Sri Lanka minimum wages lag behind Asia amid currency depreciation
EconomyNext – Sri Lanka’s minimum wages have grown since the end of a decades long conflict but remains among the lowest in Asia, the International Labour Organization said in a report.
For workers where a state mandated Wages Board set minimum salaries, the real minimum wage grew 36.8 percent between 2009 and 2013.
"However, Sri Lanka’s minimum wages are among the lowest in Asia and the Pacific," the ILO said its Global Wage Report 2014/15 released this month.
"With a real index value of 104.9 in 2013, they are only marginally above their level in December 1978 (when the index was 100). By comparison, real wages for Sri Lanka’s central government employees have grown by half since the late 1970s."
The report also says that Sri Lanka’s minimum wage for unskilled workers is the lowest in Asia at 66 US dollars a month, below its South Asian neighbor Bangladesh 68 US dollars, Pakistan 85-95 US dollars and India 70-131 US dollars.
In East Asia Cambodia 100 US dollars, Viet Nam 90-128 US dollars, , Indonesia 74-219 US dollars, Thailand 237 US dollars, China 156-266 US dollars and Malaysia 244-275 US dollars.
The Wages Board rates however only apply to certain categories of workers and not even to factory workers. Minimum wages especially in countries with high unemployment can discourage job creation by preventing low wage firms from being set up.
However in Sri Lanka wage earners have been systematically impoverished for decades through currency depreciation after a central bank was set up.
Under neo-Mercantilism that became prevalent in some English speaking countries – German speaking countries were a notable exception – inflationism was used to expand the state and devaluationism was used to boost exports.
Unsound money is a concept that became popular with Keynesian economics, though Britain, where Keynes was in government, tried to avoid devaluing the Sterling after printing money for the Second World War.
Devaluation brings export competitiveness by destroying the real wages of workers in both export and non-export sectors. Farmers, landowners and businessmen and leveraged speculators are not affected and can actually benefit.
Unlike sovereign default which only destroys the value of government debt holders, devaluation destroys the value of all debt, public and private including bank deposits of small savers.
Sri Lanka’s rupee fell from 110 to 130 to the US dollars in 2012, delivering a deadly blow to all wage earners, whether high or low. The loss in real salaries was 18 percent in that year alone and is usually reflected in loss of support for incumbent administrations.
The discontent was seen by a marked reduction in support for the ruling administration in a recent provincial election in Sri Lanka.
Former Malaysian Prime Minister Mahathri speaking in Colombo last week said Malaysia focused on strengthening people’s buying power by ensuring a stable currency instead of resorting to devaluation.
"It’s not about per capita income. Per capita income (PCI) does not determine the wealth of the people," Mahathir said.
"We go by other definitions like how industrialized the country is, and whether the people are very well educated and have capacity to do research and development just like a developed country.
"It is the purchasing power of people that’s important, not PCI. If you have a devalued currency, you can be a millionaire but that million will not buy you much. Malaysia’s strategy was to have low PCI but high purchasing power."