US embassy cable - 05KINGSTON398

UNCLAS KINGSTON 000398 
 
SIPDIS 
 
STATE FOR WHA/CAR/ (WBENT), WHA/EPSC (JSLATTERY) 
 
SANTO DOMINGO FOR FCS AND FAS 
 
TREASURY FOR L LAMONICA 
 
E.O. 12958:  NA 
TAGS: ECON, EFIN, JM 
SUBJECT: GOJ Raises National Minimum Wage 
 
 
1.  After months of deliberation, the GOJ has raised the 
national minimum wage by 20 percent, the highest increase 
since 2001.  The adjustment, which took effect on January 
31, will see affected workers taking home the equivalent 
of at least USD 40 per week, up from USD 33.  With 
inflation for 2004 ending at 14.1 percent, this raise of 
20 percent represents a real increase of 5.9 percent.  The 
minimum wage, which was last increased in November 2003, 
now puts affected workers above the income tax threshold. 
However, to remedy the situation the GOJ has instructed 
employers not to deduct taxes from employees whose 
earnings are at the minimum wage level. 
 
2.  The minimum wage increase was surprising, as it 
surpassed recommendations made by the major stakeholders 
to the Minimum Wage Advisory Commission, the body 
designated by the GOJ to review the minimum wage.  While 
the Jamaica Household Workers Association had lobbied for 
a 50 percent increase, the Jamaica Employers Federation 
(JEF), the Planning Institute of Jamaica (PIOJ) and trade 
unions had proposed increases of three percent, 11 percent 
and 14.1 percent, respectively.  The GOJ had traditionally 
accepted recommendations made by the PIOJ, as its 
submission is generally based on technical considerations, 
including the impact on productivity, inflation, 
employers' ability to pay and the amount of income 
required to meet basic needs. 
 
3.  The government's decision has drawn mixed responses 
from stakeholders.  Dwight Nelson, President of the 
Jamaica Confederation of Trade Unions, said that he was 
happy the GOJ had given due consideration to minimum wage 
earners.  However, Jacqueline Coke-Lloyd, executive 
director of the JEF, expressed surprise at the level of 
increase.  She stated that the GOJ has shown scant regard 
for most of the recommendations and was not concerned 
about employers.  Coke-Lloyd also suggested that the 
increase would have a negative impact on employment. 
 
4. Comment: While the new minimum wage will have an impact 
on cost, the impact of the increase seems to be overstated 
by Coke-Lloyd since most employers generally pay well 
above the minimum wage.  End Comment. 
 
TIGHE