Setting the Floor too High? - Guatemalan Labor Laws
This morning Heidi and I were talking to the lawyer who’s helping us out with the legal formation of the Just Apparel Partner Artisans’ group. Specifically, we were discussing the contracts that we had asked him to draw up between the artisans’ association and Dolores, our general manager, and Natalia, our quality control specialist. Natalia works for JA part time at an hourly wage of 10 quetzales, which is more than double what she made when she worked at a textile factory in Guatemala City and about one and a half times the Guatemalan minimum wage computed hourly. We expressed that we were hoping to formalize that relationship and give Natalia the benefit of being a contractually employed worker. And that’s when we stumbled inadvertently into the labyrinthine mess that is Guatemalan labor law.
You see, if I understand our conversation correctly, there’s no such thing as a part-time job in Guatemala. The minimum wage is not computed hourly, but rather monthly, and there’s no provision for someone who works less than eight hours a day six days a week to earn a prorated salary that varies by hours worked. That monthly minimum salary is Q.1310 ($175). But, naturally, there’s also a government-mandated “bonificacion incentivo” (incentive bonus) that each worker has to receive. The last time I checked, a mandatory bonus isn’t an incentive. It’s a raise. So that brings the monthly salary to Q.1560 ($210). In addition to the mandatory monthly bonus, the law also requires a mandatory bi-annual bonus of one month’s salary. So, for every twelve months of work, the law requires fourteen months of salary. That means that over the course of a year, a worker is legally entitled to Q.21840 ($2950).
Now, from the perspective of the US, that sounds pitifully small, right? A family of six (average for Guatemala) with two workers would still only earn $3.70 per person per day, which isn’t exactly the makings of a life of material comfort. As someone working to promote grassroots development efforts in Guatemala, I would love nothing more than to see everyone here earning more than the minimum wage. There’s just one catch. With all the bonuses and the like, the Guatemalan minimum wage comes out to be 118% of the estimated 2007 GDP per capita. As a point of comparison, if the US were to mandate a minimum wage that large, the minimum annual salary would be $54,100. Using the 55-hour work week that’s common in Guatemala, that would compute to a minimum hourly wage of around $18.90, or 2.75 times the federal minimum wage once it rises this summer.
Given the level of income inequality in Guatemala (the wealthiest 10% of Guatemalans earn over 43% of the country’s income), it’s currently impossible for everyone who works to earn minimum wage. There’s simply no way. It appears that the Guatemalan state may have let its good intentions get ahead of what is realistically possible. I have to ask if perhaps it wouldn’t be better for the government here to lower the minimum wage a little, allow for an hourly minimum wage for part-time employment, and bring a larger percentage of the population into the formal labor force, thereby at least granting those people basic labor rights, even if they weren’t earning an exceptional salary.
RSS
Brian
Part-time contractual labor is often excluded from the labor laws in many countries, and I would be cautious advocating for any changes to the laws that will create incentive to move the labor market towards contractual labor rather than full time employment. Contractual labor is often used by manufacturers who are trying to skirt the laws covering formal employment. Contractual labor does not necessarily increase productivity. It creates insecurity among the workers, and it is not necessarily bringing people into the formal workforce, but keeps them on the edge of the formal economy.
Perhaps Guatemalan labor laws are relatively strong because of the need to circumscribe the growing use of contractual, non-full time employment which is a commonly used as a cost cutting measure for industries who would rather use their bargaining power to deal with individual, often unempowered workers, on short term part-time contracts al la Wal-mart in the U.S., especially in the textile export sector. I would be interested to hear Natalia’s perspective coming from the garment sector in Guatemala City
Perhaps another way to help Natalia would be to help her start her own business specializing in quality control, and you can contract with her. This may require her to find more clients, but at least she will be working for herself and you will have a reliable company with whom to do business.
While your intentions for self-empowerment and creating employment may be good, laws are often written to proscribe the actions of the lowest common denominator. In Guatemalan labor history, there are plenty of examples in the banana industry and other export industries of egregious violations against workers, often including workers inability to get a leg up because they are restricted to the part-time contractual economy.
Ryan@IHF
Brian,
Thanks so much for your response. Your points definitely resonate with me, and it’s nice to get the perspective of someone with a broader perspective on labor.
I think we’ve hit on something of a tension in the situation of workers in Guatemala, at least as my limited experience here in Santiago has let me see the situation. The labor laws do great things for people who manage to wind up in formal, full-time positions, but everyone else is stuck in unregulated, “contractual” (although rarely involving a formal contract) labor. So, I suppose the question is how to get more people the legal protection they deserve.
The purpose of my post was to suggest that it might be a good idea for labor laws to be more supportive of consistent part-time work (not necessarily seasonal contractual work like in the banana industry) by providing for an hourly minimum wage and prorated benefits. Now, it’s entirely possible that the lawyer with whom we spoke has an incomplete understanding of the laws, and there are already such provisions. If so, then I suppose my point is moot.
I was also hoping to make the point that the dramatic level of inequality in Guatemala puts up some significant hurdles for anyone hoping to improve labor conditions through minimum wage legislation. The country’s economy is simply too small right now for a small percentage of the population to hold so much wealth, the minimum wage to be as high as it is, and the bulk of the rural work force to find employment under the protection of the law.
I hope to hear back from you, because I’d like to learn a good bit more about the broader labor situation in Guatemala (i.e. the stuff I can’t observe from one small community).
Thanks,
Ryan