Not everybody in tax havens profits equally from offering tax avoidance services to multinationals, as noted by Richard Murphy yesterday commenting on Luxembourg Leaks. In Luxembourg, “the gain goes largely to the financial professionals within the duchy who effectively dominate its government.”
The ongoing minimum wage debate in the Cayman Islands illustrates the inequality levels in another top five secrecy jurisdiction. An article in Compass Cayman reports that after a legislative proposal to establish a CI$ 5 (US$ 5.9) minimum wage did not pass early this year, the government set up a Minimum Wage Advisory Committee which is now expected to deliver a report next February.
Although the Cayman statistics office does not collect data on hourly wages, it has produced a “rough estimate” showing that 8 percent of the workforce earn the equivalent in Cayman dollars of US$ 5.30 an hour or less. The estimate also shows that 30 percent of the workforce earn less than US$ 10.60 an hour, which works out at 1,700 US$ a month or around 21k US$ a year.
In comparison, a search on financial sector job websites finds entry-level and mid-level positions in Cayman with minimum salaries of 60-70k a year. A Trust Officer position is advertised starting at US$ 70k, while a Relationship Manager for Commercial Banking starts at 100k .
And life in Cayman is not cheap. According to this source, most newcomers “will usually choose to share a house with other expatriates”; renting a one bedroom apartment costs at least 700 US$ a month, in an area 30 mins away from the capital. A 3 bedroom apartment closer to town can cost up to 6,500 US$ a month. This source says a Big Mac meal in Cayman costs 9.50 US$, internet is upwards of 100 US$ a month, a monthly ticket for public transport 97 US$ and a “basic dinner for two in a neighbourhood pub” 50 US$.
A related opinion piece in Compass Cayman explains that the challenges with implementing a minimum wage in Cayman are directly linked to the lack of an income tax in the country:
“Unlike the U.S. with its Internal Revenue Service, Cayman lacks the mechanism to collect accurate information on income — and, it follows, to enforce any minimum wage law that legislators enact.”
It also reveals a sadly predictable ideological slant on the minimum wage issue (as well as a limited understanding of the supply curve and the labour market):
“…our officials would be well-advised to halt their march toward a minimum wage and focus their attention (and rhetoric) on personal responsibility and professional ambition.”
“We do not believe for a moment that anyone refusing to work for, say, $3.50 an hour will be attracted into the labor force for, say, $5 an hour. If a person’s income is zero and a job becomes available at any hourly wage, he or she should take that job. What is the alternative? To wait for a handout from family members or social services?”