Proposed minimum wage increase draws mixed reactions from economists

AMMAN — Raising the minimum wage would have “muted effects” on the Kingdom’s economy amid the elevated inflation rates, according to economists. 

Economist Mazen Marji told The Jordan Times on Saturday that “even after raising the minimum wage”, meeting the public’s bare minimum needs will be impossible, as their earnings are “insufficient” compared with  the surging prices of food and energy bills. 

“Amidst today’s inflationary spikes, minimum wage increases would only bring fringe benefits to employed people,” said Marji, who noted that inflation erodes income, leading to decreased purchasing power.

He added that currently there is no real economic growth, and in the case that minimum wage is increased, employers’ staffing capacity will be negatively impacted, leading to further economic complications.

Mazen concluded that Jordan is also impacted by import inflation, due to its status as a country that relies heavily on imported goods, which are influenced by foreign price increases. 

The minimum wage in Jordan is currently set at JD260 per month for Jordanian workers. The Tripartite Labour Committee has postponed the planned minimum wage increase for 2022, and as of January 2023, the increase has yet to be implemented.

According to the Department of Statistics (DoS), unemployment rate in the Kingdom stood at 23.1 per cent during the third quarter of 2022, while inflation rose by 5.23 per cent in October of the same year.

Economist Hosam Ayesh said that “increasing the minimum wage might mitigate some effects of inflation, but the main problem will not be solved”.

To assist in improving the overall situation, the government should reduce costs and taxes, he added. 

In a statement sent to The Jordan Times, the General Federation of Jordanian Trade Unions called on the Labour Ministry to implement postponed decision regarding minimum wage increases, noting that “it is necessary to have a robust mechanism for increasing the minimum wage throughout the upcoming years”.