Maldives attempts minimum wage of MVR6000. It costs 3.9% of country’s GDP.

It’s rough time in Maldives politics. The parliamentary election is approaching soon and political parties are preparing for the toughest battle. The ruling party – MDP has taken the aim of introducing a minimum wage. Now this is the talk of the town. But, will it be benefiting the country or it would have adverse effects? Let’s take a look.

According to the last census statistics the Maldives has a population of 357,566. While there is no official count of expatriate labour force in the Maldives many believe it would reach around 200,000 or  at least get closer to this figure. Most of these foreign workers fill jobs in tourist sector, construction, restaurants and odd jobs for which enough locals do not apply. A beach cleaner at a resort would earn around $250 per month, in the construction field the pay is much lower – around $200 per month. So, let’s assume the average pay for a expat worker would be $250 – that’s MVR3,855.

The minimum wage in discussion is MVR6,000 – almost the double of the average pay of the expats. Once the minimum wage bill is passed it immediate become an incentive for the expat workers. Each expat worker would receive $139 additionally, for 200,000 workforce the total incentive would be $27.8m per month. Is this affordable for a tiny country with limited resources? Let’s look deeper.

Once the minimum wage is introduced the government may be expecting the youngsters would get jobs as expat workers become more expensive for the businesses to employ. Does Maldives have enough labour to cope with the demand? The retirement age in the Maldives is 65, the working population is estimated to be around 193,000. There are 130 resorts in Maldives that are in operation, let’s assume each would have 350 jobs, that makes it 45,500 only in the resorts. Tourism is the biggest industry in the Maldives.  Assuming an average local island would have the same number of jobs the total for 200 islands comes to 70,000. So, the total jobs in the country would be 115,500 as per the estimates. But, how far are these figure accurate? Let’s calculate another way. In Maldives the women usually stay home and lookafter the family while men go to work. So, let’s assume half the working population is men who should have jobs – it comes to 96,500. There is a discrepancy of 19,000 – you can interpret this figure in many ways, one way is to say the Maldives needs 19,000 expat workers to match with demand in labour.

If the Maldives needs only 19,000 foreign worker do you think Maldives already have 200,000 expats in the first place? If that is the case there should be a terrifying level of unemployment in the country, but I observe otherwise. The unemployment may amount up to 10% to the most. Therefore, it is very likely that the expat workforce in the Maldives is below 100,000.

Now margin of $139 as minimum wage  per person would count to  $13.9m per month. Is this figure still to high to afford? It is about $39 per head per month based on the population of Maldives. That’s about 3.9% of the GDP Per Capita. I don’t think it is feasible for the Maldives in present economic climate.

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