Strategy forum explores potential outcomes of minimum wage increase

AMMAN — While the government has decided to increase the minimum wage from JD220 to JD260 (effective in January 2021), the Jordan Strategy Forum (JSF) also predicts that the mean wage in the Kingdom will rise from JD545, as measured in 2018, to JD575 in 2021.

According to a recent JSF report, the overall mean monthly wage of Jordanians who are actively employed and mandatorily insured has increased over recent years from JD514 (2015) to JD524 (2016), to JD534 (2017) and to JD545 (2018). 

Department of Statistics (DoS) data reveals that 85.2 per cent of the workforce in Jordan consists of employees, according to the report.

The total number of paid Jordanian employees has increased from 531,649 in 2000 to 887,951 in 2017, according to the DoS figures. While there is no data for 2019/2020, this number “has definitely increased, and remains an important part of the Jordanian economy”, the report said. 

Given the coming rise of the minimum wage, the report recommended that relevant stakeholders examine the effects of this increase on a number of issues, including wages, employment levels, the informal economy, the gender pay gap and poverty. 

In addition, it noted that research efforts should also monitor the impact of the new minimum wage on prices, household consumption, investment and competitiveness of national exports. 

For example, the report warned that informal employment might increase in 2021 as employers try to avoid paying the newly suggested minimum wage. 

Within the context of the change in minimum wage, the report noted that unless “labour productivity” — which measures the hourly output of a country's economy — is improving, any increases in the minimum wage might result in higher inflation rates.

Data provided by the Conference Board, a research group organisation, suggests that the average annual change of labour productivity per person employed in Jordan has been negative. 

This is a “real issue” that must be tackled to enhance competitiveness, the report said, noting that the negative productivity growth “implies that an increase in the minimum wage might resolve some social issues, especially for those Jordanians who earn relatively low wages”, the report stated.

Based on the Jordan Social Security Corporation’s 2018 Annual Report, 14 per cent of insured and actively employed Jordanians earn less that JD260 a month. 

“Efforts must be made to increase labour productivity and try to link any future increases in the minimum wage [and other wages] with measures that enhance productivity to avoid any adverse consequences of wage increases on, for example, inflationary pressure,” the report read. 

Future increases in minimum wage “must consider” economic performance indicators and economic competitiveness, according to the report.