Minimum Wage: MVR 6,400; up to MVR 8,600 for tourism sector

The Salaries and Wages Advisory Board has recommended the Economic Minister to set MVR 6,400 as the national minimum wage, and an amount within the range of MVR 6,400 to MVR 8,600 as minimum wage for civil servants and tourism sector employees.

Economic Minister Fayyaz Ismail, who recently announced plans to declare a minimum wage before the end of this February, forwarded the Board’s recommendation to the Parliament last week. A report on the Board’s recommendation has also been published on the Economic Ministry website.

The Board analyzed two factors in reaching its recommendation; the monthly spending on food and other basic necessities per household, and local economic indicators.

According to its report, it looked into the spending on food and other basic necessities per consumption unit per household, size of an average household, and the number of people employed in an average household.

It referred to the 2016 Household Income and Expenditure Survey, which showed the average size of a household to be 5.3 people, the weighted average to be 4.2 people, and the number of people employed per household to be two people.

KEY POINTS IDENTIFIED BY THE BOARD:

• A household is made up of 4.2 people (weighted average, Household Income and Expenditure Survey 2016).
• A household is made up of two employed people (average, Household Income and Expenditure Survey 2016).
• Minimum MVR 840 required on food consumption required per day (2,400 calories).
• Minimum MVR 1,486 required for rent.
• Minimum MVR 926 required for other essential expenditure (excluding rent).
• Minimum MVR 732 required for non-essential expenditure.

Based on these figures, the Board found that, if basic needs alone were to be factored in, the minimum wage must be set to an amount within the range of MVR 5,777 to MVR 8,662. Following adjustments for inflation, the range comes up to MVR 6,008 to MVR 8,981.

The Board analyzed the economic standard by factoring in the minimum wage set in other Small and Developing States which are similar to Maldives, the poverty line, and the Kaitz index.

• Based on the Kaitz index, the minimum wage is MVR 3,183.
• Based on the standard set by Small and Developing States similar to Maldives, the minimum wage is between the range of MVR 4,761 to MVR 6,292.
• Based on the poverty line, the minimum wage is MVR 6,774.

The Board found that based on the International Standard Industrial Classification, if the minimum wage was set to MVR 5,000 - it would affect 24 percent of the labor force, if the minimum wage was set to MVR 5,500 – it would affect 33 percent of the labor force, if the minimum wage was set to MVR 6,000 – it would affect 43 percent of the labor force, if the minimum wage was set higher - between MVR 6,000 to MVR 8,000 – it would affect 62 percent of the labor force.

The results of a survey by the Board on businesses operating within the tourism sector, construction sector and wholesale/retail sector showed 47 percent of the businesses were in favor of a minimum wage within the range of USD 200 to USD 300. 21 percent were in favor of a minimum wage above USD 300.

Following analysis of all these factors; basic household spending, economic impact, and more, the Board recommended that the national minimum wage be set to MVR 6,400. Calculated based on an average 26 working days a month and the eight working hours per day, it comes to the hourly rate of MVR 30.77.

The Board also recommended that the minimum wage should be the basic salary, and that the minimum wage should apply to both foreign and local workers in order to eliminate discrimination and offer protection to workers from all industrial sectors of the Maldivian economy from within the minimum wage system.

However, it recommended that the minimum wage be made applicable to foreign workers after a one to two-year moratorium period.

The Board also recommended that a separate minimum wage be set for tourism for civil servants and tourism sector workers; an amount within the range of MVR 6,400 - recommended as the national minimum wage - and MVR 8,600 – recommended by the Board after factoring in basic household expenditure.

The Board has recommended that the minimum wage to reviewed every five years.