Government’s 12% Minimum Wage Hike Takes Effect Today

February 1, 2008
It seems like the New Year brings new wage expectations for the Nicaraguan working class. On Jan. 15, the National Committee for the Minimum Wage approved a salary readjustment for each sector of the economy.
Even though many people have argued for  one universal minimum wage forNicaragua’s labor force, the committee ultimately decided to maintain the wage chart whereby different sectors receive different salaries based on levels of production and income.
For example, the agricultural sector will receive C$ 1,179.80 ($63) plus meals. The fishing sector was approved for C$1,861.00 ($99). The mining sector got C$2,198.10 ($117); The manufacturing industry got C$1,645.70 ($87); and the sectors related to the fiscal regime, electricity, gas, water, restaurants, hotels, transportation, storage and communications all get C$2,244.90 ($120), construction, financial establishments and insurance companies will have a new minimum wage of C$2,739.00 ($146); communal, social, domestic and personal services get a C$1,715.80 ($91) and last but not least central and municipal government get C$1,526.30 ($81).
This readjustment will definitely gloss over the fact that a great part of the population can’t afford the canasta basica – or the grocery basket of basic food and household items – which is still way more expensive than what the average minimum salary can afford. It is important to realize that according to the Labor Code the minimum wage is just the lowest remuneration that an employee can get for a given service, and it’s not meant to be considered a fixed salary or the answer to everyone’s economic needs.
The private sector doesn’t agree with the wage adjustments. The increase set by the government represents a pay raise of about 12% from previous minimum wages. This means 12% more take-home pay in the pockets of the Nicaraguan workforce, but we also have to consider the consequences that this might bring on the economy.
A raise in workers’ pay also means an increase in the cost of production, so in the end if we are not careful the country might find that the inflation can destroy what a good or innocent idea was to raise the minimum wage.
Private sector leaders have also noted that the increase in minimum wage affects only those who labor in the formal economy, whereas most Nicaraguans work in the informal economy. Critics of the wage increase have argued that increasing the labor costs of employers will impede the formal economy from growing.
The wage increases take effect Feb. 1.
Blanca Paola Buitrago is a junior attorney at Garcia & Bodan law firm in Managua.
 
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