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Editorial: Not complete on labour front

Published:Thursday | August 20, 2015 | 8:00 AM

That the new school year will not start against the backdrop of a restive teachers' union is good news. The better news is the acceptance by teachers of the government's offer is its potential contribution to the long-term stability of the Jamaican economy.

A not unreasonable interpretation of the development is the signal that Jamaican labour is beginning to believe that it is on the threshold of a sustainable low-inflation economy. That would be an important psychological breakthrough. However, it would not mean the completion of the government's job of reform of the Jamaican markets for goods and labour and, especially, the public sector.

It is perhaps an irony of Tuesday's vote by the Jamaica Teachers' Association (JTA) in favour of a deal for a seven per cent increase over two years that it is essentially the same one it rejected in June. While the settlement is for two per cent more than what the government originally offered, it is far short of the 30 per cent sought by the JTA.

Maybe it is that the summer heat has receded and with it militancy, replaced by thoughtful moderation. In any case, we hope that the remaining hold-outs - the police, doctors and nurses - have imbibed the same elixir. Several other trade unions signed on a week ago.

Of course, this newspaper appreciates why public sector unions hope for big pay hikes, however, like anyone they can also use more money. They endured a four-year freeze on basic pay, and like most Jamaicans, have felt the squeeze of the government's programme of fiscal consolidation. These facts, though, do not reflect the entire story.

First, public sector employees received annual increments that were not far outside negotiated pay hikes in the private sector. Important, too, government workers opted for the wage freeze as the cost for maintaining an estimated 15,000 jobs, which were under threat by the country's past fiscal excesses, which was manifested itself in a debt crisis.

 

painful fiscal management

 

At the start of the freeze, the debt was heading towards 150 per cent of gross domestic product, the cost of whose servicing, plus the bill for wages, consumed 80 per cent of the annual Budget. After three and a half years of tight and often painful fiscal management, including achieving a primary surplus of 7.5 per cent of GDP, that is now closer to 60 per cent.

There are other achievements, too. Inflation last year at four per cent was at its lowest in four decades and is on track to be in the five to seven per cent range in 2015. The current account deficit, which was 13 per cent of GDP, is now in the low single digit. Interest rates have fallen.

These things matter. They translate into macro-economic stability, inspire confidence, and are the precursors to growth. But they can be undone by acquiescence to recklessness, which is what busting the budget to pay civil servants more would be.

This newspaper does believe that the salaries of public sector workers should be competitive with those in private companies, but that state should be efficient in its delivery of services and facilitatory of enterprise. This might require a judicious excision of those 15,000 jobs and an overhaul of its operation.