BACKBENCHERS! IT’S A MATTER OF PRINCIPLE

Posted on by

We knew it was coming for months, but there’s something in the actual tabling of the People’s Constitution Commission Bill, 2022, that has brought the point home: Belizeans are, in fact, about to embark on a journey to revise our Constitution.

The functions of the Commission are fairly straightforward and delineated in section 6 of the Bill: (a) Conduct a comprehensive review of the Belize Constitution, and (b) prepare and submit to the Prime Minister a final report on its findings of the review.

As is to be expected, the Commission is also expected to carry out this work in a predominantly consultative fashion. For its part, the Bill adds, “For the purpose of sub-section (2) [which addresses how the Commission should go about this work], the Commission shall afford the people of Belize, both within and outside the country, to the extent practicable, the opportunity to freely express their opinions and make suggestions on matters they feel should be considered in the Constitution.”

This is good. This type of process should be as broad-based and as consultative as possible. Of course, this also means that the Commissioners’ work will be cut out for them, given that broad-based also signals wide-ranging and disparate views on what should remain and what should change within the Constitution.

BASIC CONSTITUTIONAL PRINCIPLES

Now, whatever the recommended changes will be, there are at least five principles that are likely to be enshrined in a democratic country’s Supreme Law: (i) Individual Rights, (ii) Popular Sovereignty, (iii) Separation of Powers, (iv) Checks and Balances, and (v) Limited Government.

The first is somewhat self-explanatory, as this speaks to the protection of the fundamental rights of every citizen. Part II of Belize’s Constitution covers these rights, which include the right to life, freedom, protection from inhumane treatment, and protection of your freedom of movement.

The second principle, Popular Sovereignty, is what gives us our representative democracy, as it is understood that governmental authority emanates from the people. It is for this reason the Constitution protects the “voice” of every voter.

Separation of Powers is also enshrined in the Constitution by way of the three branches of Government: The Legislature, Executive, and Judiciary. Of course, in a Parliamentary Democracy, there is often criticism surrounding the blurred lines between the Legislative and Executive arms of government.

Limited Government speaks to the fact that powers of government should be curtailed by the Supreme Law. From the vantage point of the rule of law, the prime minister and no other member of government can be deemed to have unlimited powers or “above the law.”

Finally, we arrive at the fifth principle: Check and Balance. I saved this one for last, as this principle is the primary focus of this Res Publica360 entry. Fundamentally, Checks and Balances are systems designed to keep the various branches of government in line. The Legislative branch, for instance, is to oversee the executive.

BACKBENCHERS: BUILT-IN CHECK & BALANCE?

One form of check and balance (CnB) that is seldom discussed in Belize is the so-called “backbenchers” role in Parliament. Remember what I had said above: The Legislative arm is intended to oversee the executive’s policies. This job should not only fall to the Opposition but also to these backbenchers.

Let’s use present-day examples. Currently, the People’s United Party (PUP) makes up the majority, with its members holding 26 out of the 31 seats in the House of Representatives. And, given our system, the members of the Cabinet, led by the Prime Minister (who is the leader of the majority party), are likewise made up of persons from among that 26.

By definition, backbenchers are members of Parliament who are not members of the Cabinet and are supposedly free of the so-called “payroll vote.” But that’s a fairly narrow definition. The Institute for Government, a think tank, uses a much more liberal definition when discussing the “payroll vote:”

“The term ‘payroll vote’ has traditionally been used to describe MPs [members of parliament] who hold positions from which they would have to resign in order to oppose the government. This includes paid and unpaid positions. The term can also include roles which do not formally bind MPs to vote with the government, but may have been given out by the prime minister in order to reward or encourage loyalty. This is the wider payroll vote.“

Did you “hear” that? These paid (or unpaid) positions may “bind” Members of Parliament “to vote with the government.” And there you were, thinking that at least those non-Cabinet ministers were free to vote according to the needs and wishes of their constituencies or, at least, their conscience. Sorry.

Elliott Bulmer (2017)’s work, entitled “Government Formation and Removal Mechanisms,” does an excellent job of summarizing how authorities have worked to dilute the ability of backbenchers to be free enough to challenge their own party’s policies. Bulmer (2017, p. 35) states:

“The doctrine of collective responsibility means that ministers cannot vote against the government in parliament…The ‘payroll vote,’ as it is called (because ministers are on the government’s payroll), can be very influential in securing the loyalty and obedience of backbench parliamentarians. Governments may attempt to appoint oversized cabinets, or a LARGE NUMBER OF JUNIOR MINISTERS, to increase the influence of the payroll vote. As well as weakening parliament, this tactic can lead to a bloated inefficient government.

“To prevent this, some constitutions place limits on the number of ministers that may be appointed and hold office at any time. The Constitution of India (article 75), for example, restricts the number of ministers to 15 per cent of the total number of members of the lower house.”

