Wednesday, 31 October 2007 11:46 AM

CBSI Raises Caution on Proposed Minimum Wage Rise

The Central Bank of Solomon Islands, CBSI, has raised caution on the proposed increase on the legal minimum wage from $3 to $7.50.

The Manager of the CBSI Economics Department, Mr. Vincent Nomae, stated that what has been proposed was based largely on a government paper. Mr Nomae said that the CBSI had only been able to give its opinion on the proposal through the Ministry of Commerce.

Nomae said that while the CBSI supports the increase "what the government is proposing to implement is such a big increase, from a lower level of 3% to an increase of 7%".

"The reason why the CBSI is cautious about the increase is because those that will be affected are the business houses," said Mr. Nomae.

"What we could foresee happening if the new minimum wage is carried through is businesses may be forced to cut back on employment, so the increasing wage may also result in unemployment," Mr. Nomae said.

Nomae said that such cutbacks will affect the efficiency and the output of production and thus the overall performance of the business.

Nomae also stated that only a small number of people will benefit on the increase since many are engaged in the informal sector, such as betel nut and market vendors. "I think it is wrong to assume that a rise in minimum wage will increase the overall standard of living, people will pay more tax so net benefit will not increase."

"We will analyze the proposed increase by studying the proposal, we may also need to gauge views from stakeholder," says Mr. Nomae.

"Many people will be affected so shared comments followed by recommendation will be good," said Mr. Nomae.