Poverty and the minimum wage

At the end of last month, a high-level international panel, which had been meeting under the auspices of the United Nations to look at the world beyond the 2015 end of timetable of the Millennium Development Goals, submitted its report to that body. The 27-member panel—14 women and 13 men—as internationally diverse as possible and jointly chaired by UK Prime Minister David Cameron, Liberian President Ellen Johnson Sirleaf and Indonesian President Dr Susilo Bambang Yudhoyono, has called for global poverty eradication by 2030 along with the transformation of economies through sustainable development.

Its report, ‘A New Global Partnership: Eradicate Poverty and Transform Economies through Sustainable Development’, sets out “a universal agenda to eradicate extreme poverty from the face of the earth by 2030, and deliver on the promise of sustainable development”. ‘Eradicating extreme poverty’, ‘sustainable development’ and ‘economic transformation’ have all become catch phrases that tend to be repeated in reports and at international fora. In this instance, however, it is obvious that there is an understanding and consensus that one follows the other. In other words, to eradicate extreme poverty there must be economic transformation and sustainable development; and vice versa.

Director of the Earth Institute at Columbia University Dr Jeffrey Sachs, who preaches and teaches sustainable development has for years been making a case for the ending of poverty via this route. It is almost his mantra that the world is well positioned to provide enough for all its peoples, but that the gap between the haves and the have-nots is a matter of greed. In a recent column published by Project Syndicate, Dr Sachs says, “It is no longer good enough for economies simply to grow. We must also end extreme poverty, a goal within reach by 2030. We must manage the economy to protect rather than destroy the environment. And we must promote a fairer distribution of prosperity, rather than a society divided between the very rich and the very poor.

“We use the term ‘sustainable development’ precisely to mean economic growth that ends extreme poverty, increases social inclusion, and is environmentally healthy.”

Dr Sach’s declarations are backed by global poverty statistics available online, which indicate that while over three billion people—almost half of the world’s population live on less than US$2.50 a day and at least 80 per cent of humanity lives on less than $10 a day; the other 20 per cent of the global community has access to three-quarters of the world’s income. The statistics also point out that more than 80 per cent of the world’s population lives in countries where income differentials are widening.

This is happening at a time when the prices of essential items like food and fuel have risen considerably, without the benefit of a match in the increase in income in many cases.

Last month, government announced that it was instituting a new national minimum wage from July 1 and that this would see an “improved standard of living.” While the new $35,000 minimum wage is projected to take an estimated 31,000 Guyanese out of the abject poverty group (those who live on less than US$2.50 a day) they will still remain poor. Monthly food and utility bills for a single person amount to more than that; worse when the minimum wage earner has a family, is a single parent or is caring for an elderly relative.

Furthermore, persons earning the minimum wage will no longer be eligible for any welfare assistance that they might have previously had access to. In what can be described as a sleight of hand, the government has managed to relieve itself of any responsibility it may have had to those 31,000 people, by way of welfare/public assistance. However, because it has done so without any recourse to economic transformation or sustainable development, their circumstances will not change much. In fact, as the private sector indicated this week, there could very well be some amount of downsizing by businesses seeking to maintain their wage bills. With the last officially quoted unemployment figure at 10.7 per cent (some 70,000 employable Guyanese out of jobs) this could well prove counter-productive. It seems in this instance that it is job creation rather than an increase in wages which would have a positive impact on the standard of living.

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