Deputy Prime Minister and Minister for Finance, Professor Biman Prasad

Deputy Prime Minister and Minister for Finance, Professor Biman Prasad, has called on employers to act responsibly in the wake of the newly raised minimum wage, urging them not to use it as a pretext to unjustly raise prices.

Speaking on the potential impacts of the wage hike, Professor Prasad highlighted the importance of viewing the increase as a contribution towards enhancing productivity rather than an excuse for escalating production costs.

“Raising the minimum wage will boost productivity. Employers should not merely use it as a reason to increase the cost of their products, much like when certain taxes are imposed. Instead, they should see this wage increase as an effort to enhance productivity.”

Professor Prasad adds that raising the minimum wage benefits not just the workers but also the economy.

“When you increase wages for those at the lower level, you create an incentive for them to be more productive. Paying people well is a key factor in raising productivity,” he noted. “It’s not right for employers, especially those who can afford to pay, to pass these increased costs onto consumers. That would be unethical and would defeat the purpose of the wage increase.”

The Finance Minister pointed out that the formal sector has already seen a 14% rise in salaries and wages due to labor shortages exacerbated by COVID-19.

“The minimum wage increase targets those at the lowest pay level, while many in other sectors already earn much higher than the minimum wage. Employers should not use this as an excuse to increase prices, particularly when the economic benefit of raising wages for low-income workers is significant. Nearly all their income is spent, primarily on food, which in turn stimulates economic activity.”

Professor Prasad emphasized the broader economic benefits of the wage hike saying that when the income levels workers increase, it benefits employers and businesses as higher income leads to more spending, which boosts consumption and economic activity.

The Finance Minister also assured businesses that the government is open to addressing any challenges they may face due to the wage increase.

“We are prepared to assess and support employers who might face difficulties. We have already provided significant support to businesses, including removing the 3% turnover tax, not reintroducing the dividend tax, and maintaining company and corporate tax rates. Local manufacturers enjoy protection, with some sectors having tariffs as high as 42%.”

Professor Prasad urged businesses to refrain from passing on costs to consumers.

“I hope and urge businesses not to use this wage increase as an opportunity to raise prices for consumers. We must work together to ensure that this wage increase achieves its intended economic and social benefits.”

The government highlights its commitment to balancing fair wages with sustainable economic growth, ensuring that the benefits of wage increases are felt across the entire economy without undue burden on consumers.