Sun | Dec 17, 2017

Editorial | Talk turkey on wage negotiations

Published:Thursday | November 23, 2017 | 12:00 AM

While this newspaper endorses the Government's call for restraint in the wage demands of public-sector workers, it is not our sense that the Holness administration has approached the current salary negotiations with sufficient transparency and the frankness necessary to achieve consensus and lasting success.

Put another way, there seems to be a disconnect between the wage talks and the administration's public-sector reform agenda, aimed, in part, at lowering the public-sector wage bill to nine per cent of gross domestic product, (GDP), and what that would mean to the economy. These issues have to be addressed as a cohesive whole rather than as disparate issues.

The Government has offered public-sector employees an average six per cent pay increase spread over two years, retroactive to last April. The offer, in the first instance, is below the projected combined inflation over the two fiscal years.

But there are also broader contextual and sometimes competing variables in these negotiations. For instance, public-sector workers are coming off a three-year wage freeze. The former administration had promised there would be a return to free bargaining, hence the demands by public-sector unions for salary increase over the period ranging from 60 to 100 per cent.

However, the estimated compensation bill of $193 billion for government employees this fiscal year is approximately 36 per cent of projected, non-debt revenue and 40 per cent of what is earned from taxes. When debt-servicing costs are added, 61 per cent of the Budget is accounted for, without the Government addressing any of its other obligations, such as upgrading infrastructure or funding social services.

This is part of the backdrop against which the International Monetary Fund (IMF) has been insisting in the three latest agreements with Jamaica going back to the previous Jamaica Labour Party administration on a reform of the public sector to reduce its wage bill to no more than nine per cent of GDP.from the current 10.7 per cent. The wage bill was 10.7 per cent of GDP and the IMF said that target is to be reached by the end of the 2019 fiscal year.

The Andrew Holness administration, like its predecessor, has talked much about public sector reform, but has been slow to take the real tough actions, which provides the backdrop against which the Fund's managing director, Christine Lagarde, attempted to put steel in Mr Holness' back during her visit to Jamaica last week.

 

Immediate challenge

 

While hailing Jamaica for its efforts at economic reform, she said: "An immediate challenge now is to release scarce fiscal resources for growth-friendly priority spending on security, education, health, infrastructure, to create opportunities for all."

As a former finance minister of France, Ms Lagarde appreciates the political difficulty in such actions, especially if they include job losses. But, as she told university students in Kingston, it's a potentially healthy exercise if workers are released from where they add little value and retrained for jobs where they enhance production and productivity. It is essentially the same argument that the prime minister has made about a repurposed public sector acting as facilitator to the private sector in investment and job creation.

But Mr Holness, in his recent articulation on the matter, noted the potential consequences to the fiscal accounts of the high wage demands, but appeared to perceive the negotiations as a dance in concentric circles until both parties meet in the centre. "An exploration of what possibilities there may be that could ease acceptance," is how he termed it.

Our view is that this Government needs to take a big embracing approach, linking the wage negotiations and public-sector reform, even if it ends with a small, more productive public sector.