St. Maarten – The Social Economic Council (SER) agrees with the government’s proposal to annually index the minimum wage. At the same time the council advises to increase tax compliance from the current 36 percent to a higher level. “This could lead to a lower tax rate for all citizens, thereby increasing purchasing power and boosting the economy,” the SER writes in an advice it submitted to the government on December 28 of last year, but that was only published in the National Gazette last week Thursday, March 28.
The government should have published to advice the latest on February 8 based on regulations established in the national ordinance on public administration. It was however published almost seven weeks late.
In its advice, the SER notes that “one of the major obstacles contributing to an increase in cost of living is the lack of execution of price controls” in supermarkets and at wholesalers. “These prices have a direct effect on the purchasing power of not only persons who earn a minimum wage, but on the entire population.”
The SER furthermore advises to adjust the AOV premium (for old age pensions) downwards. “This measure would immediately affect all net payouts and increase purchasing power, while also giving some much needed relief in the cost of doing business.”
The SER also advised the government to expand the list of controlled items with a variety of more basic food products.
Labor Minister Cornelius de Weever decided to increase the minimum wage by 4.7 percent per January 1 from 7.96 to 8.33 guilders per hours. The increase mimics the rise of the consumer price index between august 2011 and august 2012.
The United Federation of the Windward Antilles (Ufa) took a minority position in the SER: it wanted the minimum wage to go up by 13 percent to 9 guilders per hour and to apply the full minimum wage from the age of 18. Currently the full minimum wage applies to workers of 21 years and older.
The SER still has a couple of concerns. The first point of criticism is that the government should have engaged at an earlier stage in dialogue with the private sector. Another concern is the effect of the increase: “One immediate effect – without adjusting the wage tax scale – may be that the minimum wage earners may have to pay more taxes. Depending on the tax scale they are placed in after the increase, this may eventually decrease their purchasing power, while the indirect objective of this proposal is the opposite.”
There are two methods to calculate future increases in the minimum wage: based on the average wage increase of the entire population, or based on the consumer price index.
The SER also is of the opinion that the government has to specify “various minimum wage brackets in the law, based on someone’s education. “For example: persons who have a bachelor’s degree cannot make less than X amount based on the minimum wage bracket in which they are placed.”