Despite Cabinet approving a 40% increase to the minimum wage, revising it from Rs. 12,500 to Rs. 17,500, stakeholders and experts opine that ordinary citizens are not likely to feel any relief.
Last month, the Cabinet approved the proposal forwarded by the Minister of Labour and Foreign Employment to increase the national minimum salary by Rs. 5,000 and to revise the National Minimum Wages Act No.3 of 2016 to increase the national minimum daily salary by Rs. 200 from Rs. 500 to Rs. 700.
Speaking to The Sunday Morning, Assistant Commissioner of Labour (Public Relations) N.P. Mudalige confirmed that Cabinet approval had been received for the proposal, although it was yet to be passed in Parliament. Following its passage, it would be implemented, he assured.
Private sector grievances
However, speaking to The Sunday Morning, Inter-Company Employees’ Union President Wasantha Samarsinghe voiced displeasure over this move, deeming it inadequate, stressing that in order for the public to experience a wage increase, all employees should receive an increase of at least Rs. 5,000.
“This is not a suitable increase. This Rs. 17,500 is an increase from the Rs. 12,500 received by the country’s lowest earning segment, however everyone else earns a wage that is at least over Rs. 20,000-30,000. Therefore, all employees’ wages should be increased by Rs. 5,000. Without doing so, private sector workers will not feel this increase and neither is it a solution to their problem of earning a living wage. The Government is merely matching the minimum wage to the market wage, instead of formulating a programme to provide Rs. 5,000 to everyone to ensure a living wage.”
He further noted that this move had been a measure that had been agreed upon about two years ago, which was now being revised. “The discussions were to increase the minimum wage to Rs. 21,000 along with the Budgetary Relief Allowance of Rs. 3,500. The total increase was intended to be Rs. 22,500. This is the amount that has been introduced as Rs. 17,000 and even within that, it is less than what was agreed upon.”
A tertiary subcommittee, consisting of representatives from trade unions and employers in small and medium-level enterprises, recommended raising the minimum salary to Rs. 17,500.
“This increase neither suits nor changes the wages of employees,” Samarasinghe therefore stressed, adding: “This increase will not see any employees’ wages increasing. The only change will be in those earning Rs. 12,500 now earning Rs. 17,500.”
Trouble in the State sector
National Trade Union Centre (NTUC) Secretary Mahinda Jayasinghe too stressed that the current minimum wage was unsuited to the increasing cost of living, noting that many were having to find additional sources of income to survive.
“The State sector minimum wage is around Rs. 25,000, which is completely insufficient to live on. According to the Government’s own statistics, one person requires around Rs. 17,000 per month, which would mean that a family of four would require around Rs. 60,000 for essentials alone.”
He pointed out that while they had requested an increase of Rs. 20,000, the Government had provided Rs. 10,000 of this amount. “Actually, the request for Rs. 20,000 is insufficient; it was instead meant as the minimum amount by which the wage should increase. In reality, we should request an increase of at least Rs. 50,000. A family of four needs a minimum income of at least Rs. 100,000 per month for essentials.”
He further noted that the costs of all essentials had more than tripled, although wages had not undergone a corresponding increase. “People who earn a monthly income have no other income sources. They cannot increase their income by themselves – those employed by the State or the private sector need their employers to increase their income, which is leading many to find additional income sources.”
Insufficient increase
As per the latest Government data, the average monthly income of the poorest 20% is Rs. 17,572, while 91% of households have experienced an increase in their total household average monthly expenditure and a majority, comprising 60.5% of households, have experienced a decrease in their total income as a result of the economic crisis.
University of Kelaniya Faculty of Social Sciences Department of Economics Head Prof. W.M. Semasinghe pointed out that the prevailing economic conditions meant that the recent increase would not have a notable impact on employees.
“A country’s minimum wage is determined as the minimum amount needed for people to fulfil their necessities. The Rs. 12,500 minimum wage was recently increased to Rs. 17,500 considering changes such as inflation in the country caused by the economic crisis. However, I do not believe that the Rs. 5,000 increase is sufficient under the present conditions.”
“Regardless, salaries cannot be calculated by considering the present conditions and implementing a price formula – wages cannot be changed according to inflationary fluctuations. Therefore, I believe that this is a fair level to maintain for now.”
While noting that the decision to increase wages was a good move for employees, he pointed out that the increase in minimum wage would have an impact on businesses. “For some businesses, this will drive up wages by millions, which will be somewhat disadvantageous for them since some are operating on minimum profits under the circumstances, while those that generate profit will lose some of their profit as well.”
“However, given the increasing costs of everything, there does need to be an increase in the minimum wage in a corresponding manner, although there are questions on whether Rs. 17,500 is sufficient,” he concluded.
Addressing the viability of the present minimum wage, Prof. Semasinghe noted: “This minimum wage calculation has been derived from the Department of Census and Statistics (DCS) calculation that states that a family of four should earn at least Rs. 65,000. This is a nominal value deemed necessary to fulfil the basic necessities, such as food, education, health, etc., which I do not believe is adequate to fulfil all other necessities of a family to live on.”
According to him, given the changes since 2019 when these calculations were formulated, with ensuing inflation, increased interest rates, and stagnating incomes caused by the economic crisis, the calculated amount is clearly insufficient to address the needs of the present, even to fulfil the basic necessities. “Accordingly, an individual would need an income of over Rs. 50,000 per month to fulfil both the basic necessities along with other essentials,” he said.
He opined that since wages had not increased in parallel to cost of living expenses, there should be an increase in wages.
Worsening conditions
Similarly, University of Jaffna Faculty of Arts Department of Sociology Senior Lecturer Dr. Ahilan Kadirgamar said: “The minimum wage is ridiculously low, given that from 2021, the cost of living has more than doubled. There needs to be a major revision of the minimum wage.
“Currently, poverty has greatly increased. According to the United Nations Development Programme (UNDP) over 55% of the population are multidimensionally vulnerable, and at a local level we are seeing children drop out of school, malnutrition, etc. as effects of the economic crisis and low incomes.”
These straitened circumstances are pushing people towards outmigration as one of the options they have left, he noted. “There has to be a complete change in the economic policy direction and what the Government needs to provide as social welfare and support.”
“While increasing the minimum wage is necessary, this is not the solution, since when it comes to daily wage workers, etc. they won’t receive such a minimum wage since they are not part of the formal sector,” he said, emphasising that there needed to be more universal social support, perhaps even food subsidies from the Government.