Minimum wage: It’s NOT all about the base

Nick Joseph writes: Until recent press initially confirming that planned increases in the minimum wage for the tourism industry were (for the immediate) on hold, things had been very quiet in relation to minimum wage. The outgoing administration left office without effecting any changes — although the plan was to increase the minimum wage for hospitality workers only to CI$7.00/hour this summer.

The PPM committed to a CI$9.00/hour minimum wage in its election manifesto (a 50% increase from the current $6.00) and in line with the Minimum Wage Advisory Committee’s report from October 2023 (almost two years ago), then recommending $8.75. The existing $6.00 Minimum Wage was implemented in 2016. A decade has passed since the original Minimum Wage Advisory Committee recommended that rate in 2015.

Increases are long overdue.

Friday’s news that the base will be increased to the recommended CI$8.75 will bring any suggestion that the new government may have been dithering, to an end. Less than two months have passed since the election. These members of government do not strike me as ditherers.

Those making up the government have, of course, been very awake to the issue. Indeed, that very consciousness may be part of the reason the people of the Cayman Islands elected them. I am optimistic that far from the discussion being over, Michael Myles, the minister responsible for Caymanian Employment and Immigration, and other key members of the government are prepared to kick the whole issue from its slumber — in its entirety. 

As should be clear to all examining the subject, our method of adopting minimum wage — and the haphazard, sometimes disjointed, application of related factors — has set us sleepwalking off an economic (and societal) cliff. 

The importation (and retention) of poverty is but one factor that can be influenced by the establishment and operation of a minimum wage regime. So is access to employment opportunities, the need for (and degree of) Department of Financial Assistance (formerly Needs Assessment Unit) intervention, and yes, (something emphasised by opponents to any increase) the cost of living.

Minimum wage does not exist (and has never existed) in isolation.  It must properly be considered in context — and the context is multi-faceted. The excellent report prepared in 2023 under the exemplary leadership of Mr Lemuel Hurlston, CVO, MBE, JP, PhD (Honoris Causa) — all for all the right reasons — will have withstood the most anxious of scrutiny.

Its recommendations are sound. Given its depth and quality, it is also the best value for money (at $53,638.15) I know of the government (and people) of the Cayman Islands receiving in recent times.

Now that the government has confirmed the base, much of the hard work can begin. This is not the end of the story. With apologies to Meghan Trainor, it is not “all” about the “base”.

Ms Trainor’s song lyrics remind us that music needs treble. It also needs tempo, rhythm, melody and harmony. Bass is very important, but over-emphasising it in the fundamentals of music may confine aficionados to the mosh-pit of any concert. That would be a shame.

There is so much more potential out there. The MWAC report acknowledges this, and recommends changes to legislation as part of the solution. It also acknowledges the need for more enforcement resources. We do not consistently follow our own laws, and effective enforcement is too rare.

We are suffering the consequences.

In the workplace, in our economy and in our community we must avoid a risk that we focus too much (as we have for a decade) on the base. That it be moving to CI$8.75 in six months is only one element and should not be the end of the discussion. The base is an important factor but does not exist in isolation — and we should not conflate minimum wage with living wage. They are not the same and attempts to facilitate their union should be resisted.

Also (deservedly) distinct from both minimum wage and living wage is the “adequacy of remuneration” expected for foreign workers. That is a consideration enshrined not in our labour and employment legislation, but in our immigration legislation. It, too, plays a part and requires attention, and it is lazy (and has proved dangerous) to equate the same to minimum wage.

The October 2023 report anticipates the potential for some variability in minimum wage itself, recommending different treatment for students below the age of 18. The minister is no stranger to the importance of workplace apprenticeships and on-the-job training to our population being equipped to reach its potential. Any economic incentive for employers to provide such opportunity should be welcomed. It is key to our future, and to the participation of our children within it.

If we want to advance towards resolving many of our issues, we need to consider much more than the base. A guaranteed minimum hourly pay achieves little if there is no guarantee of a minimum number of hours. Employing hundreds, or even thousands, of workers in full-time positions with such (permitted, if not expressly countenanced) flexibility in the terms of their employment that no work (or remuneration) is available to them for some weeks or even months of the year is (pardon the pun) unworkable.

If the workers concerned have been brought into the Islands on work permits, the consequences can be unconscionable (and whether we bother to enforce our laws or not, potentially unlawful).

As has been reported previously, I have been sickened to come across minimum wage “service industry” workers, some on work permits, with only a few hours of work available to them for significant parts of the year.

The result, after deductions, can be negative pay slips: People in modern Cayman owing their employer money in consequence of a month of employment. Unable to pay now? Well, hopefully next month will bring more customers and gratuities (or commissions) to make your employer whole again, but until then it’s off to church, the food bank, and ARK for help (if they have it for you). 

With full-time workers frequently having hours cut to 10 or less a week (often despite their work permit applications confirming that that they were needed for a full year at 45 hours a week), what should be the hum of a vibrant market-based economy collapses into a cacophony for many of the most vulnerable in our community. The spillover affects us all.

This is but one of several barriers to local employment identified in an article from some months ago entitled “Feeding the Addiction”.

Notwithstanding the law, entire sectors seem able to flout expectations as to minimum wage altogether. Regularly, I must confront circumstances where workers are paid $0 per hour, with all remuneration being commission based.

Calculating rates of remuneration for vacation pay, maternity pay, sick pay, redundancy pay, notice pay, time and a half overtime, and double pay on Public Holidays is easy: Any number multiplied by zero, is zero.

Calculating pension contributions is also easy. Ten percent of zero is zero.

