A report of the Minimum Wage Advisory Committee (MWAC) dated October 2023 recommended that “Based on the analysis of the data provided from the MWAC public consultation exercise and various other national data sources, the MWAC recommends CI$8.75 gross per hour as a fair and acceptable minimum wage rate.” This proposed minimum wage is intended to achieve objective one given by the Cabinet to the MWAC, which is to “address exploitation and provide real relief to the lowest paid workers.” The public reactions to the proposed CI$8.75 gross per hour, however, are mixed; some stakeholders say this is too low and does not allow workers to keep up with the cost of living, while others say it is too high and will impact businesses and employment with Caymanian employees likely to be hit the hardest.
Why do stakeholders say the rate is not enough
When it came to public reactions that the proposed minimum wage of CI$8.75 gross per hour was too low, the MWAC would not have been surprised because of the feedback from the International Labour Organization, which gave the MWAC technical assistance in reviewing the minimum wage, and the fact that the MWAC survey responses “suggested a minimum wage of up to CI$20.00.”
Concerning the International Labour Organization, the MWAC report said:
The estimates show that in 2022, the level of the minimum wage has lost 18 percent of its purchasing power compared to 2016 when it was first established as statutory in the country.
In 2023, this loss is likely to have increased to 31 percent if we consider the current high and rising price inflation.
The International Labour Organization concluded, “Altogether, there seems to be a case for the minimum wage to increase in line with inflation, considering the needs of workers and economic factors.”
Turning to the MWAC surveys where some stakeholders felt that the minimum wage should be up to CI$20, it is understood that they held this position “because they would not perceive this as an acceptable rate for a “living wage”.”
Explaining what this “living wage” is, the MWAC report said that this “is the wage rate required for households to achieve a minimum acceptable standard of living that is socially accepted.”
Notwithstanding that the MWAC’s direct mandate was to recommend a minimum wage to address exploitation and provide real relief to the lowest-paid workers and not to establish a “living wage,” the MWAC indicated a possible living wage.
The MWAC explained:
Given the rising discourse on a “living wage”, the Committee felt duty-bound to include a section that explores the main ways a living wage is typically calculated and implemented in the report.
The assessment found that a living wage in the Cayman Islands could range between CI$10.38 and CI$16.95 per hour, depending on the method used.
The range of the “living wage” that Caymanians could earn based on skills acquired or to be obtained in the future was estimated in the MWAC report as follows.
However, to help Caymanians achieve this “living wage,” the MWAC recommended “prioritising the upskilling (advanced skills through additional education and training) of Caymanians earning minimum wage rather than mandating a living wage.”
Regarding who should set the “living wage,” the MWAC report said, “a living wage is typically not mandated by law and therefore not the remit of the Government.”
In other words, the Government’s role may be seen as setting a minimum wage in legislation to “address exploitation and provide real relief to the lowest paid workers,” but beyond that, it appears to be up to stakeholders to ensure that proper training and education is in place for Caymanians, so that Caymanians can take on those opportunities to enhance their skills and later negotiate with employers to be paid a “living wage.”
Why other stakeholders say CI$8.75 gross per hour is too high
On the other side of the debate, concerns were raised by the Chamber of Commerce on page 129 of the MWAC report: “This recommended increase exceeds what we had recommended to the committee during our presentation which was based on consultations, surveys and focus group discussions with our members.”
The Chamber of Commerce added:
Our members, of which more than 400 are classified as small Caymanian owned businesses, agree that an increase in the minimum wage is overdue, but recommended a rate increase from KY$6.00 to between KY$7.50 – KY$8.00.
They stated that increasing the rate beyond KY$8.00 will adversely impact them and may lead to staff and work hour reductions and price increases, causing a rise in the cost of goods and services in an economy that already is contending with a high cost of doing business and living.
The Chamber of Commerce continued:
Furthermore, data from the Economics and Statistics’ Employers and Households Minimum Wage Survey confirms what our members are warning.
When asked if the business would continue to keep all of its employees if the minimum wage was increased by one dollar 77.6% of businesses that responded to the survey said they would keep all their employees, but only 45.5% would retain all of their employees with a three-dollar increase. Other industry associations such as the Cayman Islands Tourism Association and the Cayman Islands Small Business Association have warned of the same result.
If businesses maintain this view that they may need to fire some employees if they think the proposed minimum wage is too high, then the next question is the number of employees that may lose their jobs.
Regarding this, the MWAC report noted that a Labour Force Participation survey completed in the Spring of 2023 said, “the total number of persons impacted by the minimum wage increase is estimated at 10,457, of which 22.9 percent are Caymanians and 77.1 percent are non-Caymanians.”
The breakdown of these numbers is set out in the MWAC report as follows:
Unless the Government creates a legal mandate to protect jobs held by Caymanian employees, hundreds of Caymanians (if not more) could lose their jobs if businesses continue to hold the position that they cannot manage a minimum wage increase beyond CI$8.00 in the circumstances where skill levels are not also increased. In these circumstances, these Caymanians could be replaced by foreign workers who have more skills from their country of origin (but who are not being paid well there) and who are eager to find a higher-paying job in Cayman.
If some businesses decide to keep Caymanians, they could reduce the number of shifts or hours worked, resulting in less overall pay.
Lastly, businesses could incorporate the minimum wage increase into the price of goods and services, thereby keeping consumers’ purchasing power unchanged or lower.
If Caymanians’ purchasing power remains unchanged, a significant policy question is who will supplement their income or make up for any cost-of-living shortfalls.
Unless Caymanians get upskilled as suggested by the MWAC and win better salaries to improve their situations, the Needs Assessment Unit might become overloaded with new requests for financial assistance from Caymanians.
Given that the Needs Assessment Unit already helps thousands of families and probably has a budget, additional Caymanians seeking assistance following unemployment could face limited options. Such limitations could even lead to further complex social issues.
Looking at both sides of the equation like this demonstrates that the minimum wage issue is not straight forward. This is because it involves not only individual emotions and personal circumstances but also short-term and long-term economic considerations.
Perhaps if detailed data from Cayman’s sectors had been analysed decades ago, students’ education and skills were tailored throughout the education system to meet the needs of these sectors, and Caymanian students were encouraged and supported to enter sectors other than the financial services industry, then the above-mentioned risk of job loss across various sectors (as intimated by some businesses) might have been less.
The situation policymakers face, however, is not “what could have been” but the circumstances facing the country now. That is, policymakers must work with the relevant sectors to determine how to upskill relevant Caymanians as quickly as possible to justify whatever policymakers finally decide should be the increase in the minimum wage, or they must find some other way to protect Caymanian jobs.
