With the National Union of Public Workers (NUPW) being forced back to evaluate its position following the virtual failure of its two-day protest over a pay rise, two of the island’s top economists are suggesting that public workers are in a no-win situation.
The economists argue that should the NUPW succeed in securing the pay hike it is demanding, this would have serious negative implications for the ailing economy.
However, both University of the West Indies (UWI) lecturer Jeremy Stephen and President of the Barbados Economic Society (BES) Shane Lowe warned that an all-out national strike would likely have the same effect.
The NUPW has been pressuring Government for a 23 per cent increase and a $60 million lump sum coping subsidy, arguing that public servants have not had an increase in ten years despite constant increases in the cost of living, made worse by the National Social Responsibility Levy.
After giving the Freundel Stuart administration a January 15 deadline to return to the negotiating table, the NUPW earlier this week announced a two-day strike which ended today, after Government failed to meet its demand. The NUPW’s sister union, the Barbados Workers’ Union, is demanding a 15 per cent wage hike for its members in the public service.
Assessing the likely impact of a strike, Stephen told Barbados TODAY that while industrial action was justified “if workers’ grievances need to be heard and taken very seriously”, a strike would affect almost all sectors including the island’s vital tourism industry and international business, as well as private sector entities doing business with various Government agencies.
In fact, with Government being responsible for about 20 per cent of economic activity, Stephen said an all-out strike could all but drive a dagger in the heart of an economy which is registering anaemic growth.
“If public officers aren’t working nothing happens . . . . If there is no Government activity at all, worse case scenario, then there is a fifth of the economy down the drain which would then impact on tourism, and at this time we are in the middle of the season,” Stephen said.
“You got the Treasury; if workers don’t process Government debt then salaries won’t be paid. So the whole point being that Government is vital as an industry, vital to the running of our economy. So a shut down across all facets is not to the benefit of Barbados at this time. But again, I wish to express that all industrial action is justified once workers grievances need to be heard,” he explained.
Stephen said a 23 per cent pay increase would lead to increased confidence and more spending, resulting in a short-term uptick in the economy.
However, he said it could also have a negative impact, with Government being forced to cut back in other areas, which could mean less financing for some Government agencies, and increases in the already high fiscal deficit and debt.
“It can have a very serious effect with respect to the financial system as well because the financial system would probably be required to hold more Government debt, and in this environment they don’t necessarily have the appetite to do so. So that means possibly even greater fees being charged on depositors in this country,” he said, pointing out that what was needed now was increased productivity and a new way of financing public sector wages.
“It is unfortunate that it has come to that position because we had some bit of space or means to do this financing years ago before we really saw an explosion in the Government’s wage bill [between] 2008 and 2010 and a contraction in the economy in a sense.”
Meantime, Lowe told Barbados TODAY any increase in wages at this time without “a commensurate cut in other current expenditures” would lead to rising Government expenditure; a higher fiscal deficit which would prompt the Central Bank to print even more money; and additional demand for imports, further draining the already troublingly low foreign reserves.
“Any wage increase therefore needs to be accompanied by expenditure savings in other areas, and/or increased productivity gains in the public sector to facilitate economic growth,” Lowe said.
“My wish is that all parties can settle on a mutually beneficial arrangement. However, while the public sector does not directly earn foreign exchange, it does facilitate a few key sectors that are primary earners of foreign exchange – tourism via the air and sea ports and international business being among the most important. Any disruptions will have an adverse impact on economic activity and may reduce Government’s collection of taxes. Ultimately, anything that further compromises fiscal sustainability will make our fiscal adjustments more difficult,” he warned.