A Wages Policy with Order and Justice
Jose S. Azcona Bocock
Every year we repeat the same cycle: workers and employers in conflict over the increase to the minimum wage, and the state acting as arbitrator. This is the result of the conflict of interests between the two, but mostly, is the result of confusion and lack of systematization for it. There is no defined order to establish this increase in addition to political criteria, and it is divided into multiple categories of company sizes and types. All this for the confusion of some, the advantage of others, and the ability to plan ahead for no one.
There are two basic criteria that we must consider when periodically adjusting the minimum wage: that it reflects changes in the economic situation, and that it allows companies and individuals to plan their finances. The first criterion is intended to be applied in a very subjective way, and for the second it has been tried to create a partial mechanism without the expected success.
No one disagrees that wages should be readjusted for the increased cost of living periodically. However, the adjustment is left to negotiation, subject to manipulation and arbitrariness. For example, in 1999 an uneven increase was taking place by sector (agriculture had an insignificant increase, while the financial sector had a considerable increase), other times the increase has been excessive, other times very low, and in most of them the process has been dominated by disorder.
The disorder has been the product of the multiplicity of categories, some justifiable and others remnants of an ancient system of labor legislation. In recognition of the sectors involved, it has been reduced from eleven activities, three categories of company size and three geographical regions for a total of forty-seven different minimum wages in 1993 to eight today. There is justification for reducing these categories even further, since the simplification helps employers and employees understand their duties and rights without the need for bureaucrats. The only criterion should be the exemptions or privileges granted to certain elements dedicated to producing goods or services for external consumption such as non-traditional agriculture, assembly plants, hotels and restaurants under the RIT and ZOLT legislations. The reasons for this distinction are obvious and accepted by all, but even so this criterion is only partially reflected in the minimum wage scales: tourist establishments are in a lower salary category than the other benefited elements.
The amount of increase has also been the subject of eternal debate. With respect to objectivity, the only statistical criterion that can be used to determine the increase in the general cost of living is the percentage change in the Consumer Price Index (CPI). There is another factor to consider, which is the performance of the economy. The growth or decrease of the Gross National Product (GNP) per inhabitant must be considered, since companies cannot be overloaded when the economic situation worsens, nor deny a share to the workers when the economy improves. Considering this, the variation to the minimum wage for all categories would be:
New Wage = Current Wage x (1 + Variation % of CPI + % of GNP growth — % of population growth)
This formula is easy to apply, very useful for future planning, and above all it does not lend itself to group manipulations, demagoguery, greed, or arbitrariness when making decisions. To further eliminate clutter in the system, this automatic review should be done automatically, preferably to take effect on January 1 of each year. The year-on-year change in the CPI from September to September could be used to make the new table official on October 1 of the previous year, to give companies and workers three months to do their planning.
A minimum wage system aims to provide justice for workers and economic security for companies. This justice and this security cannot be achieved in the midst of disorder and arbitrariness. Only clear, simple and transparent rules can ensure society the protection of everyone’s interests.
(2000, LT)
