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Wage hike would create more unemployment and informality

The Dominican Confederation of Micro, Small and Medium Enterprises (Codopyme) assured that a significant percentage of micro and small businesses are not capable of a salary increase.

Codopyme’s reaction is made in response to the recent proposal of the National Council of Private Enterprise (Conep), which suggests to employers a voluntary adjustment of wages taking into account the levels of inflation experienced in the country during the last year.

The Confederation warns, according to a statement by its president, Luis Miura, that this could have repercussions in an increase in the prices of products to the direct customerloss of employment and increase in informality in all national productive sectors.

“If what the government is looking for is to increase the purchasing power of citizens of productive age, it will be necessary implement a direct targeted subsidy to our employees, the same or similar to the Employee Solidarity Assistance Fund (FASE)”, suggested Miura.

He stressed that this would avoid “an increase in the cost of products, unemployment and informality, which costs the State more than the amount that Phase represents.”

He added that “the uncertainty and instability experienced by MSMEs due to ...-Covid-19 crisis, the conflict in Russia and Ukraine, the shortage of raw materials, the high costs of electricity, the variable costs of fuel and the low economic activity make it impossible for more than 70% of the Micro and Small companies to implement a salary adjustment in this moment, even though it is our desire as a business owner. It is impossible to continue expanding the financial framework of these companies that can barely honor current commitments”.

The leader of the MSMEs pointed out that “SMEs do not belong to the Tourism or Free Zones sectors, which are the ones that exhibit constant growth. Let’s segregate the data so that we can see the different sectors in their proper measure. We must also remember that a salary increase is not just 10% as proposedto this we must add the social costs in the face of the happy social security, “said Luis Miura, president of Codopyme.

He argued that a salary increase would not be the best solution, because “this measure, far from alleviating the increase in the costs of the family basket, what we have historically seen is that these increases are transferred to the good or service that is provided to customers, because wages are part of the cost to consider when setting a price”.

“So what about the above? That the percentage of those who manufacture is increased, plus the percentage of those who transport, plus the percentage of those who store, plus the percentage of those who sell to the final consumer and when adding all the production costs, it is not true that it is raising the purchasing power of the consumer, it is the opposite, because the cost ends up being higher and what was seen as an increase the worker will have to pay for higher products,” Miura said in a note sent to the media.

from the blind eye
The president of Codopyme recalled that the government authorities for decades have turned a blind eye, attributing that the workload is the greatest cause of informality in our country.

“Already informality is around 60%. And we ask ourselves, how long will this situation last? In the same way, SMEs will have to adjust their personnel to their budget and this will generate unemployment. And any economist knows, that increases are inflationary. So, we see that the actions that the Institutions have been taking are different from the will expressed by President Luis Abinader.”

Dialogue
Conep’s proposal motivated the Minister of Labor, Luis Miguel De Camps, to summon the different sectors that intervene in the labor market to the dialogue table to evaluate the possibility of making a salary adjustment to workers, which has been supported by various entities.

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