The Government is required by law to conduct annual reviews of the Minimum Wage rate. In 2020, admist the COVID19 pandemic, the minimum wage increased from $7.60 to $8.00 an hour. Making a decision on minimum wage requires a nation-wide consultation as the outcome will affect everyone in the Cook Islands. In deciding on a minimum wage, there needs to be a balance between needs of workers and the ability of all sectors to afford any increase.
Submissions on the Minimum Wage are now invited from the public. All points raised will be reviewed by the Minimum Wage Review Panel and taken into account when compiling its report to the Minister. Below are issues identified for consideration in the review. Your views are important. Please add other points that you think are important for the review.
1. Currently the Cook Islands government is funding the economic response plan (ERP) largely through debt funding. This means Cook Islands have taken on significant debt which will need to be paid back with interest. The economy is in a critical situation compared to pre COVID.
2. The Government has chosen a continuation of the wage subsidy (longer than virtually any other country in the pacific including NZ and Australia) as well as other funding for the Economic Response Plan (eg business grants etc) as being the most important way of supporting all workers in the current environment.
3. The wage subsidy has not only allowed employers to keep paying their staff, but has prevented a huge downturn in people being able to spend money on necessities. Both employers and employees have benefited massively. The alternative would have been a closure of many businesses and exodus of workers.
4. The government debt has occurred not just through expenditure on ERP but also through a significant reduction in taxation through reduced business profitability and company tax, as well as reductions in VAT and PAYE returns (less spending by tourists and lower salaries/wages for many employers and employees).
5. COVID impacts on the ability for either Government or businesses to pay more than the current minimum wage is simply not sustainable for the foreseeable future (due to debt and debt servicing).
Other General Considerations:
1. Any minimum wage increase must be paid for from somewhere. It can come from diverted government funds, increased prices, reduced company profits and increased company losses.
2. The minimum wage should balance the need to adequately compensate an entry level worker against affordability of government and businesses.
3. Employers need to access labour efficiently and affordably.
4. It is prudent to avoid measures producing excessive inflation and price rises.
5. The current minimum wage ($8.00/hour) in the Cook Islands is significantly higher than in most other countries in the Asia Pacific region but is lower than in New Zealand or Australia (noting that New Zealand and Australia are amongst countries that provide the highest minimum wages in the world and it is unrealistic to base local minimum wages on their precedent).
6. The minimum wage should strike a balance at the economy –wide level between workers and employers.
7. Do you think there is a need for a government set minimum wage or would you rather leave that to the market forces to decide? Why?
Issues for Workers:
1. What do you feel is a realistic minimum wage for an entry level worker?
2. Do you think there is a need for industry specific minimum wage rates?
3. Do you think there is a need for a youth minimum wage rate?
4. Are you currently paid the minimum wage? Do you think the current wage is fair relative to other wages?
5. Is the level of the minimum wage a factor in deciding whether to take up unskilled work locally, rather than leave for work overseas?
6. Is the current minimum wage of $8.00/hour, enough to meet minimum living costs for a single person? for a couple? for a family?
7. Is employment on the minimum wage preferable to subsistence work such as planting or fishing?
8. Would students’ decisions about when to leave school and enter employment be influenced by a higher minimum wage rate?
9. Is the current minimum wage suitable for workers in the Pa Enua? Or should the Pa Enua have a different minimum wage rate?
Issues for Employers:
1. What do employers feel is a realistic minimum wage for an entry level worker?
2. Are employers currently paying a significant number of workers the minimum wage or near the minimum wage (near being within $1)?
3. Would an increase in the minimum rate have a significant impact on their business?
4. If so, would employers need to increase prices? Reduce staff hours? Lay off staff? Absorb costs through reduced profits? Close down?
5. Would a higher minimum wage put pressure on other wage bands for an increase?
6. How does the minimum wage rate influence decisions to employ foreign workers?
7. Would a higher minimum wage have a greater impact on employers in the Pa Enua?
8. How would an increase in the minimum wage affect industries that rely on relatively inexpensive labour (for example: agriculture)? Would commercial operations in these industries be able to afford an increase?
9. Would the increase encourage businesses to be more productive?
Issues for Government:
1. Will an increase in the minimum wage for public servants be affordable?
2. What are the inflationary impacts of a minimum wage increase, and in which sectors?
3. Are there minimum wage considerations particular to the Pa Enua?
4. Does a minimum wage increase conflict with other Government policies in relation to sector growth (for example, in agriculture or fisheries)?
5. Does an increase in the minimum wage channel more money in the economy to low income earners?
6. Does an increase in the minimum wage cause job losses? E.g. Employers may be forced to reduce hours
7. Will an increase have an impact on government worker job sizing bands?
8. There may be budget constraints for overall government payroll, particularly in the Pa Enua. Should Pa Enua minimum-wage public servants be able to work reduced hours at a higher wage rate, maintaining or slightly improving their current income while giving them more time for fishing / planting etc?
Written submissions in Maori and English can be emailed or dropped off at the Ministry of Internal Affairs.
Submissions will remain confidential to the Panel.
Email: [email protected]
Subject: 2021 Minimum Wage Review
Mail: Minimum Wage Review Panel, Ministry of Internal Affairs, PO Box 98, Rarotonga, Cook Islands
Oral submissions: At a public meeting, Thursday 11th February 2021 @ 5pm, at the Sinaii Hall, Avarua.
The closing date for submissions is: 25/02/2021- 10:00 am