Outspoken local economist Dr Michael Howard says the 1500 public workers sent home last week is not enough bring Government’s ballooning wage bill under control.
The former University of the West Indies lecturer told Barbados TODAY, based on his calculations, Government’s decision to cut from the lower spectrum of the salary scale while simultaneously granting civil servants a wage increase, has actually increased the wage bill.
He said even with the pending trims to the state-owned enterprises, Government’s cuts would need to run much deeper.
“The magnitude of the public sector wage bill and transfers will not be solved by just cutting off 1500 people. They are going to have to go much deeper because the people that they are sending home are the low-income people and my estimation is that if you lay off 1500 of those workers then you only cut expenditure by just 30 million for the year,” said Howard, who contended that the five per cent increase announced in Prime Minister Mia Mottley’s June 11 Mini-Budget has added 60 million per year to the wage expenditure.
“If you increase the public sector wage bill by 60 million and then you lay off 1500 people, you are not really doing anything to that expenditure. That is my dilemma,” he added, while steering clear of suggesting to Government just how many jobs should be cut.
In his assessment of the Barbados Labour Party (BLP) Government’s first five months in office, Howard said that it was clear to him the intention was to make up the shortfall from taxation. He contended that while this may have the effect of calming nerves while enabling the BLP to fulfil some its campaign promises, he is yet to be convinced that such a plan is going to work.
“I think she [Mottley] did not want to go very deep into the cuts because of social fall out and instead went very heavy on taxes to maintain services. So you drive up the water bill, taxes for health and for gas and that sort of thing. I am not sure if this plan is going to work because we could head deeper into recession,” he warned
Howard said “you could get one or two things done like the CDB loan and Ross University. But those things are isolated injections. In the sense of a macro-economic perspective, heavy taxation such as an increase in corporate taxes it is going impact on the cash flow of business spend. So you are actually dampening the economy.”
The economist concurred that Mottley had indeed delivered on many of her signature campaign promises, but he told Barbados TODAY he feared that it might be at the expense of the country’s economic recovery.
“I think she was too proud to withdraw those promises especially the public sector wage increase, which added to public expenditure, so too did the increase in pensions. The free tertiary education promise added another $20 million in expenditure. Those approaches are inconsistent with an austerity approach,” Howard said.