Haiti's Wage Floor

Part of a dialog on Bob Corbett's Haiti list, 6 February 1999

Lance Durban wrote a while back, responding to Merrill Smith and me:

> Many people bemoan the low salaries prevalent in Haiti and think
> that they should simply be raised by decree. Could be done, and the
> few existing exporters of manufactured products might not pull
> out... moving does cost money too. But, this act would do nothing
> to encourage new investors, who would still be faced with the host
> of other high costs cited above. All else equal, all raising the
> minimum wage does is make Haiti an even less attractive place for a
> foreign (or Haitian) investor to invest his money. Far better would
> be a Haitian government goal of tackling those high cost factors
> cited above, one by one, as a means of encouraging new investment in
> factories and subsequent creation of employment.

Just for the record, let me say that I agree with this paragraph, and find realistic Lance's list of factors resulting in high costs of doing business in Haiti, most of which have to do with deplorable infrastructure. The only thing I'd add is that it would be unwise for any Haitian government to put all its eggs of economic development in the basket of manufacturing. The better course, I think, would be a plan of development in 3 stages:

1. Restore Haiti's agriculture to the point where most of the food supply is produced in-country.

2. Develop manufacturing for domestic consumption, using locally produced raw materials as far as possible.

3. Only after the first two stages are well along, turn to the more lucrative manufacture of goods for export.

Although this process would be slow, it would be better than the current efforts that are getting nowhere. It would be a form of SUSTAINABLE development.

Further response to Lance Durban about Haiti's wage floor. He wrote:

> Tom Driver maintains that U.S. geo-economic interests in Haiti
> dictate a policy of maintaining the status quo. No question the
> U.S. wants to see stability in Haiti, but so do most Haitians
> from all social strata.
>
> This does NOT mean that U.S. policy is to keep Haitians poor and
> wages low. This geo-economic analysis whereby the U.S. has a
> vital interest in keeping Haitian wages low to somehow make
> U.S. firms more competitive worldwide just doesn't add up.
>
> 1. While Haitian wage levels may be the lowest in this
> hemisphere, there are other regions where wages are lower still,
> and U.S. firms can and do invest in many of them. Haiti is certainly
> not needed for its low wages any more than it is needed for
> its mangos.
>
> 2. If a major concern of U.S. policy is to discourage boat people,
> it would seem that stimulating overall employment in Haiti, thereby
> INCREASING the purchasing power of the poor is the way to go.
>
> Why are wages in Haiti so low? The economist's answer is much
> more supply than demand. Yet if the low-wage profit potential of a
> Haitian investment is as great as Tom Driver would have us believe,
> why does so little manufacturing take place in Haiti? American
> private investment is almost completely absent, and there are very
> few wealthy Haitians investing in exports (where presumably Haiti's
> low wages would give them a competitive edge).

My point was not that the low wages in Haiti make manufacturing there a bonanza. My point was that those low wages exert a downward pressure on wages throughout the Western Hemisphere. It's the effect on wages ELSEWHERE that is so highly beneficial to business, and it is this that requires the vigilance of the U.S. Government on behalf of the business interests.

In its efforts to keep wages low, the U.S. does not rely entirely on market forces. Throughout the Caribbean basin it assists local political and military forces that are engaged in a war against the poor -- driving peasants off the land, destroying or disempowering popular movements, beefing up armies to wage war against their own people (as in Haiti 1991-94), and training Latin American officers in terrorist tactics at the Military School of the Americas in Georgia (among other places). This sort of thing has, I regret to say, become business as usual.

Tom Driver

Tom F. Driver
New York City
<tfd3@columbia.edu>