Raising Jersey’s minimum wage

Why has it taken another independent report to spur the Jersey government into action?

This is an online expanded column that originally appeared in the Jersey Evening Post on the 12th of July 2017

Last week the results of a minimum wage review by consultants Oxera led Jersey’s Chief Minister, Ian Gorst, to state that the aspiration to achieve a minimum wage of 45% of earnings by 2026 was “too slow” and he now wants to accelerate that timetable by six years, and for good reason.

The report shows that nearly a quarter of the working population in Jersey, around 14,800, would see a ten per cent rise in their income, with the estimate of around 60 jobs being lost. The Jersey Statistics Unit recently published the lowest employment figures in 8 years, with 1,180 people actively seeking work, so it’s a small figure by comparison.

In fact if the States had raised the minimum wage during the two opportunities they had last year unemployment would still have declined overall.

Downsides are that the hospitality, retail and agriculture sectors would “likely” see an annual fall in shareholder profits, prices would go up by around 0.06 percentage points and there would be lower economic activity overall. However, consumer spending in the economy would increase by £2.4m — because lower earners tend to spend in the real economy — which would likely be in the sectors that are to feel the hit of having to pay a higher minimum wage. Productivity would also see an increase and the government would receive an extra £300,000 in annual revenue.

Despite the high cost of living in Jersey, our minimum wage level has fallen behind the UK and Guernsey. Reviewing the States Assembly voting statistics over the last six years, whenever a proposition has been brought to raise the minimum wage the Council of Ministers have generally voted against it. Even the original proposition brought by Reform Jersey to have the Oxera review, that has led to the raise, was voted against. Their pro-business leanings increasingly appear to have been at the detriment to thousands of workers on the island.

Out of the two options in the Oxera report to raise the minimum wage by, £7.88 or £8.40, Ministers have naturally gone with the lower one but it’s still a commendable step in the right direction, even if it may still leave us ultimately trailing behind the UK. There will likely be strong resistance from certain sectors that are currently struggling on tight margins, having to rely on cheap labour, but do we really want to live in a society where people aren’t paid enough to live on? Tax payers already subsidise certain businesses by topping up low wages through the income support system. For perspective, the Catholic Jersey charity Caritas estimated last year that the living wage for Jersey in 2017 should be £9.75 an hour.

FOI request showing income (business) support claims for those in work as at 30 June 2015

The Chief Minister importantly has said that he wants to “work with other Ministers and Members in looking at how we could support the sectors most affected, promoting productivity and offering support to help businesses to adjust to the proposed change.” One area would be to look at the zero-ten tax regime which disproportionately favours multinational companies that are able to use tax efficient structures to minimise costs at the expense of locally owned businesses that are instead required to pay the full rate of corporation tax.

After ten years of stagnant wages it’s a welcome sign to see many getting a much deserved boost in pay but a question does have to be raised. With the States having access to economists, statisticians, Scrutiny and an Employment Forum that regularly reviews the minimum wage, why has it taken the results of another independent report in order to get the Council of Ministers to improve the lives of nearly a quarter of the working Jersey population? Are reports the only way to get things done now?

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