Eight years after 10-10-10 it is clear that the present Dutch coalition government is prepared to finally establish a social minimum. While the responsible state-secretary Van Ark has recently announced that the presentation of the study into the social minimum to parliament will be delayed, the chairman of the Kingdom Relations Committee of the First Chamber is demanding to receive the report no later than July 1st. Also the representatives of CDA and D66 factions in the Second Chamber have stated that social benefits for the three BES islands (Bonaire, St. Eustatius and Saba — Ed.) have to be increased by January next year. This even without knowing what the outcome of the study will be. This is definitely good news.
Some are questioning the need of the establishment of the social minimum. It is, however, extremely important in order to prove how the present social benefits and the minimum wage relate to the minimum amount that our people actually need to live on and whether they have a within-the-Netherlands-acceptable level of service and that adjustments have to be made. Seeing the urgent call that is now coming from parliament, it appears that the political will is there to establish the social minimum as well as to take the next, and just as important, step to come with proposals to also guarantee that our people actually have this minimum amount at their disposal.
There is in my opinion a comprehensive approach needed to arrive to this social minimum for everyone. First comes to mind, of course, to just raise the minimum wage and the social benefits. Since social benefits are tied to the minimum wage, you cannot raise one and not the other. I guess that raising the social benefits is the easiest one, especially when the political will in The Hague is there. The extra moneys needed for this will come from the budget of the national government. In order to keep the amount for the benefits under control, however, measures may be introduced to bring down the cost for our households. Hereby we can think of the introduction of subsidy on house rent and finding ways and means to reduce cost for other essential expenditures such as for electricity, water, telephone and inter-net, bank interest, insurance, just to name a few. Purposely I left out of this list the cost for foodstuff. Although I am aware of the cry by some for price control in this area, a recent study in the prices has established that the net margin for supermarkets is a mere 3 per cent. This means that there is not much room to cut the food prices without this having a negative effect and may result in closures of supermarkets or much-needed food items that fall under the control will no longer be offered.
When social benefits have to go up, also the minimum wage needs to be adjusted. Here some caution is required, because an increase in minimum wage does not come from the budget of the national government, but has to be paid by our mostly small local businesses. It is therefore extremely important to establish if the local businesses can carry an higher minimum wage and as a result an increase in their payroll cost. If this is not the case the measure may lead to business closures and the loss of jobs, which will make it counterproductive. Another logical effect may be that the businesses are forced to raise their prices, whereby the value of the wage increase will dissipate.
In the tourism sector the higher operating cost as a result of the increase of the minimum wage may negatively affect the competitive position of the sector when these costs in the rest of the Caribbean are much lower and consequently will result in less tourism and less income for the sector. It is also important, in order to measure the impact, to identify in which business sectors minimum wage is being paid. Although to my knowledge no official research has been carried out, I believe that in Static, for instance, by supermarkets, other retail stores as well as in the hotel and restaurant sector minimum wage is common.
It is therefore unavoidable that with the increase in minimum wage an incentive or compensation package needs to be introduced to reduce the effect of the increase of payroll cost to the businesses as much as possible. This can be done for instance by reducing taxes and premiums the businesses have to pay. The tripling of the amount of taxes collected in the Caribbean Netherlands since 2011 should allow enough room for this.