Then and Now: Cost of Zelaya’s “Gift”

January 24th, 2013

In late 2008, then president of Honduras José Manuel (Mel) Zelaya increased the minimum wage for the country’s workers more than 50 percent. Everyone bringing home a salary was overjoyed and sang Zelaya’s praises in the streets throughout the nation.

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Former Honduran President Manuel Zelaya.

Before the increase, the minimum wage was Lps. 3,500 a month for a 44-hour work week. People earning that amount (the majority of workers in Honduras earn the minimum) were hard-pressed to make ends meet. When Zelaya raised it to Lps. 5,500, everything seemed hunky-dory, and everybody looked ahead to a more prosperous future. They thought 2009 would be the year they would start living high on the hog.

The joy did not last very long. Businesses found themselves strapped with an unprecedented increase in payroll without any increase in production. To maintain profit margins, they had to reduce expenses by reducing overhead and cutting their biggest cost: labor. This had a devastating effect on all levels of the national economy, and everybody felt the blow. Within months 40 percent of the workforce was without a job, and those that weren’t laid off had to work as many as 60 hours a week without overtime pay.

Well, that was then, and I have got to say that things have not gotten any better over the last three years. An employer that in 2009 employed six workers now has only three, and those three are doing the same work and putting in about the same number of hours as the six employees did before. Some workers are getting no day off and only a half-hour for lunch. In some establishments the chairs have been removed so employees cannot sit, even to eat.

The minimum wage has since been raised further, to Lps. 6,500. But some workers are working for less than the legal minimum, and with as much as 49 percent of the workforce out of work, they are not complaining, because they are afraid of losing their jobs.

In addition to these mandated wage hikes, businesses operating on the mainland, and some on the islands, have been hit with an additional payroll requirement in these insecure times – the need to hire an armed security guard. For small operations, this is a significant expense.

With higher prices for electricity, potable water and fuel, and the devaluation of the lempira, it’s no wonder that as many as half of small and micro businesses have closed down.

There is one other expense that plagues businesses on the mainland. It is the one that is initiated by a phone call from a stranger threatening to burn the business if a certain amount of money is not paid. This extortion scheme is now the norm in almost the entire country – the dreaded impuesto de guerra (war tax). It is a modified version of the old protection racket associated with the mafia. Previously, a couple of thugs would visit the business and “put their cards on the table.” Now, anyone with a cell phone can perpetrate the scam.

Not all this can be blamed on the 2008 wage increase, but a lot of our troubles stem from the high unemployment that was generated by Zelaya’s ostentatious Christmas gift to the workers, a gift that bore political overtones. It has since been construed by some as a true gesture toward promoting the welfare of the people. But generosity is not always good.

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