Rushed and Risky: Don’t Change the Minimum Wage Now!!!

The government’s recent decision to raise the minimum wage for 2025 and a proposal to introduce stricter working hour regulations represent a significant shift in Aruba’s labor policy. While these measures are presented as pro-worker initiatives, their timing and potential consequences raise serious concerns. As I highlighted in my December 2023 column, consecutive wage increases in 2023 and 2024 have already placed immense pressure on businesses. Now, the proposed changes to working hours due to a fixed minimum wage per hour instead of per month risk compounding these challenges, threatening to harm the workers these policies claim to protect. This proposal will backfire on employees.

What’s more troubling is the proposal’s timing—less than two weeks before elections. Passing this law now risks saddling a new administration with policies it did not design and their long-term consequences. Even if the current administration were to rerun, they would not be able to manage this. Decisions of this magnitude require careful consideration, not political opportunism.

Context: A Pattern of Successive Wage Increases

The proposed changes continue a trend of consistent labor cost increases:

   •   2023: The minimum wage rose by 4.3%, reaching Afl. 1,893.41 per month.

   •   2024: A further 4.9% increase will raise the minimum wage to Afl. 1,986.20 per month starting January 1.

   •   2025 (Proposed): If this law passes, a similar increase could push the minimum wage above Afl. 2,085 per month next year.

These successive increases ripple beyond base salaries. The overtime pay threshold, calculated as 2.5 times the minimum wage, rose to Afl. 4,965.50 in 2024 and would surpass Afl. 5,200 in 2025. For industries like tourism, retail, and hospitality – already grappling with high operational costs—this escalation makes labor increasingly unaffordable. Our small and medium sized business (“SMEs”) can’t afford this raise in overtime and this is the big danger of passing this law.

What’s Changing: New Restrictions on Working Hours

Introducing stricter limits on working hours adds another layer of complexity for businesses. While these measures aim to enhance worker protection, their practical implications are troubling:

1. Rigid Hourly Caps

The proposed regulations set tighter limits on maximum weekly hours and overtime. For sectors that rely on flexibility, such as tourism and healthcare, these restrictions will reduce their ability to adapt to demand fluctuations, especially during peak periods. Our business community was asking for flexibility, not more rigidity!

2. Increased Staffing Requirements

To comply with reduced hours, employers may need to hire additional staff. However, in a tight & non-flexible labor market, this is often unrealistic. It will raise costs for the employer either in more overtime pay or for hiring more staff.

3. Reduced Earnings for Workers

Employees relying on overtime to boost their income could reduce their hours under these new restrictions. Instead of protecting workers, this proposal risks leaving them financially worse off. Sometimes more is less!!

4. Rising Employer Costs

Coupled with rising minimum wages and higher overtime thresholds, these hour caps will significantly increase payroll expenses, pushing many businesses toward financial instability. On top of the inflation that businesses are already facing,

Why Passing This Law Now Is Problematic

The timing of this proposal raises red flags, particularly given its proximity to the elections:

1. Election Proximity

Major policy changes like these should not be rushed through mere days before an election. Such decisions demand transparency, debate, careful consideration and a well-balanced plan – not just launching an election stunt –  ideally by a government with a fresh mandate from voters for the next 4 years.

2. A Burden for the New Administration

If enacted, this law will tie the hands of the next administration, which will be left to deal with its economic fallout. The potential for job losses, business closures, and inflationary pressures will make it harder for any new government to pursue alternative solutions or focus on recovery efforts. This is on top of the warning expressed by Comeciantenan Uni Aruba about the extra 2% to be charged by the Aruba Banker’s Association – a move that raises questions about fair trade by our “banksters”.

3. Avoidable Consequences

Freezing the proposal now would allow the next administration to evaluate whether such changes are necessary. If they are, they should be implemented as part of a broader strategy that considers the interests of workers, employers, and the economy.

A Call to Freeze the Proposal

Managing these changes is a complex challenge, and passing this law as a standalone measure is irresponsible. It lacks the comprehensive package of instruments necessary to address its effects. If this law is even justified -an issue that remains highly debatable – it must be implemented alongside tax relief, business incentives, and safeguards to mitigate its impact.

The problem is not the minimum wage increase itself but its cumulative effects. The rise in the overtime pay threshold, combined with stricter hour caps, will create a disaster for businesses and hurt workers. Employers will cut hours, limit hiring, or close entirely, leaving workers with fewer opportunities and rising living costs.

This law fails to balance good intentions with economic realities. It is not a sustainable solution—it is political opportunism masquerading as policy. The government must freeze this proposal, reevaluate its necessity, and engage in genuine dialogue with stakeholders before moving forward. Aruba deserves smarter policymaking, not reckless decisions.

Conclusion: Time for Caution, Not Haste

The proposed changes to working hours and successive wage increases represent a significant economic shift with far-reaching implications. While the government’s intent to improve worker protections is clear, its execution risks destabilizing the economy and harming the people it seeks to help.

Passing this law mere days before an election is a mistake. It burdens a new administration with avoidable consequences, disrupts business operations, and reduces opportunities for workers. A better approach requires freezing this proposal, assessing its long-term effects, and ensuring any future changes are part of a balanced, sustainable strategy.

For more insights on labor policies and economic trends, visit www.lincolngomez.com. See you next week!

Related Articles

For more on this topic, explore the following:

   •   Understanding The Impact Of Minimum Wage Increases: 2023 And 2024 (December 17, 2023)