Minimum wage increase

The government has announced that the minimum wage will increase to JD290 starting January 1, 2025. This decision was agreed upon by a special committee, including representatives from the government, employers, and workers. The goal is to balance the workers’ need for better wages with the economic challenges faced by employers.

Over time, inflation has reduced the value of the current minimum wage of JD260, which now has the purchasing power of only about JD153. For many Jordanians, this wage is no longer enough to cover monthly living expenses, making the increase essential.

One of studies found that the cost of this decision is relatively small. Depending on how much the wage is increased, it could cost between JD11 million (for a raise to JD281) and JD26 million (for a raise to JD 340). The overall impact on business costs is expected to be modest, ranging from an increase of 0.6 per cent to 2.4 per cent. Over the past 20 years, data shows that wages in the private sector have risen faster than the minimum wage, widening the gap between the two.

Raising the minimum wage can also boost the economy, when workers have more income, they spend more on goods and services. This increases demand in the market, encourages businesses to produce more, and creates more jobs. Higher wages can also motivate workers to be more productive and reduce the costs companies face from frequent staff turnover.

Some worry that higher wages might increase unemployment because businesses may not afford the higher labor costs. However, studies show that this impact is usually small in Jordan, especially when the increase is introduced gradually. In Jordan, raising the minimum wage in the past has not caused significant changes in unemployment, likely because businesses in the country have been able to adapt.

Increasing the minimum wage is not just about helping workers, it is also a way to support the economy and promote social stability. It boosts spending, reduces unemployment, and helps drive sustainable economic growth. In the future, it’s important to link wage increases to inflation and productivity, ensuring that wages reflect actual living costs and economic conditions.