Thursday, September 2, 2010

Setting the Minimum Wage: Third Rail of Honduran Politics?

When then-president Manuel Zelaya, acting as required by Honduran law, last set a new minimum wage, the 5,500 lempiras a month baseline bottom wage shocked Honduran businessmen, enraged many of them, and reportedly was a contributing factor in the coup in 2009. Many companies refused to pay it with impunity.

Now it's Porfirio Lobo Sosa's turn, and his attempt to avoid this electrified issue has been prolonged.

His government has "hosted" negotiations between business leaders and worker's union leaders, as required by Honduran law, since the spring. These talks are supposed to allow these two sectors to agree on the new minimum wage, avoiding the need for the president to take a unilateral position.

But talks have been at a stalemate since at least May. By law, once they reach such an impasse, it is up to the President to set the new minimum wage. Lobo has been sitting on a decision since before he went to the World Cup in May.

The Lobo Sosa government has promised to declare a new minimum wage several times this summer, most recently, on August 30.

Instead, it convened yet another fruitless meeting between business representatives and union leaders. Lobo Sosa's Labor Minister, Felicito Avila, first declared Lobo would freeze the minimum wage where it is now, and as recently as yesterday argued that the government would insist that, rather than changing the minimum wage, businesses pay a one-time bonus of 3000 lempiras to workers this year.

Lobo himself is in a catch 22 situation. He says his government doesn't have the funds to pay a wage increase to government workers that would be triggered by raising the minimum wage.

As the government, it could, in theory, issue bonds to cover the increase. But in reality the Lobo Sosa administration cannot take such a step, because it would interfere with his negotiations with international financial agencies.

In order to convince the International Monetary Fund that Honduras qualifies for a standby line of credit, Lobo Sosa must prove to them that he has contained government costs in the 2011 government budget, especially salaries. The IMF returns to Honduras next week to review Lobo's 2011 budget proposals. Obviously, adding a large increase to the budget, specifically for salaries, would undercut meeting that target.

So, for now, not having set the minimum wage is probably better for the Lobo Sosa administration, although it has reinforced the atmosphere of labor unrest that exists.

Because Lobo has not set the minimum wage, labor unions have called a "civic strike" day for next Tuesday, September 7. Some unions, such as STENEE, the state electrical workers union, have said this is a preview to a national strike, should there be no progress on a minimum wage.

Wonder if a general strike will help or hurt the task of impressing the IMF?

No comments: