Don't blame the workers for IMF debacle

THERE HAS been an attempt to blame public-sector workers who held out for wages due to them for Jamaica's failure to have its economic programme assessed by the International Monetary Fund (IMF).

Minister of Finance and the Public Service Audley Shaw, said last week that the $30 billion owing to public-sector workers represents 2.3 per cent of the gross domestic product (GDP) and that it will have an impact on achieving the medium-term goal of lowering the public-sector wage bill to nine per cent of GDP. When the IMF arrangement was signed, the wage bill stood at 11.5 per cent of GDP.

"We made a decision that we would pay public-sector workers the arrears that we owe them. That's a lot of money; $10 billion more for this year, $30 billion cumulatively over the next two years," Shaw told the monthly meeting of the Manchester Chamber of Commerce, at the Christiana Branch Library last Thursday.

What he did not tell the chamber is that the $10 billion in increase and retroactive monies which the Government has agreed to pay the workers is the least of the country's problems with the IMF. Those payments, which will move the wage bill to $142 billion, account for a mere 0.79 per cent increase in the wage bill as a percentage of GDP. That is significantly less than the 0.9 per cent of GDP that the gas tax is earning.

Numbers not credible

The central issue is that the numbers provided in the medium-term projection for reducing the wage bill are not credible. In fact, the massive layoffs in the public sector appears to be the most likely way the Government can remain on the desired trajectory of reducing the wage bill to nine per cent of GDP by 2015-2016.

Thus, unless there is significant growth in the economy, the wage bill, which now stands at 10.7 per cent of GDP, can only be reduced through drastic actions.

The Gavel believes none of those actions should be another wage freeze, especially given that inflation is expected to run an average seven per cent per year, eroding the workers' purchasing power.

It, therefore, brings us to the questions of pension reform and job cuts. Given this stark possibility, Prime Minister Bruce Golding may not have been forthright when he suggested to Parliament during the Budget Debate that attrition would take care of a significant chunk of public-sector job cuts.

Golding said the public sector rationalisation programme, which is intended to bring greater efficiency to the public service, is being implemented on a phased basis over the next five years.

"It is estimated that it will result in savings of between $40 and $50 billion over that period. These savings will come primarily from staff reduction and the disposal of assets arising from the privatisation and outsourcing of certain functions. Even greater benefit is expected from improved efficiency and productivity.

"As part of a Reform Matrix agreed with the IMF, World Bank and IDB, a census of public-sector employees was carried out to verify the accuracy of the number of persons reportedly employed by ministries, departments and agencies. The census revealed that the total number of persons employed to Government is 118,163. It is projected that with the rationalisation programme, that number will be reduced to between 108,000 and 109,000."

That five years should take us to 2016, by which time wage bill as a percentage of GDP must be lowered to nine per cent. This, however, cannot be gained by denying increases, which in any event, is in line with inflation. As Shaw has indicated, it is time to "wheel and come again".

Send home lackeys, yesmen

The Government will have to find a credible way to cauterise the wage bill to achieve reduction within the set timeline. If one wants to be purely emotional about the issue, we would suggest they start by sending home the political lackeys and yesmen who camp out in the various ministries and departments bleeding the taxpayers' pockets.

That, though desirable, is not a sustainable option. The Gavel believes pension reform is a critical, low-hanging fruit the Golding administration should target. For the most part, public-sector workers do not contribute to their pension. The country is paying out $22 billion in pension funds this year.

We hope the Government will support the recommendation of the World Bank consultants who say the current system should be replaced by a contributory pension scheme to which both the Government and the individual employee would make contributions.

In the meantime, it is not good for public discourse to blame public-sector workers for the IMF delay in reviewing the country's economic programme for the quarters ending December 2010 and March 2011.

And so, even as Shaw and his team prepare to find a buyer for its shares in Clarendon Alumina Production, they must seriously revisit the public-sector wage bill, and resist all temptation to apply moral pressure on the workers in the hope that they will give up their seven per cent increase.

thegavel@gleanerjm.com