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Belize: Raise the minimum wage

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Posted: Sunday, January 27, 2019. 6:02 pm CST.

The views expressed in this article are those of the writer and not necessarily those of Breaking Belize News.

This article was written by Richard Harrison, Belizean investor in production and services businesses in Belize. He holds a Master’s in Business Administration degree from Lancaster University.

By Richard Harrison: The minimum wage in Belize is BZ$3.25/hr and has not been changed since 2003.

A normal 45-hour work week will net a worker BZ$148.50 per week.

The minimum wage should be increased to BZ$5.25/hr

“Many workers in Belize, especially women and young people, are unemployed. Many of them have been unemployed for a long time. Over the past decade, there has also been little growth in real earnings. Improving these labor market outcomes is a prerequisite for reducing poverty and raising the overall living standards of Belize’s population.

With high unemployment and near stagnation in median real worker incomes, Belize cannot have made much progress in alleviating poverty. Based on an assessment of the economic and social conditions of Belize in 2009, the Government of Belize and the Caribbean Development Bank (2010) reported that 31 percent of all households and 42 percent of the population fell below the national poverty line.” ~ IDB 2014, “Labor Market Performance in Belize”

It is national budgeting period in Belize from January to April 1…but all eyes are distracted by the ICJ debate….so the budget issues are not being aired and addressed properly.

HOW TO AFFORD INCREASE OF MINIMUM WAGE?

The general sales tax (GST) is only charged on 35% of Belize’s consumption….most goods that are consumed in high volume are either exempt or excepted from this 12.5% consumption tax.

In 2018/19 GOB expects GST to earn around BZ$545 million.

If the rate of GST is decreased to 10% and the tax was charged on 70% of consumption…the GST would take in BZ$870 million….which is an additional BZ$325 million over the current inflows.

Of course this would temporarily increase the cost of living by 10%…as the GST of 10% will now be charged on many basic food items…but a large chunk of it will come from the 1.5 million tourists (and growing) who are currently paying no consumption tax on 65% of what is consumed.

So…with the additional inflow of BZ$325 million…we can eliminate all taxes except the 10% GST on fuel, which now brings in BZ$90 million…so that the price of diesel would fall to around BZ$6.90/gallon.

The Business Tax can be reduced from 1.75% down to 1.0% across the board…no exemption nor exception for any business…thus revenues from this source would drop by BZ$115 million from BZ$270 million to BZ$155 million.

The total labor force of Belize is estimated at around 180,000 and about 20% earn at the minimum wage, or 36,000 workers.

If the minimum wage is increased to BZ$5.25/hr that would be an increase of BZ$2.00/hr or BZ$90/week…for a total increase in the wage bill of BZ$170 million per year.

With BZ$90 million savings from fuel tax and BZ$115 million savings from Business Tax…a total of BZ$205 million left in the hands of the people…can more than afford the BZ$170 million extra that the increase in minimum wage will cost us.

With this additional BZ$170 million in the hands of workers, they can consume, save and invest more…and this will increase demand for all goods and services.

In summary, minimum wage earners will see a rise in income of 61%…while initially they will see inflation of 10% in cost of basic items…so they will be around 50% better off. That initial inflation should be tamed as the lower price of fuel works its way into reducing cost-of-living and cost-of-doing-business.

Much of the gains will come from taxing consumption of basic items by tourists….and will grow continuously along with tourism.

 

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