Minimum Wage and Foreign Investment

I saw this article floating around on Corbitt's list and thought that it would make for an interesting discussion.  I am no economist and appeal to those of you with a background in small business development to make your opinions know about the following issue:

Will raising Haiti's minimum wage help or hurt the economy?

Clearly, the vast majority of Haiti's economy is informal and thus the mimimum wage will not apply.  However, when one Haitian has formal employment many others benefit.   I ask myself how effective such a move is when there are so few opportunities for formal employment.  I have seen or read nothing to convince me that there has been a signficant increase in foreign direct investment during Preval's term.  If Im wrong, please correct me.

  

It would be interesting to see what the minimum wage is in neighboring countries.  Is Haiti's minimum wage higher or lower than the Dominican Republic? Than Mexico?  Than Honduras? Is there a correlation between the minimum wage and investment, or are the non-tangibles more important when the decision to invest is made? Haiti has some advantages.  A hard working and abundant labor force and proximity to the United States.  An increasingly business savvy Diaspora could be an advantage, but remains largely an untapped resource.  

There are disadvantages. Considering the lack of infrastructure and ongoing corruption issues in Haiti it is hard to imagine that companies will want to start businesses in Haiti without special incentives and favors. 

 

I dont think a raise in the minimum wage would upset business owners in Haiti as much if they did not have to deal with bribes. I know of a business owner who closed a garments factory in the capitol because of the constant demands for (large) bribes.

In the past we have proposed the development of special economic zones.  The central government has a limited presence throughout the country.  It seems to make sense to focus on several geographic areas and rigorously enforce sound business practices in these zones.

In this way, business becomes a sort of public private partnership.  Expectations are made of both business owners and the government.  The business owners adhere to ethical business practices and the minimum wage, maybe even help with infrastructure development.For its part, the government must protect the businesses from shakedowns, while responding rapidly and robustly to resolve issues.  An empowered Ministry and an Industry Czar would be required - there are excellent Haitian candidates in the USA.

It may also help to set a flat tax rate for companies in these zones, it has been effective in several Eastern European countries like Slovakia. It is my hope that the private sector in Haiti can be encouraged, cultivated, and eventually come to be seen as part of the solution to long term development.   I wish that workers in Haiti had more bargaining power, but it seems to me that with businesses investing everwhere but in Haiti, some flexibility is going to be required.  

A relationship between industry and government, and workers, based on mutual respect, is needed.  Foreign direct investment is not the single shot solution to Haiti's problems, but it would certainly help.  Welcome your thoughts.

Bryan

Adjustment

In April 2003, when the Haitian Government last adjusted the minimum wage to 70 gourdes per day, we already showed how this adjustment was clearly inadequate: ".When we take into account the rise in the cost of living since 1995, the minimum wage should be adjusted to at least 7.5 times 36 gourdes, to 270 gourdes per day. If, we also take into account the devaluation of the gourde relative to the US Dollar, then the minimum wage should be adjusted to at least 300 gourdes per day. And then, this would simply be an adjustment, not a raise.

When we realize that the working class particularly has become more and more  skilled, this skill level entitles it to a proportional wage increase, ofbetween 350 and 400 gourdes per day, which should be the minimum wage!" These figures also correspond to Article 137 of the Labor Code, which stipulates that the minimum wage should be adjusted proportionally each time there is a cost of living increase of 10% or more in a fiscal year. And allthis does not take into account rising costs of health care due to increasingly poor living conditions, and urban spread which leads to higher transportation costs, among many other factors which mean that workers need a real wage increase.

Steven Benoit, a member of the Haitian parliament, has sponsored a bill which would raise the minimum wage to 200 gourdes and would also seek to regulate the periodic adjustment of the minimum wage due to inflation. In his pressreleases, this member of parliament has shown how his proposal is based on aminimum living wage.

There are two statements we would like to make regarding this pending legislation: firstly, Article 137 of the Labor Code already stipulates how the minimum wage should to be adjusted relative to inflation, although adding other criteria which would bolster cost of living adjustments would a positive. But Article 137 has never been respected (which makes the State and the bourgeoisie completely illegal!- but as workers we already know that). Secondly, as we have already shown, a minimum wage adjustment to 200 gourdes is clearly insufficient, although we should not reject any wage increase.

That is why weare calling on all workers to support this legislation and make it law. Itwould relieve some of the misery that we as workers are subjected to as part of what the Haitian bourgeoisie claims is its "comparative advantage", which is going to save the country! We should mobilize in support of a minimum wage increase to 200 gourdes, but also right away we should fight for more, in ways that correspond to our abilities in each enterprise.

The bourgeoisie and its representatives have already begun to protest Steven Benoit's pending legislation, arguing that a minimum wage increase would stimulate inflation. Of course, in their argument they neglect to mention that labor is already a commodity in this capitalist system, and that it is precisely because the price of all other commodities has risen that a worker's wage also needs to increase.

In some areas of the country, workers are already earning more than 70 gourdes ($1.96

per day or 25¢ per hour). Daily laborers at Marnier-Lapostolle, near Cap Haitien, because of their constant struggle through their union, SOML-BO, (Sendika Ouvriye Manye Lapostòl, Batay Ouvriye) have ensured a yearly cost of living wage adjustment, and today they earn 345 gourdes daily  ($9.67). Therefore, it's possible! It's possible through our struggles, but it's also possible for companies to maintain their profitability while paying these wages. But in order to get there, we had to bypass the Zephyr brothers in our  negotiations. These Haitian capitalists, acting as local representatives of Grand Marnier, the French liqueur company, were completely opposed to wage increases, pretending that they would drive the company out of business, while Grand Marnier itself was willing to adjust wages.

Since then, these wage adjustments have been put into effect, through the efforts of the workers to negotiate directly with the foreign owners. But not only have their wages been periodically adjusted to the cost of living, to 345 gourdes daily, but also, the workers of SOML-BO also get yearly bonuses, as mandated by law, paid sick  days, maternity leaves, a clean cafeteria, toilets and showers, a health clinic wiith medicines and a nurse, a car for emergency transportation, clean cool drinking water, and most importantly, the workers now are no longer subjected to demeaning disrespectful mistreatment from their supervisors and managers, as is generally the case in Haiti.

So once again, it's possible! And we should pay no mind to capitalist economists or their paid-off politicians who are trying to convince us of the opposite. Through its staunch opposition to Article 137 of the Labor Code and to any minimum wage adjustment, even though insufficient, the Haitian bourgeoisie has shown its anti-popular and anti-national nature. We can also see clearly that their so called "economic development plan" is based squarely on our misery as workers. Only through our struggles can we change this!

For all these reasons stated above, that is why we demand that the proposed  minimum wage adjustment to 200 gourdes be enacted immediately, and that
additionally:

- the state also place a ceiling on the price of basic necessities

- the state also regulate the exchange rate between the gourde and the dollar so that workers don't get cheated when we get paid in gourdes

- the wages of all workers who already earn more than the 70 gourdes minimum wage be adjusted proportionally to the minimum wage increase

- the Department of Labor (Ministry of Social Affairs) put in place adequate structures to enforce the adjustment of the minimum wage retroactive from the date it takes effect. (It took many, many struggles to ensure the respect of the last increase to 70 gourdes!)

All workers must join as one, mobilizing in these partial struggles, and continue to struggle against the limitless exploitation of the imperialists,the ruling classes and their reactionary state!

Our struggle has just begun! Let's fight on for our rights!

Batay Ouvriye, October 2007

(As of October 1, 2007 the exchange rate was 1 USD = 35.6445 HTG. Inflation has
been averaging around 12-15% per year over the last decade)