The increase in the National Minimum Wage Rate (NMWR) is anticipated to lead to higher consumer prices as businesses transfer the increased labor costs to the prices of final goods and services.
In Westpac’s quarterly economic update, Senior Economist Shamal Chand noted that export-oriented businesses in competitive markets might experience reduced profit margins. These businesses may adopt cost-saving strategies such as enhancing productivity, investing in new technology, or, in extreme cases, laying off workers.
However, Chand indicated that significant layoffs are unlikely based on past trends, as companies generally prefer other cost-saving measures.
“Given Fiji’s high living costs, the increase in NMWR could further elevate prices due to cost-push inflation, and enhancing productivity will be essential to mitigate long-term risks.”
The national minimum wage rate will rise from $4 per hour to $5 per hour in two phases. Effective from August 1, the NMWR will increase to $4.50 per hour, and then to $5.00 per hour from April 1, 2025.
Additionally, sectoral minimum wages will also increase by $0.50 from August 1, and another $0.50 from April 1, 2025.
Chand mentioned that the wage reform aims to address brain drain and the out-migration of skilled and experienced workers; however, 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 consumer prices have since risen by an average of 7.5 percent.
The budget has also allocated $85.0 million for wage and salary increases for all civil service workers.
Government wage earners will receive a disproportionate pay increase in the range of 10-20 percent, while salary earners will see a pay rise of 7-10 percent through a restructuring of current civil service salary bands, effective from August 1, 2024.
The last pay increase for government employees was in 2017 with reforms to the civil service salary bands, while overall consumer prices have since increased by 16.8 percent.
Plans are also in place to improve productivity in the civil service, with around $24 million allocated for modernizing IT infrastructure, improving ease of doing business, and reducing waiting times.