The Barbados Private Sector Association (BPSA) has warned consumers to brace for continued high cost of living challenges, until greater attention is given to productivity and the establishment of a system to measure it.
Chairman Trisha Tannis said on Tuesday that while businesses, particularly supermarkets will have to pass on the increase in the minimum wage to consumers, the “uncomfortable,” but most important conversation – productivity – is not being heard.
“I call for a national productivity mechanism. We have to be able to know how productive we are, how we benchmark against the rest of the world, and to set essentially, very, very stringent and robust goals for where we need to get to—to increase our competitiveness and to create real organic opportunities for the economy to grow,” Tannis told Barbados TODAY.
“That is the only way that essentially, we are going to climb our way out of this hole, and try to even profit again….”
The private sector spokeswoman went further to anchor her argument on what Barbadians can expect to experience regarding the cost of living.
“I think if we continue to have conversations around cost of living, minimum wages and so on, we are going to… continue in this spiral. The conversation that we seem not to want to have, is the conversation of our productivity that has fueled these adjustments,” she contended.
“If we have more of a focus on how do we reach productivity and growth in the country, then things like minimum wage and cost of living will take care of themselves. But that’s a harder conversation to have. It’s a much more difficult conversation to have. We still don’t have a national productivity measurement mechanism. We still don’t know how unproductive we are.”
The BPSA leader continued: “So, when that is our reality, then we are always going to have challenges with the cost of living, we are always going to be talking about minimum wage. We essentially are not going to be able to essentially grow the economy, because we are simply not looking at what we have to do to generate the critical mass that we need to be able to drive the cost of living down.”
Turning her attention to external shocks, she said, though critical, the country cannot do anything about them.
However, Tannis is adamant that Barbados can take action to improve its efficiency, curb counterproductive lifestyles, encourage greater support for local industries, and enhance overall competitiveness.
“How we innovate, our business facilitation and the way we do business and the cost to do business will essentially feed into the cost of living. We can’t have a high cost of doing business and a low cost of living,” she pointed out.
In specifically addressing the private sector’s response to the minimum wage hike, Tannis said various businesses will handle it differently.
“I have not been getting it [increase in food prices] broadly, but it is not surprising though that the supermarket industry, the retail industry would essentially be one of the primary sectors to respond first. As you know, they operate on a fairly slim margin, and are quite sensitive to these things, particularly if they were paying at the previous minimum wage level. You would appreciate that overnight, that wage bill will increase by just shy of 30 per cent,” the business leader stated.
“They are indicating that they would have to push the price through to the consumer, and there may be a diversity of responses across the various sectors.”
Tannis assured that while Managing Director of A1 Supermarkets Andrew Bynoe may have been the first and most vocal business leader to warn of pending increases in the price of food due to the minimum wage hike, he will not be the only one.
“That is why any adjustment to the minimum wage has to be done very carefully because this is eventually an unfortunate reality that may be triggered,” she said. “I believe that every effort was made to keep it within a certain level, so as not to trigger any hyper-inflationary impact. So, it will be very difficult to say from one business to the other, that this is what we can do, and this is what we can’t do.”
The private sector head pointed out that every business therefore now has to examine the impact of the adjustment on their business model.
She explained that some may not have a choice but to pass it through to the consumer, while some “may decide that they can swallow it.”
“It really depends on… where your base point is and where you are coming from. If coming from $8.50 [per hour] to $10.50 [minimum wage], and your biggest expense is going to increase by 26 per cent, plus freight rates essentially rising coming from the Far East, and so on, it is very difficult to think there is not going to be an impact on the prices as well,” the BPSA chairman added.
Tannis also noted that there may be business owners who were already paying at or above the minimum wage who may not be impacted by the increase at this point in time. On the other hand, she said, those who were paying the previous $8.50 per hour will be challenged.
“These are the entities—may be small, medium size enterprises, may be retail, wholesale—that are going to be a bit more sensitive to that adjustment. There may be entities that may only be able to balance the equation by reducing hours to keep people employed,” Tannis said.
For those that cannot reduce hours, however, their prices may increase, she noted.
Tannis cautioned that there is a limit to how far prices can practically be increased, noting that extraordinary hikes could turn off consumers.
emmanueljoseph@barbadostoday.bb
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