Minimum Wage Earners Have More Purchasing Power

Jamaica’s primary institutions for data collection and analysis, the Statistical Institute of Jamaica (STATIN) and the Planning Institute of Jamaica (PIOJ), are reporting inflation figures so far this year that reflect a continuation of last year’s low levels of general price increases.
The low inflation figures are all the more important when viewed against recent increases in the national minimum wage, one of the social security mechanisms of the Government of Jamaica.
The minimum wage rate rose by 60 per cent in the period from January 2005 to January 2007, having been increased by the government from $2,000 per week to $3,200 per week.
In January this year, the national minimum wage was increased from $2,800 per week to $3,200 per week. This followed a previous increase from $2,400 per week in January 2006. In 2003, the national minimum wage was $1,800 per week. In 2004 the government committed itself to an annual review of the national minimum wage for the protection of vulnerable and non-unionised workers, who are estimated to represent some 80 per cent of the labour market.
The increases in the minimum wage rate since 2003 represent a 78 per cent rise over the four year-period. Over the same period, general price levels (inflation) increased by a total of 55.4 per cent, resulting in an overall significant increase in purchasing power during the period.
Consider this: If in 2003, a worker earning the minimum wage of $1,800 spent his or her entire earnings on goods and services; given the 55.4 per cent increase in prices between 2003 and 2007, this worker would have seen the cost of these goods and services rising to $2,797.20.
With the person’s salary at the minimum wage rate rising from $1,800 to $3,200 during the 2003-2007 period, this means that this worker is not only earning more money in dollar terms but is now able to purchase 14 per cent more goods and services than four years ago.
In addition, the minimum wage earner could choose to save the additional income instead of purchasing additional goods and services.
The increases in the national minimum wage over the past four years have therefore served to improve the quality of life of the most vulnerable in the society. When this gain is added to the impact of other social support programmes, such as the Programme for Advancement Through Health and Education (PATH) and the National Health Fund (NHF), the impact is even more significant.
With close to 25 per cent of the labour force or almost 250,000 Jamaicans estimated to be earning minimum wages, this latest increase in the purchasing power means a big boost in the quality of life of thousands of Jamaicans.
The sharp boost in minimum wages and purchasing power over the past four years coincides with positive economic growth in the 2003 to 2006 period as well as a sharp increase in consumption and a reduction in the level of poverty. The PIOJ is reporting that the poverty level is at a historic low, down by almost 50 per cent over the past decade.