Monday, September 6, 2010

Minimum Wage or Living Wage?

In all the discussion about setting a new minimum wage, with its focus on the proposals and counter-proposals of business and labor organizations, it can be easy to lose sight of what it costs urban workers to subsist in Honduras. The Honduran government has defined this as the cost of the canasta basica alimenticia, a monthly supply of 32 basic products that feeds a family of six.

In 2008, Honduras' labor minister said the cost of the canasta basica was 6,800 lempiras ($360 US). The minimum wage then was just half that amount.

Rampant speculation in 2008 was driving up the cost of beans. When the minimum wage was last set, Honduras had the most expensive canasta basica in all of Central America.

When he set a new minimum wage in December 2008, Manuel Zelaya explicitly placed it at 500 lempiras less than what it would cost a worker to buy the components of the canasta basica at that time.

Yet the claim being made today is that the canasta basica costs a fraction of its 2008 price, a claim that if true, would justify (in some measure) a lower minimum wage. How is this estimate being produced?

COHEP says the canasta basica cost is about 4,400 lempiras per month, basing their estimate on pricing the goods at the Tegucigalpa government-subsidized supermarket called Banasupro and the wholesale market in Tegucigalpa. This is well under the current minimum wage of 5,500 lempiras.

The workers unions, in contrast, suggest the canasta basica costs about 6,300 lempiras a month in the stores where their employees actually typically shop. The difference between the two sides comes to about $100 (US) a month.

The Instituto Nacional de Estadistica (INE) calculates the prices of the constituents of the canasta basica in a quite different manner from that used by COHEP. INE collects prices from six retail markets in a specific city, for a given week, as well as in seven supermarkets, 46 pulperias and two farmer's markets in the same city, and for each category calculates an average price. These four averages are then averaged to get a price for a given item in the canasta basica. You can find the weekly price reports for 2006 to 2008 for several cities on the INE's website here.

The Banco Central de Honduras then use these prices and applies them to a standard amount of each item sufficient to feed a family of six for a month, and calculates the cost of the canasta basica.

What COHEP did, in contrast, is go to a wholesale food market and to a government subsidized supermarket, a disingenuous selection of prices that systematically profoundly underestimates the real cost of the canasta basica.

Current INE estimates, and in fact, any of those for 2009-2010, are not available online. But one thing is clear: proposing a minimum wage based on low prices very few Hondurans will actually be able to obtain would make the minimum wage something far different from a living wage.

La Prensa noted in August that, in general, prices have continued to increase throughout all of 2009 and 2010. Bean prices increased $0.80 a pound just in the month of August, largely due to speculation. Vegetable prices have increased rapidly as the persistent heavy rains damage field crops. To the extent that these prices are not reflected in neighboring Central American countries for the same commodities, and they are not, this indicates significant market price manipulation in Honduras.

When Porfirio Lobo Sosa was sworn in in January, 72 percent of Hondurans lived in households that didn't have access to even the canasta basica according to a European Union study, creating a serious food security problem for Honduras. That's 5.7 million people. A further 1.5 million Hondurans lived in households that earned enough to pay for the canasta basica every month, but not enough to afford housing, health care, transportation, education, etc. That leaves just 800,000 people in Honduras, according to the study, in households with incomes that adequately support them.

And that is what is at stake in the current negotiation, if we step back and think about how wages affect people's ability to survive.


Jeff said...

Thanks for clarifying how the minimum wage is supposed to relate to the canasta básica. Using Banasupro (indirectly) as an excuse to lower minimum wage is really just too much: we'll subsidize food so you don't starve, and then we'll take that subsidy out of your inadequate salary.

I also wanted to add that my experience on the ground is that there are many businesses, even of reasonable size and prestige, which routinely ignore minimum wage (knowing that most people working for L.4,500 or 5,000/mo can't afford to risk endangering their job by complaining to the Ministerio de Trabajo).

That is only the tip of the iceberg as far as atrocious labor practices; it is particularly disturbing to see the way that people are frequently harassed into quiting by management looking to avoid paying prestaciones or other derechos de ley.

Carlos Tower said...

It is hard to overestimate just how many people are not paid the minimum wage, regardless of what is on paper, or on file, or what they are legally entitled to (and this is non-payment of the wage before Zelaya raised it). In the Capital, as you enter the lower income inner city areas it can be difficult to identify a single "home" with a wage earner making the minimum salary. There is no real investigative process. The Worker's Ministry investigators are easily bribed for a portion of what is stolen off the employees. In the last decade I dont recall even hearing of anyone's successful battle of a multi-year wage claim. This is not to say big business are the culprits or leaders of this rampant practice. As a general rule, the bigger and more well-known the business name, the less likely there are to be problems and more likely they are to pay the true minimum wage. Of my hugely extended family and friends in Honduras, the only ones paid the new wage regardless of operation during the coup were the biggest grocery, eatery, hardware, auto, banking, etc. businesses in the country. There is a reason why they have an insane number of applicants/requests year after year after year.

Boehmaya said...

The biggest businesses are the ones who are most likely to pay the minimum wage? Seriously? This has to be a joke.

I'd surely like to think that about Mario Canahuati, for instance, and his maquiladora business paying the minimum wage to workers, but that is simply out of the question regarding maquilas and duty free zones in general, which happen to be owned by those big businessmen.

And what about the fast food franchises, which in spite of not not having to pay taxes at all by some ridiculous law don't even pay the minimum wage and simply wonderfully just hire someone by hours, as many will be able to do now?

And it depends on what you exactly do whether they decide to pay you the minimum wage or not, because the people who show their face to the public like a cashier and someone doing all the dirty handwork behind the scenes like a cleaning lady might be getting completely different treatment(and payment). What was said above is based on completely superficial arguments and is magnifying the tiny space there is for an almost non existant middle class to get a decent job (or more like lying about how the owners of big business pay their fair share or pretend to and put a bit of make-up here and there to create the illusion that they do in general?).

And even assuming these big businessmen paid the minimum wage to most of their employees, on the other hand, they don't pay any taxes and can make up for that.

No matter how some try to be apologists of corrupt big businessmen(who we all know are a great part of the predominant ones in Honduras) you can't cover the sun with a finger(nor with a Tower). This "common sense" dictating some that they don't have the need to not pay taxes or pay the minimum wage because they are rich anyways is nothing anyone is buying anymore.

RAJ said...

Legally, maquilas and free trade zone businesses are not subject to the same minimum wage law. This complicates understanding who is/is not complying.

In the wake of the passage of a new minimum wage under President Zelaya there were widespread reports of noncompliance, and there did not seem to be any specific profile to the non-compliant businesses: large and small business owners were cited.

This is not a new thing.

In the 1980s, we heard many reports of underpay from people who were working with us, who were day laborers in the agricultural sector. Particularly common were violations of technical aspects of the law-- not paying the seventh day, not paying for all the hours required (e.g. unpaid overtime). We also heard people we knew talking about their live-in maids, and those of others, and it was clear that the wages paid to these laborers were entirely negotiable.

So I want to underline that experiences in different places may well be different. Carlos Tower, who I do not think is defending any specific large businesses, is reporting on his own experience. It may well be that his network of family have found that larger businesses are less likely to avoid the law.

The key point of his comment is the first sentence:

It is hard to overestimate just how many people are not paid the minimum wage.