The ‘hustle economy’ threat
Rushing to impose a living wage could fuel a “hustle economy” in which bosses dodge their tax contributions by paying staff in cash, the Bermuda Employers Council has warned.
Family Centre also cautioned against mandated higher wages risking the jobs of low-skilled workers or preventing them from gaining full-time employment.
Both groups welcomed the announcement that Lovitta Foggo, the labour minister, was drawing up legislation for a Wage Commission to tackle both a minimum wage and a living wage. The independent commission is to partner with unions and employer groups, according to a ministry statement on Monday.
Keith Jensen, president of the BEC, said the council believed “hustle” practices had “flourished during the recent recession”.
He said some bosses resorted to cash to sidestep “health insurance, pension contributions, social insurance and payroll taxes”.
Mr Jensen added: “In the worst-case scenario, a poorly conceived living wage may embolden the hustle economy.”
He said “thoughtful consideration” of a recommended living wage came at a time when Curtis Dickinson, the finance minister, had proposed “relatively few tax increases in light of uncertainties in the economy”.
He warned: “While there have been identified positive outcomes of a living wage, moving wage costs rapidly in an economy that is walking on a tightrope may introduce self-inflicted, cost-push inflation.”
Cost-push inflation refers to cases in which overall prices rise because of higher wage costs.
Mr Jensen said such a scenario could be triggered by “the combination of an ill-advised living wage, the 25 per cent increase in foreign currency purchases tax, the fixed cost taxes and dividend taxes which are still being dealt with from last year’s Budget, the sugar tax, and the structural economic issues within the retail/restaurant/personal service industries”.
The BEC, which represents unionised and non-union members across the island, was said to be “understandably cautious” of the living wage’s potential impact.
Mr Jensen said the council looked forward to having its say in the commission’s deliberations.
Martha Dismont, the executive director of Family Centre, commended the move in July 2018 when a parliamentary Joint Select Committee tabled its report on the wage change.
A living wage in keeping with Bermuda’s prices was suggested at $18.
This week, Ms Dismont called it “very critical” to legislate a living wage from “a comprehensive perspective that helps to ensure the legislation achieves what is intended”.
Ms Dismont said that some employers gave low-skilled workers the chance to become full-time staff with “smaller, more casual jobs as a start”.
She added: “We also expect that this is done by paying these ‘casual’ workers with cash.
“Those same employers may maintain an accurate accounting of these payments, and one would hope that they are following the proper legal requirements under the Employment Act.
“However, if there are employers who are maintaining lower-skilled workers through cash payments, they will likely be the first who are cut once employers are required to pay a higher wage.”
Ms Dismont said it would be “not surprising” if more bosses had turned to offering cash during the economic downturn.
“These arrangements tend to support the needs of employers as well as the individual who needs to earn some, or any, level of income,” she said.
“If employers were given the incentives and supports to hire unemployed, lower-skilled workers, it may reduce the practice of saving costs by sidestepping the legal requirements and paying in cash.”
Not all workers paid in cash were low-skilled, she added.
“However, our experience is that these workers tend to be subcontractors, who work independently and receive their pay however the employer chooses to pay them.”
Ms Dismont said Family Centre’s concern was the chance of “lower-skilled workers losing entry points for work”.
She said such workers could suffer as a result of the legal requirement for a higher wage if employers began “asking for a higher skill level”.
Ms Dismont said she hoped that a comprehensive look at a statutory wage would include examining how workers who had been taking their wages in cash could transition to a wage through job training incentivised programmes.
She added: “To the point of whether employers will look for other ways to cut corners, we believe that until we solve the high cost of doing business in Bermuda problem, employers will continue to look for ways to achieve costs savings to save their businesses.”