In January the minimum wages will go up sharply. For purchasing power and for Bonaire’s economy, it is desirable that price increases be limited to what is really necessary to absorb the increase in labor costs. That limitation is a common task in which both the employers and the government, as well as the consumers of Bonaire, have a role to play.
Unkobon appeals to the local government, the Chamber of Commerce and to companies to take actions to limit price increases to what is really needed.
- Educate employers.
It is still not clear to many employers how the increase in the minimum wage is compensated by the central government and what other fiscal measures provide additional purchasing power. Here is a task for the government and the Chamber of Commerce to educate entrepreneurs in a timely manner and provide the right information.
- Help desk for entrepreneurs
There are employers who need additional information or support around the wage increases and/or compensation scheme and/or price calculation. For example, a 20% increase in labor costs does not automatically mean a 20% increase in prices. Unkobon has developed a simple calculation model (https://rb.gy/ohsps4) that will help a company understand what the impact of a wage cost increase on prices should be.
Unkobon is asking the Chamber of Commerce to set up a help desk to educate business owners on the impact of the minimum wage increase on their businesses and help them make decisions on how to set margins.
- Assistance for consumers
If people do not handle the hefty wage increase wisely, they run the risk of mounting debt. Local government has an important task here. In addition to comprehensive education on sensible money management, individual counseling will need to be offered to many people.
- Price increase hotline
Consumers should be able to report excessive price increases. Unkobon asks the local government to set up a central hotline where consumers can report price increases they consider unfair.
Employers from whom reports are received will be contacted for clarification and/or assistance. Consumer organizations Tienda pa Konsumidó and Unkobon can play an important role in this, provided funding is taken care of.
It is certainly not the case that increasing the minimum wage will lead to increased prices everywhere. That depends, among other things, on the share of labor costs in prices. In many industries the higher minimum wage will have little or no impact (between 0% and 2%) on prices, and in a limited number of industries, for example the cleaning industry, the impact will be relatively large. Companies that raise prices sharply have more to explain than “it’s because of the increase in minimum wage.”
- Corrective pricing measures
If goods or services are offered at such prices that there is a conflict with the public interest, the local government must take corrective action.
- Corporate social responsibility
Corporate social awareness ensures that companies are socially responsible. Companies have a responsibility to deal with the minimum wage increase situation in an acceptable manner. Businesses that persist in abusing and exploiting the situation even after help is offered, can count on negative publicity.
The minimum wage will rise from $1,236 to $1,570 per month in January. In particular, workers with wages around the legal minimum will benefit substantially. Because the tax-free allowance also increases substantially, these people will have as much as $334 more to spend net per month. People with full AOV get $288 more per month to spend. A second substantial increase will follow in July.
With this huge increase in purchasing power, business owners’ sales will increase sharply starting in February. If business owners are wise enough to limit price increases to what is strictly necessary, there will be strong real growth in the local economy. A win-win for everyone.