BELIZE’S CONSTITUTION AND THE PAYROLL VOTE

As Bulmer (2017) highlighted, prime ministers in parliamentary democracies have an incentive to effectively purchase obedience and loyalty from their party folks; thereby, minimizing the possibility that non-Cabinet members of his own clan could too easily challenge the Cabinet’s policies.

[It is worth keeping in mind that Belize’s Constitution—since the last Constitutional reform—has anti-defection provisions which prevent “crossing the floor,” which is yet another source of protection for the prime minister of the day. But anti-defection is a topic for another time].

The Belize Constitution tries to defend against the payroll vote in section 40(2), which states:

“Provided further that the CABINET shall be comprised of, (a) not more than TWO-THIRDS of the elected Members of the party that obtains the majority seats in the House of Representatives following the holding of a general election.”

Keeping with the current majority, that provision limits the PUP to about 17 ministers. And, of course, the administrations—past and present—have done well to satisfy that part of the law.

So, in theory, all things being equal, at least nine members of the PUP majority in the House of Representatives should be free of the payroll-vote noose. And, where necessary, these free men and women could call—if even politely—their own government colleagues back into alignment with sound public policy.

But, of course, as pointed out by Bulmer (2017), this fairly weak proviso in the Supreme Law leaves the door open to Junior Ministers, or what is often called “Ministers of State.”

How so? Section 40(2) of the Constitution considers only Cabinet members, but as section 44 of the Constitution makes plain, a “Minister of State…SHALL NOT be a member of Cabinet.” So, there you have it. Junior Ministers are paid from the public purse, and, therefore, whatever little flicker of criticism that could have emerged from the backbench is muffled by the expanded payroll vote. And here’s the kicker! Under the current language of Section 40(2) of the Constitution, it’s perfectly legal!

AMENDING SECTION 40(2)?

Okay. So this brings us full circle. I started this off by talking about the basic principles governing any democratic Constitution. As we move into the Constitutional reform process with those principles serving as guiding lights, the Belizean people—among many other things—will also have to examine the strength (or lack thereof) of these so-called check-and-balance institutions.

If we borrow from the criminologists’ “broken window” concept, we could say that we ought not to let even the smallest crack in our oversight mechanisms go unattended. The payroll vote is one such small crack.

Consequently, as we move towards this extensive exercise of reviewing the Belize Constitution, this is one area that is worthy of our attention. And it should force upon us this question: Should section 40(2) of the Constitution be amended to include not only Cabinet members but also any paid government office to which a Member of Parliament could be appointed, with the expressed goal of limiting the payroll vote?

We shall see where this issue lands on the reform agenda. For now, it could only be hoped that it will all boil down to a matter of principle for most of us.

A Balanced and Evidence-based Approach to Minimum Wage Adjustments

Posted on by

As the conversation on a minimum-wage adjustment develops, it is good that all stakeholders agree—even the business community, as articulated in a recent interview with the Belize Chamber of Commerce and Industry (BCCI)’s President—that an uprate to the minimum wage is necessary.

Additionally, most stakeholders appear to agree that the best way to approach it is by having a minimum-wage-adjustment formula serving as the guide post. That is also a good thing.

The agreement in those two BROAD areas is a great start. However, there are a few technical things that must be highlighted.

BALANCED AND EVIDENCED-BASED

Let’s start here. The likes of the International Labour Organization (ILO) have advised that a Balanced and Evidence-based Approach (BEA) be employed when making uprates. What’s a BEA? Simply put (and is consistent with the ILO’s Minimum Wage Fixing Convention, 1970) is for policymakers to consider the needs of workers, the conditions of the economy, and the ability of enterprises to actually afford the increase.

Candidly speaking, policy always has to consider, inter alia, the ability of the regulated entities to comply with the change. This is why, no one—with a straight face—has uttered that the minimum wage should increase to something like $20 per hour.

More precisely, the ILO, in its minimum wage policy guide, puts it like this:

“A balanced approach is one that takes into account, on the one hand, the needs of workers and their families and, on the other, economic factors.

“Such an approach combines both social and economic factors in order to find a level that benefits workers and society WITHOUT PROMPTING NEGATIVE EFFECTS. A balanced approach is necessary because a minimum wage is a redistributive tool that has both BENEFITS and COSTS.

“If set too low, minimum wages will have little effect in protecting workers and their families against unduly low pay or poverty. IF SET TOO HIGH, minimum wages will be poorly complied with and/or have ADVERSE EMPLOYMENT EFFECTS.”

CHANNELS OF ADJUSTMENT

Before proceeding, there is value in discussing these “effects” alluded to by the ILO and others, as there is a need to expand the paradigm on this subject.

Frankly, the economic literature on MW changes has long since moved towards recognizing that there are many likely channels of adjustment (CoAs) associated with an MW change.

