The increase in minimum wage is anticipated to lead to higher consumer prices as local businesses transfer the additional labor costs to final goods and services.
Westpac Fiji senior economist Shamal Chand presented this viewpoint in the bank’s quarterly economic update released this week.
He noted that export-oriented businesses in competitive markets might experience shrinking profit margins and could resort to cost-saving strategies such as enhancing productivity, adopting new technology, or in extreme cases, laying off workers.
“However, past trends indicate that significant layoffs are unlikely, as companies tend to prefer other cost-saving measures,” Mr. Chand said.
“Given Fiji’s high living costs, the increase in national minimum wage rates might further escalate prices due to cost-push inflation, making productivity improvements crucial to mitigate long-term risks.”
Mr. Chand also highlighted the $85 million budgetary allocation for wage and salary increments for civil servants.
“Government wage earners will have a disproportionate increase in pay in the 10-20 percent range, while salary earners will see a pay rise in the 7-10 percent range by restructuring the current civil service salary bands, effective from August 1, 2024.”
He mentioned that government employees last received a pay hike in 2017 with reforms to the civil service salary bands, while overall consumer prices have risen by 16.8 percent since then.
“There are plans to improve productivity in the civil service as around $24 million is allocated towards modernizing the IT infrastructure, enhancing ease of doing business, and reducing waiting time.”