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AfricaMoney | August 20, 2017

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National Economic and Social Council publishes Report on Income Inequality in Mauritius

National Economic and Social Council publishes Report on Income Inequality in Mauritius

According to the report the National Remuneration Board should be reinforced and have greater independence to effectively review sectors under its mandate and could eventually be entrusted with the fixing and review of the National Minimum Wage, should that be introduced in the country. (Image: nesc)

The National Economic and Social Council (NESC) has published a report entitled ‘Income Inequality in Mauritius – The role of Wage Policy’, where the main objective of the study is to understand wage-setting mechanisms in Mauritius.

The subject of Income Inequality was raised as a subject for study by NESC at it last Annual Summit.

The first part of the report looks at income inequality in the country which is measured through the Gini coefficient has been rising steadily for the past decade, reaching a figure of 0.41 in 2012.

Furthermore, looking at income distribution in the country, the report has established that the highest 20% income earners are earning nearly half of the total income in the country and that the ratio of the highest 20% to the lowest 20% of income share is increasing.

With employment income, explaining most of the inequalities in the country, it was important to examine the wage determination system in the country and its influence on income inequality.

The report has probed to some depth in the wage determination mechanisms in the country notably the Pay Research Bureau (PRB), the National Remuneration Board (NRB) and the National Tripartite Committee (NTC).

One of the main observation is the pivotal role of the NTC which sets the annual compensation payable for loss of purchasing power.

Since some time, the NTC has introduced a tapering element whereas the low income earners are almost wholly compensated, with decreasing compensation for high income earners.

It has also been observed that PRB’s outcomes invariably reflect the full compensation for the erosion of purchasing power since the previous pay review, thereby correcting the tapering/ceiling approach of the NTC.

The NRB, for its part, has been very far off in delivering on its mandate with 22 sectors out of the 30 sectors not having been reviewed and subject to a remuneration order for the last five years.

In such absence of a review by the NRB, the NTC induced Additional Remuneration Orders have been the main compensating agent. The report has also shown that workers in sectors which have been reviewed by NRB come out better than those in sectors not reviewed.

Given the fragmented nature and outcomes of the wage determination system, NESC recommends the reinforcement of the functions of the NTC which could ultimately be the nucleus of a future National Pay Commission.

With the recommendation that the NTC grants an annual uniform compensation for cost of living to all workers, both in public and private sectors, PRB could then concentrate on reviewing conditions of service and become an effective facilitator of collective bargaining between the Government and the Unions.

According to the report the NRB should be reinforced and have greater independence to effectively review sectors under its mandate and could eventually be entrusted with the fixing and review of the National Minimum Wage, should that be introduced in the country.

Finally, in the long run, consideration may be given to bringing together the skills and strength of all the three institutions (PRB, NRB and NTC) for a genuine national pay commission subject to extensive consultations among social partners with a view of achieving consensus on this issue.

About the National Economic and Social Council:

The National Economic and Social Council (NESC) acts as an independent national forum to address socio-economic issues, enhances national policy formulation and dynamises the democratic process through consultation, dialogue and consensus-building.

As a consultative organisation, it offers its advices and recommendations to Government on many policy issues.

The Council is also engaged in consensus-building where the voices of all involved stakeholders are heard. It allows stakeholders, including workers’ organisations, business organisations and civil society, to organise and give democratic expression to their views after debate and reflection.

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