the proposal of a minimum salary at Rs 8,000 for the year 2018 and Rs 8,500 for 2019.

Indeed, as we pointed out in our last edition, this week has been a decisive one regarding two important issues concerning thousands of workers. The Prime Minister maintained his stand on the Rs 360 quantum until it was finally agreed by all stakeholders. He explained that he took into consideration the current economic situation prevailing in the country and on the international front, the actual social landscape and the estimated inflation rate of 3.6%. He also reassured all those who are recipients of social aid that they will also benefit from a compensation, though the amount is yet to be defined.

Pravind Jugnauth gave an overview of factors influencing the economy at international level. He reminded us of the socioeconomic situation prevailing in the United Kingdom, Germany, Qatar, Iran, Saudi Arabia, North Korea, Kenya, South Africa and Zimbabwe, which has both direct and indirect bearings on the Mauritian economy. He further recalled that the price of petrol was $ 47 in December 2016 on the world market and that today it is estimated at $ 61.

According to the authorities, the Rs 360 compensation will, in effect, match the proposal of Rs 450 by the trade unions if we include the overall benefits derived from the forthcoming minimum salary and the recently implemented Negative Income Tax.

Initially, the All Employees Confederation had proposed an amount of Rs 800. Trade Unionist Rashid Imrith emphasized that all workers, irrespective of their grade or salary level, should benefit from a compensation, with a higher percentage for the low earners. On its side, the ‘Confédération des Travailleurs du Secteur Privé’ (CTSP), had proposed the amount of Rs 550 for workers and Rs 500 for social aid recipients.

The National Trade Union Congress wanted a uniform salary compensation of Rs 600 for all workers. Business Mauritius, representing the interest of employers, had proposed Rs 310 for those earning up to Rs 8,500 a month and Rs 300 for those with a salary between Rs 8,501 and Rs 30,000. According to Pradeep Dursun, Chief Operating Officer of Business Mauritius, this proposal would have cost the private sector nearly Rs 1.7 billion.

He is also of the view that the tripartite meeting should be reviewed as the calculation of salary compensation should be done through a new approach. The public sector will have to fork out Rs 500 million to pay the compensation.

 Rashid Imrith : “We asked the PM not to approve the NWCC report”

In a statement to Teleplus, Rashid Imrith explained the NWCC said that all those who will benefit from the minimum wage will not obtain a salary compensation. His trade union was against this principle and insisted that anyone, irrespective of the salary level and hierarchical position, should benefit from a compensation.

“We appreciate that our demand has been acceded to. Secondly, we demanded that recipients of social aid must also benefit, and this has been agreed by the tripartite committee. Thirdly, we had proposed Rs 450 and government offered Rs 360, and we understand that the difference will be included in the package proposed in the wake of the national minimum wage and the Negative Income Tax support.

We have made an appeal to the Prime Minister that the report of the NWCC should not be approved as there is no consensus. The Prime Minister has agreed to take into consideration our observations.”

Reaz Chuttoo : “The divergence lies in the definition and application method”

Reaz Chuttoo, of the ‘Confédération des Travailleurs du Secteur Privé’ (CTSP), terms the salary compensation of Rs 360 as a ‘progress’. However, he highlights the uncertainty surrounding the minimum wage, whether it will include this compensation. He further explains that, in the case of the minimum salary, it is not the figure that matters, but rather the definition of terms and the way it will be applied.

There is a difference between basic salary and basic remuneration. Remuneration includes all allowances and benefits. If the remuneration becomes minimum salary, then nothing changes. For example, the basic salary in the Export-Oriented manufacturing sector is Rs 5,300 but the basic remuneration is much higher if we include such things as productivity bonus, attendance bonus, etc.

For me, the debate on minimum wage is not on the figure but on the overall definition. In 2013, the CTSP conducted a study which found that 100,000 workers earned less than Rs 5,300 as salary. This conclusion forced the then finance minister to review 14 Remuneration Orders and we were already speaking of a basic salary of Rs 6,500. So, today, when we are again referring to a basic salary of Rs 5,300 it shows that we are going backwards.” Rea Chuttoo concluded that the present government won the elections on the ‘minimum wage’ theme and it might lose the next elections on the same theme.

 Arvind Nilmadhub : “A positive effect on the overall economy”

Economist Arvind Nilmadhub says he welcomes the quantum of the compensation. “I was expecting a lesser amount, so I think the government has made a good effort. While I agree that workers’ have lost considerable purchasing power, we must also be cautious not to overburden private enterprises, especially small and medium ones, who may not have the capacity to pay.”

On the issue of minimum wage, Arvind Nilmadhub says thus will impact the economy in different ways. “Firstly, a minimum wage is an excellent initiative as it increases the purchasing power of those at the foot of the social ladder.  Even a small pay rise is a boon for a poor family. A higher minimum wage also has a positive psychological impact on workers and contributes to higher productivity.

There are however fears that some enterprises might not be able to pay higher wages if they cannot absorb the costs, and fail to increase their revenues. But this is also an opportunity for them to find ways to boost their competitiveness and become more efficient to reduce costs. With a higher wage, workers become more motivated and the enterprise benefits.

There is indeed risk of short term job losses but there is great potential for long term job creation as the additional pay is a monetary injection in the economy, with multiplier effect. On the other side, some enterprises will be forced to raise their end prices to sustain costs, thus consumers lose.

Since this is the first time in modern Mauritius that we are introducing a minimum wage, if we impose a wage too high, it might affect economic stability. The transition should be smooth, with annual review until we reach a fair quantum.”

Zohra Gunglee : “Invest the money in other ways for a better society”

Zohra Gunglee, a young economist, says she does not really like the traditional system of paying compensation to workers. “Every year, workers obtain a small amount to compensate them for loss of purchasing power.

However, the amount obtained does not really compensate the full loss. While the entire compensation bill might cost several billions, the little increase per person does not allow him to increase his standard of living. I would rather we invest the billions in collective goods and services for society.

For example, compensation is given because workers face higher price of food and vegetables. So why not use the billions to increase our food and vegetable production through new technology, thus bringing prices down and improving quality?

This way, society is better off. Similarly, we could invest in more ambulances for SAMU or life saving equipment for the Fire and Rescue Services, more facilities for the disabled, the poor, etc. We could invest in drug eradication campaign, which in turn will reduce criminal activities, making our society safer. There are countless examples where we can really improve the lives of citizens by investing the global amount in specific projects, rather than allocating a few hundred rupees to each worker.”

 Radhakrishna Sadien : “Regular meetings are important”

The chairman of the Government Services Employees Association, Radhakrishna Sadien, stated that his union is satisfied with the salary compensation quantum, and that the meeting took place in a very cordial atmosphere.

He said it is very important that there are regular meetings between the government and the trade unions. He also welcomed the government’s decision to reopen the National Economic and Social Council.

Eric Ng : “We must see the impact on SMEs”

Eric Ng, economist, told Le Défi Economie that he welcomes the introduction of a minimum salary in Mauritius. He however fears some enterprises might be unable to bear the additional salary bill.

This might force some vulnerable enterprises, especially SMEs to close down. In an interview to Le Défi Quotidien, Eric Ng stated that we have introduced the Negative Income Tax scheme before the advent of the minimum salary and he anticipated a clash between the two, and this is what will happen now.

He termed it as a lack of cohesion in policy decision by the government which functions according to pressure from lobbies.