The PNG Minimum Wage Board's decision to increase the minimum wage after 16 years will bring much relief to unskilled workers.

 The increase was announced by the chairman of the Board Pex Avosa early last month and comes at a time when the global economy is experiencing a recession. PNG and other Pacific Islands nations are already feeling the effects of the recession.

 The new hourly wage rate has been increased to K2.29 per hour but will be applied in transitional increases over 40 weeks from the date of effect.

This means that on the date the new rate comes into effect, wages will immediately go up to K1.14 per hour. After 26 weeks wages should further increase to K1.72 and after 40 weeks K2.29. Employers are not allowed to pay below a threshold of K1.14 or K50.16 per week.

Low wage earners will now earn K201.52 a fortnight after 40 weeks which is a major increase from the current K74.40 per fortnight they have been earning since an early 2000 adjustment. The new wage level was determined using the Bank of PNG inflation rate since 1993.

The board has taken into account employers in the rural agriculture industries who were not able to pay the K2.29 per hour rate or who were allowed under the International Labour Organisation Convention to place a fair and reasonable value on the allowances and benefits provided to their employees and their families. Such employers have to apply for an exemption.

The board had placed for them and all other employers a maximum value claimable for these allowances and benefits at K1.15 an hour, leaving a net minimum cash wage of K1.14 per hour.

The minimum wage does not apply to small holder growers and Land Settlement Scheme farmers.

The increase will bring some relief to low wage earners because prices of basic goods in PNG today are five to seven times more expensive since the last minimum wage increase. For instance, the price of Trukai rice which has become a staple food in PNG was as low as 0.68 toea a kilogramme in 1993.

Today, a kilogramme of rice costs more than K5. The popular Ox & Palm that is a favourite in a number of Pacific islands used to be K1.50 but is selling today for K7. Such increases have made it almost impossible for those on a minimum wage to afford basic food items as well as medical and educational expenses in the last 16 years.

A government decision in the mid-90s to devalue the PNG Kina had also impacted negatively on the low wage earners.

The board has also defined a minimum wage earner as "an unskilled worker aged 16 and over in formal employment in any industry sector located in an urban or rural environment".

Meanwhile, employers have had a mixed reaction to the new minimum wage.

The Papua New Guinea Chamber of Commerce and Industry said while it supports the increase, it would need more time to adjust.

President John Leahy said his organisation supported the rise in wages but regarded the current proposal as being too sudden and not allowing businesses sufficient time to adjust.

"Such sudden changes to the ground rules under which businesses operate will inevitably lead to job losses and the increase in practices such as piece work," he said.

WR Carpenter PNG, a major employer in PNG, is also assessing the impact of the wage rise. Deputy Managing Director Tamzin Wardley said: "The proposed rates will affect agricultural businesses and come at a time when companies and governments across the world are suffering mass job cuts and pay freezes".

"Our concerns include the inflationary aspect of the proposed increases on the salaries and wage expectations of non minimum wage earners and the resulting price increases on food products and manufactured goods in PNG once wage increases are passed."

However, businesshouses in East New Britain (ENB) province have applauded the increase saying it was long overdue. Vice-president of the ENB Chamber of Commerce and Industry Tim Wilson said the decision was quite good and reasonable as workers across PNG had waited patiently for the National Government to recognise their financial difficulties brought about by the ever increasing cost of living and low wages.

He said workers needed to be paid more so that they can afford the most basic goods and services and fortunately, many employers had realised this and responded by paying above the award rates.

"If anything, it didn't go quite far enough to actually satisfy the peoples' needs, but it is still enough to support families with spouses and children," the owner of the Travelodge Hotel in Rabaul said.

There was an attempt by the Minimum Wages board in 2000 to award an increase from K45 a fortnight to K120 a fortnight. The award, which was gazetted, met stiff opposition from the powerful PNG Employers Federation and the Rural Industries Council who claimed they could not afford the increase. They said 15,000 to 20,000 jobs would be lost as a result. The award was deferred and a new minimum wage of K74 a fortnight came into effect up until this year.