Originally published in Inforpress Centroamericana –– July 18, 2008
- Analyst accuses organized labor of ignoring informal sector; union president denies the charge
- Debate over whether improvements to productivity or labor conditions are more pressing
As oil and food price climb higher by the week, Honduras unions have called for a mid-year raise to the minimum wage. While the government has already convened several meetings between business and unions representatives, there has been no result to date, and it is unclear whether the private sector will oblige worker demands. At any rate, the minimum wage’s failure to cover the basic cost of living is not specific to the current crisis. It is a decades-old problem, dating to the minimum wage’s inception in the early 1970’s. The issue, then, is a structural one and will require structural reforms. Many analysts say the answer lies with increasing productivity. But with productivity rising throughout the Western Hemisphere, and salary increases trailing far behind, it will be difficult to convince Hondurans that that the road to riches is paved with harder work, technology, and more education.
Two Months and Counting. During the 1970’s there were two hikes to the minimum wage. During the 1980’s there were two more. Since 1990 there has been an average of one a year. But with the price of basic goods multiplying in recent months, it is possible that there will be two hikes in 2008 alone.
This would be an extraordinary measure. The law only requires one revision to the minimum wage every year, or two if inflation exceeds 12% by June. At mid-year 2008, although inflation had only hit 6.8%, unions pressured the government to negotiate an adjustment anyway.
From December 2006 to May 2008, the price of the canasta basíca – a government measure of all the goods and services necessary to support a family of five – had swelled by 10.8%, reaching US$ 293.31. Meanwhile, the average minimum wage is US$181.45 (minimum wages vary by industry and region), which only covers 61% of the cost of the canasta basíca.
Beginning in May, Labor Minister Mayra Mejía said that she would encourage the business sector to consider a wage review. And yet two months later there has been no outcome.
Government officials have insisted that a raise will be imminent. Orlando Lara, General Director of Salaries for the Labor Ministry, told La Tribuna on July 11 that “basically everyone has agreed there’s a need to raise the minimum wage.”
That appears not to be the case, however. The regional director for the Honduran Manufacturer’s Association, Guillermo Matamoros, told CAR that the business sector had only committed “to sit down and negotiate.”
Daniel Durón, the president of one of Honduras’ biggest unions, the CGT, said “that much of the business sector has recognized the need to raise wages, but certain recalcitrant industrial interests have been blocking negotiations.”
In the yearly reviews of the minimum wages required by law, the government simply declares a new wage if businesses and workers can not come to an agreement. Since this session is not legally necessary, though, the government will not have that power. Daniel Durón told La Tribuna after an inconclusive meeting between unions and businesses on July 17 that, if there is no agreement, the CGT will pressure congress to increase wages by decree. With this in mind, he said, unions and social groups are planning a “civil stoppage” on August 5, like the one in April, when hundreds of thousands of Hondurans took to the streets in protest.
Crisis Behind the Crisis. As much as prices have soared in past months, the sizable disparity between the minimum wage and the price of the canasta basíca is not new. When negotiations broke down between employers and unions last December, the government fixed the current average minimum wage of US$181.45. Even then, that only satisfied 67.4% of the canasta basíca, which was worth US$ 269.12.
Former Minister of Labor German Leitzlear, who served under President Ricardo Maduro (2002-2006), told CAR that year to year workers win or lose purchasing power, without ever closing the gap between earnings and expenditure.
“Since the minimum wage came into being in 1972, it has always been insufficient,” Leitzelar said. “That has generally meant that the head of household has had to earn two minimum wages in order to raise a family. For that reason, I’ve favored slowly closing this long-standing gap, so that one person earning one wage can earn enough to satisfy the basic needs of a family.”
This in turn, he said, must be based on improvements in productivity, so that wage increases do not cause inflation and unemployment.
The analyst Rafael del Cid similarly believed that productivity is essential to increasing wages. But unlike Leitzelar – who says an immediate raise is “absolutely necessary” – del Cid believes that not only the current negotiations, but also the yearly wage increases, are harmful. As he points out, Honduras’s population of workers in the informal sector is enormous – about half of all workers, according to the International Labor Organization (ILO) – and they, of course, do not receive a minimum wage.
“The increase in salaries raises demand for the canasta basica” he said, “making it even more unaffordable for the poorest part of the population – who are workers in the informal sector.”
Much of the problem, he said, is that “unions are dominated by workers in the public sector, especially teachers and doctors. Many government workers earn vastly more than a minimum wage, but their salaries are guaranteed to rise proportionally with minimum wage increases.”
This is why unions push for new negotiations as frequently as possible, del Cid argued, and why Honduras’ underdevelopment can not only be exclusively blamed on business interests.
“There’s no doubt that behind the country’s poverty is a powerful sector that dominates the state’s resources and that is insensitive to suffering. In general it is very short-sighted,” he said.
“But today you can’t just talk about a stupid ruling class. You also have to talk about the stupid unions, which have also come to live off the state’s resources. They have forgotten about the other parts of the population.”
Whether or not unions ignore the informal sector in practice, CGT president Daniel Durón turned to the subject of the informal sector unprompted.
“It’s good to talk about the minimum wage, but with most workers in the informal sector, it’s only part of the solution,” he said. “There’s a whole other problem, especially in agriculture (where there is usually no guaranteed wage). Our responsibility is to make a universal proposal.”
Among the CGT’s initiatives, he claimed, is to incorporate informal workers into the social security system. According to Durón, his union is pushing for a clause to be included in Central America’s Association Agreement with the European Union, whereby isthmus countries are required to pursue this program, while the EU promises to provide the initial funding.
Productivity and Work Conditions. Beyond the current wage negotiations, Rafael del Cid, Guillermo Matamoros, and German Leitzelar stressed that, fundamentally, Honduras must improve its productivity if it is to improve its earnings.
Towards this end, Del Cid recommended “a pact in which workers agree to make the kind of extraordinary effort that has mostly been seen in other countries during times of war. And in turn the business sector promises to increase salaries beyond what they have in the past.”
Still, Del Cid – and everyone else consulted by CAR – agreed that advancements in productivity will ultimately hinge on advancements in education. According to the ILO, only about 12% of the population has completed high school.
In and of itself, though, it is unclear whether improving education and productivity would raise salaries. As pointed out by the ILO, Latin America, like the US, has not seen salaries grow commensurately with productivity. A CEPAL report published in January found that to be specifically true within Central America, blaming the phenomenon on “high levels of unemployment, underemployment, and informal employment (which) drastically undermine workers’ leverage during salary negotiations.”
And an ILO report released last year found that throughout the isthmus, except in Costa Rica, unemployment is actually higher for educated workers than for uneducated ones. While it might be true that qualified workers would attract higher paying industries over time, the report said that, for the moment, even the small number of qualified workers are in overabundance, probably because economies are not “diversified or sophisticated” enough to employ them.
In this context, Daniel Durón said he was “reluctant to talk about productivity until the business sector acknowledges its social responsibilities. How can you demand that workers be productive, if the labor conditions – that is salaries, workplace environment, training, and investment – are insufficient.”
Rafael del Cid, for his part, acknowledged that “the market is dominated by monopolies, making it difficult for improvements in productivity to be shared.”
But he was skeptical of the left’s capacity or willingness to change this arrangement, because “it has totally lost its revolutionary ambitions. It’s not even interested in taking power anymore – only interested in talking about things like the minimum wage.”
Daniel Durón, however, was optimistic that the current crisis might provide an opening. “The Washington Consensus has failed,” he said. “It´s time for a system that’s one part capitalist and one part socialist.”
Matthew Brooke 