The increase in the National Minimum Wage Rate (NMWR) is anticipated to lead to higher consumer prices as domestic businesses transfer the increased labor costs to final goods and services.
In Westpac’s quarterly economic update, Senior Economist Shamal Chand pointed out that export-oriented businesses in competitive markets might experience reduced profit margins. These businesses may adopt cost-saving strategies such as enhancing productivity, acquiring new technology, or, in extreme cases, laying off workers. However, Chand noted that significant layoffs are unlikely based on past trends, as companies tend to prefer other cost-saving measures.
“Given Fiji’s high living costs, the increase in NMWR could further drive up prices due to cost-push inflation, and enhancing productivity will be crucial to mitigate long-term risks,” Chand stated.
The national minimum wage rate will increase from $4 per hour to $5 per hour in two phases. Effective from 1 August, the rate will rise to $4.50 per hour and then to $5.00 per hour from 1 April 2025. Additionally, sectoral minimum wages will also increase by $0.50 from 1 August and another $0.50 from 1 April 2025.
Chand mentioned that the wage reform aims to address the issue of brain drain and out-migration of skilled and experienced workers, though it will take a few months of data to assess the policy’s impact on emigration numbers.
The NMWR was last increased to $4 per hour in January 2023, and since then, consumer prices have risen on average by 7.5 percent.
Moreover, the budget has allocated $85 million for increases in wages and salaries for all civil service workers. Government wage earners will receive disproportionate pay raises in the range of 10-20 percent, whereas salary earners will see increases of 7-10 percent by restructuring the current civil service salary bands, effective from 1 August 2024.
Government employees last received a pay increase in 2017 with reforms to the civil service salary bands, while overall consumer prices have risen by 16.8 percent since then.
There are also plans to improve productivity in the civil service, with around $24 million allocated towards modernizing IT infrastructure, improving ease of doing business, and reducing waiting time.