Dear Editor,
According to the Jamaica Observer article by Avia Collinder published on Wednesday, March 2, 2016, titled ‘Minimum wage hike expected to impact BPO sector’ the business process outsourcing (BPO) sector will be hit hard by a raise in the national minimum wage.
Any first-year student of economics — credits to Dr King University of the West Indies, Mona — will realise that the more money in the economy will result in more spending and prices will rise. Let me break it down in layman’s terms: Say minimum wages increase from $6,200 to $8,200, employers/business operators will have to increase their products and services to offset the salaries of employees. Then commodities will be more expensive. This will cause us to be right back at square one. So with the extra $2,000, we would only be spending that on the same commodities that we bought previously because everything would have risen. Don’t let the more money fool you. The spending power will be the same with $8,200 as with the $6,200.
Now, I am not bashing our prime minister, Andrew Holness. As a matter a fact, I really like the guy; he brings youth and vibrancy to the table, but if he fails then we all fail as a country. Nevertheless, we have to be realistic. Think about it. Come 2017, if we cannot balance the budget, repay our loans, pay workers, etc, the Government will have to either print more money or borrow more money.
Well, the printing of money is an option that not many people understand. Let me explain: Hypothetically, say the Government’s bills totalled $100 million. And assume they only collected $80 million in taxes, etc, because they gave the tax relief of $1.5 million, they would thus need an extra $20 million to cover the deficit or the shortage. Printing money to pay the bills would cause more inflation. What is that? It is when there is more money in the economy and people desire more goods and services than suppliers are able to supply to the market. So prices will rise. Get it?
So who pays for this? Not the rich, because they have their assets in real estates or US currency. Thus, they earn as their assets and monies abroad increase in value and they can afford it. But its the lower income earners who bear the burden of inflation as they will have to pay more. Because the power of our money has decreased, no longer can we spend the $6,200 to cover our old bills, we would need the entire $8,200 and more. So then the economy is messed up and it wouldn’t have made any sense for the raise. Hope you understood.
Now back to the real problem. If the BPO business is paused or ceased because they would have found cheaper labour in other countries, like India, do you know how bad that will affect our economy? Think of the 18,000 or more people that are currently employed in the sector. Imagine them without a job. I can’t even fathom the thought of such a catastrophe.
Prime Minister Andrew Holness, you are a very smart guy. Is it that you will turn your back on your promises to increase the minimum wage from $6,200 to $8,200 or are you going to cancel the tax break to those earning under $1.5m? Are you going to take from Peter to pay Paul, like add higher taxes on gas or increase GCT, property taxes, passport fees, licensing fees in all sectors? These questions are not politically motivated to cause any diversion or any upset; however, we the people of Jamaica, particularly the younger generation, are dying to know.
Laurene Ward
Tourism management student
University of the West Indies
knuew1@yahoo.com
According to the Jamaica Observer article by Avia Collinder published on Wednesday, March 2, 2016, titled ‘Minimum wage hike expected to impact BPO sector’ the business process outsourcing (BPO) sector will be hit hard by a raise in the national minimum wage.
Any first-year student of economics — credits to Dr King University of the West Indies, Mona — will realise that the more money in the economy will result in more spending and prices will rise. Let me break it down in layman’s terms: Say minimum wages increase from $6,200 to $8,200, employers/business operators will have to increase their products and services to offset the salaries of employees. Then commodities will be more expensive. This will cause us to be right back at square one. So with the extra $2,000, we would only be spending that on the same commodities that we bought previously because everything would have risen. Don’t let the more money fool you. The spending power will be the same with $8,200 as with the $6,200.
Now, I am not bashing our prime minister, Andrew Holness. As a matter a fact, I really like the guy; he brings youth and vibrancy to the table, but if he fails then we all fail as a country. Nevertheless, we have to be realistic. Think about it. Come 2017, if we cannot balance the budget, repay our loans, pay workers, etc, the Government will have to either print more money or borrow more money.
Well, the printing of money is an option that not many people understand. Let me explain: Hypothetically, say the Government’s bills totalled $100 million. And assume they only collected $80 million in taxes, etc, because they gave the tax relief of $1.5 million, they would thus need an extra $20 million to cover the deficit or the shortage. Printing money to pay the bills would cause more inflation. What is that? It is when there is more money in the economy and people desire more goods and services than suppliers are able to supply to the market. So prices will rise. Get it?
So who pays for this? Not the rich, because they have their assets in real estates or US currency. Thus, they earn as their assets and monies abroad increase in value and they can afford it. But its the lower income earners who bear the burden of inflation as they will have to pay more. Because the power of our money has decreased, no longer can we spend the $6,200 to cover our old bills, we would need the entire $8,200 and more. So then the economy is messed up and it wouldn’t have made any sense for the raise. Hope you understood.
Now back to the real problem. If the BPO business is paused or ceased because they would have found cheaper labour in other countries, like India, do you know how bad that will affect our economy? Think of the 18,000 or more people that are currently employed in the sector. Imagine them without a job. I can’t even fathom the thought of such a catastrophe.
Prime Minister Andrew Holness, you are a very smart guy. Is it that you will turn your back on your promises to increase the minimum wage from $6,200 to $8,200 or are you going to cancel the tax break to those earning under $1.5m? Are you going to take from Peter to pay Paul, like add higher taxes on gas or increase GCT, property taxes, passport fees, licensing fees in all sectors? These questions are not politically motivated to cause any diversion or any upset; however, we the people of Jamaica, particularly the younger generation, are dying to know.
Laurene Ward
Tourism management student
University of the West Indies
knuew1@yahoo.com