For retirement (or shopping for groceries) that math does not work, sometimes no matter how hard (or long) the employee does. Let’s hope anyone operating on this basis has a Trade and Business licence, so their employer can at least claim their worker is an “independent contractor” rather than an “employee”.

None of this explains how, a decade after minimum wage was invoked, there are still “employees” in Cayman (including on work permits) with a base wage of $0. 

Determining the amount of grant fee due to the Cayman Islands Government on a Permanent Residence application (the fee varying based on “earnings from employment”) is more complicated. An applicant’s bank statements may show earnings of $400,000 a year thereby warranting payment of a $12,500 “grant fee” to the government. 

That person’s employment letter, whilst acknowledging the total remuneration says their base salary is $0, so the Department of WORC asserts only $500 is due. Oh well, it’s only the Caymanian people’s money.

Of course, this pressure is not from a single point alone and is beyond simple math. The government cannot continue to provide significant amounts of “social employment” at three times the rate available in the private sector.

Our former premier, in October 2024, a full year after the latest MWAC report was written, declared an ambition that the most lowly paid civil servant receive no less than $3,000/month (an equivalent to $18.46 an hour for a 37.5-hour work week). That ambitious amount seemingly does not take account of additional and sizeable benefits available to civil servants including non-contributory pensions and healthcare.

Our budget cannot bear it.

(Does anyone know the margin between what private sector security guards are being paid by their employer and what the Cayman Islands Government pays their employer for their service?)

The systems of apprenticeship and training required by our immigration laws have not been consistently or uniformly applied. Whole sectors of industry appear to have been allowed to develop and grow with relatively few (or even no) Caymanians gaining (or being equipped with the opportunity to gain) the skills required to participate.

Our people can no longer tolerate it. 

Almost free access to foreign labour at all (and even at no) skill levels and at often derisory rates has long been driving down salaries, all in the face of a now long-established cost-of-living crisis. Increasing numbers of people have been forced (and permitted, if not overtly encouraged) to live in unsafe and unsanitary conditions. 

Our very way of life cannot sustain it.

Whilst a previous government alluded to increasing numbers of students leaving the private education system to attend public schools as evidence of significant improvements in the public system (and some praise is indeed worthy for much that is being accomplished), others say economic circumstances compelled it.

The media has recently reported on worrying trends I have seen for years. The abuse of foreign labour and the brain drain as Caymanians are forced to seek opportunity in foreign lands. The same pull/push dynamics that have brought people to us are operating to drive some of our own people, including trained Caymanian professionals with prior international experience, away.

This is plainly causing real harm to our society and to many of those, of all nationalities, who live within it. Increasing minimum wage is necessary, and overdue. However, any adjustment that does not recognise and enforce key elements of our labour system — including as to ensuring that much of our imported “migrant” labour is guaranteed remuneration for a minimum number of hours EVERY week — will fail.

Allowing the employment of persons from overseas without ensuring that they receive expected levels of remuneration not only undermines those persons’ ability to function in our economy, it also undermines (and literally undercuts) the ability of Caymanians to function effectively within it.

I am not ignoring the plight of Caymanians. Far from it! The system used to work. It is now broken, in part due to a transition to (or even imposition of) US-based employment/remuneration methodologies. Why pay salaries when you can force your customer to bear the price of your employee?

Our refusal to require Seasonal Permits (operated optimally at the Hyatt Britannia throughout the 1990’s with the literal help and charm of the Irish) has also contributed. When Seasonal Permits were required, Caymanians employed in tourism could enjoy full time jobs year-round. Not today.

The reality is that every foreign worker we bring in and allow to be remunerated at rates below the poverty line encourages the literal importation of poverty — and ALL that that entails.

Sometimes the price may be worth it. Allowing a single mother access to affordable childcare so that she can go to work, or an elderly person the care they need in their own home, may invite a compromise worthy of consideration. 

Too often, it is not. A need to maximise profits does not, by itself, warrant the harm.

At the same time, requiring our school leavers, even those who have achieved excellent academic credentials, to compete at the same wages with seasoned and skilled workers from overseas for even the most entry level positions is madness. (Meanwhile, well qualified and experienced teachers, who love Cayman and want to be here, are amongst those finding themselves economically exiled. We cannot afford to lose them, yet they cannot afford to stay). 

Enforcing our laws (and the principles underpinning them) in relation to work permits, including the use of seasonal permits, pensions, adequate health insurance, housing, term limits, marriages of convenience, permanent residence, the right to be Caymanian and minimum wage all have an important role to play.

The recent warning shot in relation to requiring adherence to Business Staffing Plans is a necessary part of the path to solutions. The anonymous pushback from some businesses (effectively: “you cannot expect me to be compliant with decades-old laws!” “You will destroy the economy!”) is troubling (and telling). Some should brace for a bumpy ride.

Amongst aspects acknowledged as outside of the MWAC’s terms of reference but recommended in their report and worthy of sincere contemplation are:

• Inadequacy of suitable quality and quantity of rental housing for low-paid workers.
• Cost of living components, making employment unattractive to some Caymanians; and
• Lack of affordable childcare options.

Our education system is clearly not keeping pace with the expectations placed on it to adequately prepare our children for the roles needed in Cayman. The business world is not academic. Its expectations incorporate the needs and legitimate demands of increasingly sophisticated employers (needing increasingly specialised staff and operating in an increasingly competitive, and cost-sensitive, local and global economy).

Our government is the conductor in this orchestra. As it examines the role, nature and volume of the “bass”, it is compelled to do so in the context of the whole in seeking the melody and ultimately the harmony we all wish for our Islands. 

There are many parts to be played. Getting it right may take some time.

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