The increase in the National Minimum Wage Rate (NMWR) is anticipated to lead to higher consumer prices as domestic businesses transfer the additional labor costs onto final goods and services.
In Westpac’s quarterly economic update, Senior Economist Shamal Chand noted that export-oriented businesses operating in competitive markets might face reduced profit margins and could implement cost-saving strategies such as enhancing productivity, acquiring new technology, or, in extreme cases, laying off workers. However, past trends suggest that significant layoffs are unlikely, as companies generally opt for other cost-saving methods.
Given the high living costs in Fiji, the rise in NMWR could further increase prices due to cost-push inflation, making productivity improvements crucial to mitigate long-term risks, Chand added.
The national minimum wage rate will increase from $4 per hour to $5 per hour in two phases. From 1 August, the rate will rise to $4.50 per hour and then to $5.00 per hour starting 1 April 2025. Sectoral minimum wages will also see a $0.50 increase on 1 August, followed by an additional $0.50 increase on 1 April 2025.
Chand mentioned that the wage reform aims to tackle the issue of 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 raised to $4 per hour in January 2023, and since then, consumer prices have increased by an average of 7.5 percent.
The budget has allocated $85 million for wage and salary increases for all civil service workers. Government wage earners will see a pay raise in the 10-20 percent range, while salary earners will receive an increase in the 7-10 percent range through a restructuring of 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, whereas overall consumer prices have risen by 16.8 percent since then.
Plans are also in place to enhance productivity in the civil service, with around $24 million allocated for modernizing IT infrastructure, improving ease of doing business, and reducing waiting times.