As pointed out by economists such as John Schmitt (2013) and Hirsh et. al (2015) there are POTENTIALLY multiple CoAs. Schmitt, for his part, identified at least ELEVEN that COULD follow an MW increase. These are (1) Reduction in hours worked, (2) Reduction in non-wage benefits (bonus, health insurance, pension contributions), (3) Reductions in training, (4) Changes in employment composition, (5) Higher prices, (6) Improvements in efficiency, (7) Efficiency wage response from workers, (8 ) Wage compression (slower increases for non-MW workers), (9) Reduction in profits, (10) Increase in (consumer) demand, and (11) Reduced turnover.

Now, please notice the use of the words “potential” and “could.” This area of economics is still evolving and many times the results are inconclusive across disparate research works. Nevertheless, there is value in keeping these adjustment channels in mind, as we discuss adjustments to the minimum wage.

Additionally, it is clear that not all of those eleven CoAs are “bad.” Now! Which of those 11 CoAs will dominate in Belize? Well! That should be the subject of our own idiosyncratic research. Remember. Each economy is like fingerprints: Unique, and thus requires unique, research-based attention.

THE FORMULA

The CoAs and the need for a balanced approach are, among other things, the key motivators for a formula-based approach to be utilized. Countries such as Costa Rica employ a formula that looks at the consumer price index (CPI)’s changes alongside the state of the economy, while still preserving the indispensable role of the social partners.

In other jurisdictions, other variables such as the poverty line, productivity measures, and more have been incorporated into their formula in an effort to balance the needs on both sides of the labour market.

Most importantly, the formula-based approach is more predictable, frequent, and structured.

Hypothetically speaking, if since 2012, a formula had been utilized to guide changes on either an annual (or biennial) basis, and those changes were incremental, it is likely that the conversation TODAY would NOT be about jumping from $3.30 to $5.00, which is a significant 51% increase that already struggling employers would have to find! Considering the inflationary times, that pill would be a lot for micro, small, and medium-sized enterprises (MSMEs) to swallow virtually overnight.

If this process had benefited from more frequent updates (annually or biennially), then change might have been well below a 10% uprate (as opposed to more than 50%). Too sudden of a shift may summon the more negative members of that eleven-point list of CoAs mentioned above.

MEDIUM-TERM STRATEGY

For this reason, the ILO’s advice on medium-term MW strategy is also instructive:

“Many countries have discovered that a GAP exists between the legitimate needs of workers and their families and what the ECONOMY IS CAPABLE OF PAYING IN TERMS OF MINIMUM WAGES. It will NOT be possible to eliminate this gap in a SINGLE MINIMUM WAGE ADJUSTMENT, at least NOT WITHOUT ADVERSE ECONOMIC EFFECTS.”

“This suggests that there should be a medium- to long-term target for this policy – that is, closing this gap in SUCCESSIVE, GRADUAL adjustments.”–ILO (2016, p. 52, at Link 1).

In order for there to be a “gap” there has to be two sides: In this case, workers and employers. Often, the conversation on minimum wage ventures into decreeing that the needs of the workers are at least $5.00, $10.00 or more. And, from a cost of living standpoint, that may very well be true!

However, the other half of that GAP is whether the average micro, small, and medium-sized enterprises (MSME) can currently afford to fill those gaps practically overnight.

In short, then, the balanced and evidence-based approach is not an attempt to relegate or ignore the financial needs of workers in any economy. Instead, it rightfully recognizes that there are literally two sides of the equation, and the private sector’s ability to pay cannot be ignored.

ROLE OF SOCIAL PROTECTION PROGRAMS

Of course, the retort can easily be the old adage: “While the grass grows the horse starves.” Can a responsible set of policymakers truly implement a judicious set of incremental increases to the minimum wage, while believing (or maybe even confirming) that the needs of workers are much higher?

The short answer is “no.” But then, at this point, it becomes a debate on responsibility-sharing. While, yes, the workers should benefit more from their work via higher wages, in the interim this is where governments must step in with social protection and assistance programs that, among other things, help to fill the remaining “gap.” The minimum wage, therefore, cannot be the chief and only poverty-fighting strategy of policymakers; there is an urgent need for other social protection programs to be upgraded or introduced, and these include “graduation programs,” rent assistance initiatives, and more.

Graduation programs are worthy of some special attention. These types of social protection programs tend to include cash transfers to individuals or households (e.g. the individual may receive a stipend). Simultaneously, the beneficiaries are (mandatorily) enrolled in skills training programs, and thereafter are matched with productive employment opportunities. Fundamentally, at the end of a prescribed period of time, the participant should be able to stand on his or her own two feet either as a productive employee or an entrepreneur, and may very well be earning more than the legislated minimum wage.

To conclude, then, we must not lose sight of the real problem that we’re trying to address: Poverty. Do minimum-wage adjustments help (however little) ease poverty? The empirical literature says, “Yes.” But is this the only and permanent solution? From an inclusive growth and development point of view, the answer would be “no.” Initiatives like “Graduation Programs,” if done correctly, and in tandem with other robust social protection institutions, can help individuals climb socially and beyond minimum-wage levels.