Sanjay Matadeen, Economist: "The GM Could Grant Rs 600 to Rs 800 to Employees Earning Less Than Rs 20,000"

Sanjay Matadeen, an economist and senior lecturer at Middlesex University Mauritius, believes that salary compensation will not be uniform but rather graduated according to income levels. He argues that the government should provide targeted support to SMEs to help them implement this measure, similar to past practices.

The tripartite meeting on salary compensation, chaired by the Prime Minister, is scheduled for Thursday, December 11. In what economic and social climate does this crucial meeting take place? The economic situation remains challenging. Each week in the National Assembly, it is reported that some projects are struggling to launch due to budget constraints. This tripartite meeting occurs against the backdrop of the government's intent to control public spending and reduce the balance of payments deficit.

That being said, salary compensation is a cost of living allowance aimed at offsetting workers' loss of purchasing power due to inflation observed in 2025, to help them cope with rising prices. A positive note is that inflation is showing a downward trend.

Official inflation is estimated at 3.7% for 2025, a figure strongly disputed by unions who claim it does not reflect the realities faced by households. What is your opinion on this? An inflation rate of 3.7% does not mean that prices have stopped rising. Prices are indeed still increasing, but at a slower pace than in previous years. This is the key point to understand. Currently, inflation is within the target range of 2 to 5% set by the Bank of Mauritius. Internationally, a rate below 5% is generally considered under control. In other words, even though prices continue to rise, the rate of increase is now more moderate and contained compared to previous years.

Approximately 103,700 employees earn less than Rs 18,000 per month, while the cost of living continues to rise. Do you think we should go beyond mere compensation to alleviate low incomes? I believe that the amount of compensation will not be uniform but rather graduated based on income levels. This approach has been adopted in the past, where full compensation—equivalent to the inflation rate—was provided to employees earning less than Rs 20,000, while different amounts were given to other income brackets.

It is important to distinguish: salary compensation is not a wage increase. Wage increases are subject to negotiations between employers and employees, as will be the case within the PRB and NRB. The cost of living allowance is solely based on the observed inflation.

It can thus be estimated that the government could provide complete compensation, ranging from Rs 600 to Rs 800, for those earning less than Rs 20,000.

On one hand, unions demand compensation between Rs 855 and Rs 1,792. On the other hand, businesses argue that some sectors lack the financial capacity to absorb this additional cost. What are your comments? It is normal for unions to advocate for the interests of those they represent, namely the employees. From the business perspective, some sectors are doing quite well, while others, particularly SMEs, are facing cash flow and profitability challenges, making it more difficult to pay a salary compensation.

The government must consider several factors: the ability of businesses to absorb this cost, the impact of the measure on the economy, and also, more broadly. It is equally essential to think about the most vulnerable workers who are directly affected by the erosion of their purchasing power.

According to estimates from Business Mauritius, providing salary compensation to all employees would cost nearly Rs 9.2 billion to the private sector... The tripartite committee must be allowed to complete its work and make an informed decision. I believe it will arrive at a reasonable figure, likely lower than what employers fear. As has been done in the past, the government will probably provide targeted support to SMEs to help them meet the salary compensation.

It is also time to move beyond the argument of inability to pay. Several sectors have seen their revenues grow due to inflation. The banking sector, tourism, and financial services are capable of paying the compensation. It is about finding a balance. We must consider not only economic constraints but also social stability. We cannot allow workers to continue suffering from rising living costs without support, risking the creation of other problems.

Unions demand the inclusion of employees earning over Rs 50,000 in the compensation mechanism, arguing that they too are experiencing purchasing power erosion. With 56,600 people affected according to Statistics Mauritius, what is your stance on this matter? I do not believe that a uniform 3.7% compensation will be applied across all salary brackets. However, it is quite feasible to adopt the model used in the past: granting a compensation equivalent to 3.7% to employees earning less than Rs 20,000, and a fixed amount for those earning above that threshold.