VCCI CALLS FOR USE OF CPI BEST PRACTICE FOR SETTING MINIMUM WAGE
The Vanuatu Chamber of Commerce and Industry (VCCI) has called on the Government of Vanuatu to use world-wide best practice for setting and reviewing the minimum wage and base increases on the consumer price index* (CPI).
The President of the Chamber, Mr. Antoine Boudier re-affirmed that the private sector does not oppose an increase to the minimum wage, and offered the solution that the increase should be based on actual CPI increases, which can then be reviewed annually and matched accordingly, instead of large arbitrary increases.
“We have seen a year-on-year increase of 17.5% to CPI since 2019, which was the last time the minimum wage was reviewed. We believe using the CPI as a tool to set the wage annually is the correct course of action. Then the wage can be reviewed periodically, as most countries in the world do,” said Mr Boudier.
“Annual or periodic reviews of the minimum wage would help provide certainty for both workers on the minimum wage and Vanuatu businesses. When minimum wages aren’t regularly adjusted for long periods and are followed by unexpected and large increases, it makes it extremely challenging for businesses to absorb wage cost increases, and especially small and medium sized Ni Vanuatu businesses.”
On 9 May 2023, the Government of Vanuatu’s Minister of Internal Affairs, Rick Tchamako Mahe signed an Order to increase the minimum wage rate to VT300 per hour, a 36% increase to the current rate of VT220.
The last increase to the minimum wage in 2019 raised the minimum wage from VT200 per hour to VT220 per hour. Under Vanuatu law, the minimum wage rate should be reviewed once every two years based on economic factors.
The VCCI are proposing the new increase be matched annually, in this case the cumulative CPI increase of 17.5% should be applied which would increase the minimum wage from VT220 to VT260.
This proposal will again be raised by the VCCI on Friday 21 July at the Tripartite Labour Advisory Committee meeting being hosted by the Department of Labour. It’s the first meeting of the Tripartite Labour Advisory Committee since December 2022, over 7 months ago when VCCI first presented their solution.
Since the Ministerial announcement, VCCI has rigorously urged the Government to refrain from enforcing the Order and has been advocating for a common-sense approach that encourages collaboration, consensus and, most importantly, uses best practice to set a precedent moving forward.
Since the May announcement of the increase, and subsequent media statements from VCCI’s President Antoine Boudier, the Government has gone quiet on the matter and not implemented the increase.
A random announcement made by the Minister of Internal Affairs last week via the Vanuatu Broadcasting Television Corporation’s (VBTC) social media suggests the increase is going ahead despite no direct communication from the Minister to the VCCI. It is believed the minimum wage increase may be publicly announced by the Vanuatu Prime Minister during upcoming Independence Day celebrations.
“We are bitterly disappointed with this lack of communication and willingness by the Minister to collaborate with the Vanuatu business community on such important economic legislative changes,” said Mr. Boudier.
“We have made countless attempts to speak with the Minister. We have been met with silence. We have tried the Commissioner of Labour, who seems to not be able to offer us any information. This is frustrating and unacceptable.”
“We have called on the International Labour Organisation to assist us in re-establishing best practice with employers, workers and the Government of Vanuatu to work together to reach consensus thru the tripartite partners process,” Mr. Boudier continued.
“We hope a meaningful social dialogue can be facilitated so that we can work as the tripartite is intended. We need to work together on joint solutions, and base decisions on proper data analysis and best practice for the good of our country.”
The VCCI is very concerned about the Government’s lack of consideration for the domino effect of the wage increase on the Ni Vanuatu business community will lead to higher unemployment for Ni Vanuatu workers.
“To rest this increase decision on the argument that it will help Ni Vanuatu workers to meet the financial needs of their families and encourage workers not to travel for seasonal work is a dangerous assumption,” said Mr. Boudier.
“Our fear is this decision will actually lead to unskilled workers losing their jobs and worse, having our lowest paid workers forced into the informal sector where their rights are not protected by the law.”
“Many local businesses are unprepared and financially stressed and they cannot afford such a big arbitrary hike to wages without being forced to make drastic changes to their workforce or shut down,” explained Mr. Boudier.
“It is also wrong to believe that most businesses pay only minimum wage. I can speak on behalf of my business and most others I know, that pay much more than the minimum wage for skilled workers. We simply must pay more to remain competitive or we lose our talented workers to labour mobility programs.”
The VCCI is also extremely concerned that informal surveying of provincial Ni Vanuatu business members (any business with a valid business licence) shows that over 80% were not aware of the minimum wage or the correct rate, and said there is no way they can afford to pay it.
“Has the Government considered how their decision will affect Ni Vanuatu run businesses? What communications campaign will they use to inform and educate the majority of the private sector that are operating outside of urban areas? How will it be enforced?” said Mr. Boudier.
“We ask again that we work together to ensure a good outcome that works for all parties, and especially Ni Vanuatu businesses. Our charter is to support ALL our members. Most of our members are Vanuatu small and medium sized businesses, and not big businesses.”
RESOURCES FOR JOURNALISTS
Vanuatu Consumer Price Index
The Consumer Price Index (CPI) is the instrument to measure inflation. It is used to estimate the average variation between two given periods in the prices of products consumed by households.
Vanuatu CPI Changes 2017-2022
Year CPI Index Rate of Change over previous Year
2017 151.2 3.1%
2018 154.8 2.3%
2019 159.0 2.8%
2020 167.5 5.3%
2021 171.7 2.3%
2022 183.6 7.1%
Figures from the Vanuatu National Statistics Office (VNSO)
International Labour Organisation (ILO) Minimum Wage Policy Guideline
“Setting and adjusting the level is perhaps the most challenging part of minimum wage fixing. If set too low, minimum wages will have little effect in protecting workers and their families against unduly low pay or poverty. If set too high, minimum wages will be poorly complied with and/or have adverse employment effects.
A balanced and evidence-based approach is necessary which takes into account, on the one hand, the needs of workers and their families and, on the other, economic factors. An appropriate balance between these two sets of considerations is essential to ensuring that minimum wages are adapted to the national context, and that both the effective protection of workers and the development of sustainable enterprises is taken into account.
An evidence-based approach also implies that there should be clear criteria to guide discussions on the level of minimum wages, as well as reliable statistical indicators to support governments and social partners in their deliberations. Common statistical indicators that are used include the general level and 1 distribution of wages, the evolution and differences across regions in the cost of living, as well as national or sectoral levels of labour productivity and rates of economic growth.
To maintain their relevance, minimum wage levels need to be adjusted from time to time. Failure to do so may lead to an erosion of the purchasing power of workers who earn the minimum when prices of goods and services are rising, or may lead to more wage inequality when the general level of wages is increasing.
Because the social and economic effects of minimum wages are never fully predictable, it is essential to ensure that the impact of minimum wage adjustments is adequately monitored and studied.
If mathematical formulas are used to periodically adjust minimum wage rates, these should be consulted with social partners and not be used as a substitute for social dialogue.”
