Sun | May 28, 2017

Editorial: Towards consensus on public sector

Published:Wednesday | May 27, 2015 | 5:00 AM

Mr Audley Shaw may not be in command of the details, but whatever may be said about hindsight and 20/20, he is correct about the principle. The Simpson Miller administration has been too slow about public-sector reform, which is one of the reasons why it is embroiled in tense negotiations with trade unions over wages.

Mr Shaw himself, of course, fluffed the tough decisions when he was the Jamaica Labour Party's finance minister between 2007 and 2011.

The issue now is that after a four-year freeze on negotiated salaries, public-sector unions have demanded hikes of up to 30 per cent. The Government's offer is five per cent, in line with its declared budget for salaries (excluding pension payments) of J$165.2 billion and its agreement with the International Monetary Fund (IMF) to reduce its wage bill to nine per cent of gross domestic product (GDP), from more than 12 per cent four years ago.

Clearly, the finance minister, Peter Phillips, has little room in which to manoeuvre on this issue. Giving in to the demands would likely undermine his primary surplus target of 7.5 per cent of GDP, ruin Jamaica's economic support agreement with the IMF, and cast the country back into the fiscal crisis from which it has been showing admirable signs of emerging.

Part of the problem is that the Government, in embarking on the IMF programme, took the politically less risky route on the salary issue. It might have cut 15,000 public-sector jobs, instead of the salary freeze, to moderate the wage bill. Or, it might have been far more aggressive in public-sector reform, including eliminating jobs by attrition, which is what Mr Shaw says he would have done.

A government unit that is supposed to manage this project says that 10,000 jobs could go this way, which the current administration says it is pursuing - but not at the pace that satisfies Audley Shaw. Had he been in the post, says the shadow finance minister, he would not have fired any worker, but would have carefully analysed "the utility and usefulness of every position once somebody has reached retirement".

There are real questions about whether this process, by itself, could deliver the required reduction in a government workforce of nearly 120,000 in the time required. The Government, for instance, says that it has eliminated around 6,000 public-sector posts over the past two to three years. Their elimination means that these are not jobs that can be filled in the future and, therefore, require no budgetary allocation. Another 1,000 jobs that became vacant have not been filled.

Yet the wage bill, which accounts for more than a quarter of government spending and consumes 43 per cent of tax revenue, is not at a level at which Government can be sanguine that it won't be a cause for fiscal instability.

We understand the politics behind the Government's reluctance to bite the bullet on public-sector reform when it hopes to maintain consensus on its economic programme, as well as Mr Shaw's urging of public-sector unions to reject the wage offer. But more important, Mr Shaw accepts that with fewer people to pay, the Government is in a better position to pay more. Hopefully, too, it can lead to a better quality public sector. That, we take it, represents consensus between the parties, with only nuanced points to be clarified.