Sun | Jun 26, 2016

Give stake in divested properties to civil servants, says Chung

Published:Friday | October 19, 2012 | 12:00 AM

Avia Collinder, Business Writer

Analyst Dennis Chung, who is advocating for key civil servants to earn higher pay commensurate with their jobs, says the Government can foot the compensation bill using non-cash rewards.

Principally, he states, an equity stake in properties on the divestment list is one alternative to wage and salary increases. He is also suggesting pay linked to performance.

Chung's suggestion of pay hikes to selected public servants appears counter to the current programme seeking to cut the wage to nine per cent of GDP by 2015-16.

The plan involves culling the Civil Service Establishment Orders of some 3,000 vacant posts and a proposal to cut 10,000 government jobs.

The wage bill this year is expected to amount to J$146 billion, rising consistently from J$88 billion pre-recession.

Under the 2010 IMF agreement, Jamaica has committed to reducing the public-sector wage bill to nine per cent of GDP by the 2015-16 fiscal year.

The government is now making staggered payments on a retroactive increase of seven per cent for the period April to August 2011 with payments to extend to May 2014. The cost to the Government for the back pay is J$31.8 billion.

"There are various ways that they could consider compensating them outside of wages and salaries. Remember that wages and salaries are just a means to an end, and so the approach to take is to look at the final needs and wants," Chung said.

He also suggests offering key officials equity shares in government companies that are to be divested.

"This also has the benefit of getting the Government out of the operations that, in many instances, lose money because it is under government control. So a part of the divestment requirements is that a portion be set aside for government workers," he said.

The Urban Development Corporation alone has been trying to sell more than 30 properties, the Factories Corporation of Jamaica had about a dozen and the Development Bank of Jamaica is trying to rid itself of properties and companies taken over due to loans gone bad.

put idle lands to use

Chung proposes that idle lands be provided to groups of public-sector workers, who establish themselves in a company to engage in enterprise inclusive of agriculture.

"This is a way of compensation for pension benefits foregone, providing future income, and also brings greater economic activity for any displaced worker," the analyst said.

As for his proposal of pay for performance, he said that should be linked to the performance of the deficit.

"For example, if workers give up their pension and salary increase benefit then the trade-off should be that if we exceed the fiscal targets then the workers would get a percentage of that excess as incentive compensation. This can be worked down to the ministry level, or even in more detail," Chung said.

What the measures will do, he states, is postpone costs for Government without creating a financial obligation; incentivise production, "and may be a palatable way for public-sector workers to forego some current benefits. There is no lost revenue, or more important, no debt obligation to be recorded," he adds.

Chung said that money is already being lost on state-owned entities waiting to be divested.

The analyst argues that a compensation scheme that puts them into production would be "a revenue gain" for the Government.