Central Bank Governor Cleviston Haynes has warned that any increase in public servants’ salaries now would force cuts in other areas of Government expenditure.
While acknowledging that commodity prices continue to rise, putting strain on households, Haynes explained that for the Mia Mottley administration to grant an increase in public sector wages and salaries, several scenarios had to be carefully examined.
“In the context of Government and businesses generally, pay increases are related to the ability to pay and, therefore, if you have a wage increase it also means you have to make a judgment as to what you are going to forego. It is not a free good, so there are choices that would have to be made,” he said on Wednesday, though stressing that the final decision on pay hikes rested with Prime Minister Mia Mottley who is also Minister of Finance.
Singling out Government’s emphasis on accelerating its capital works programme, Haynes said this was being done in order to generate increased economic activity and employment, suggesting that this ran the risk of being postponed if the public sector wage bill was increased.
“There is a broader issue that one has to look at in terms of what is happening with your competitors, because when you raise the cost of wages does that spill over into the private sector? Does it make them less competitive with the countries against which they are competing? So, the whole question of competitiveness is the other issue that one will have to look at,” he explained.
Earlier this month, the National Union of Public Workers (NUPW), the largest public sector labour representative, served notice that in light of the increased cost of living, its top brass would be lobbying Government for an undisclosed amount increase in salary to help public servants live more comfortably.
This came on the heels of similar sentiments expressed by president of the Congress of Trade Unions and Staff Associations of Barbados (CTUSAB), Edwin O’neal, late last month.
O’neal had indicated that since workers got a five per cent salary increase in 2018, several factors have eroded their spending power.
However, Haynes insisted that granting a salary increase to public servants at this time would require a delicate balancing act.
He declined to speculate on what percentage wage increase Government could consider, if any, stressing that the island’s ability to compete must be taken into consideration.
“I am sure that everybody would want to see some relief if prices are rising, but I think one has to look at the big picture and make that determination,” he said.
“We don’t want to go to a situation where our expenditures are such that we are not able to honour our obligations, because we have spent too much and then you don’t have the funding. So, it is a balancing act which I am sure the Minister of Finance [will have to examine].”
During his economic review of the first three months of this year, Haynes pointed out that Government expenditure on wages and salaries rose by $27 million, driven mainly by additional staff hired to implement COVID-19 control measures.
Capital expenditure also increased as Government continued several projects including the Speightstown and Constitution River flood mitigation projects, implemented the Sanitation Service Authority (SSA) Residential Waste Collection Improvement project, and made provisions for repairing or replacing houses damaged by Hurricane Elsa in July last year.
At the same time, consumers are being increasingly impacted by elevated prices caused by supply disruptions, rising freight costs and spiralling food and energy prices which started in the latter half of 2021 and continued into the first quarter of the year, exacerbated by the Russia-Ukraine war.
“Inflation measured on the traditional 12-month moving average rose by 4.2 per cent, but by 9.3 per cent when comparing March 2021 to March 2022,” according to the latest Central Bank data.
“Rising import costs were concentrated on prices for food, non-alcoholic beverages and energy. During the quarter, food prices rose by three per cent, but over the preceding nine months significant increases for vegetables, meats, oils and fats, and seafood led to the acceleration of prices over the 12-month period,” the Governor explained.
International oil prices are expected to stabilise at elevated levels while commodity prices are forecast to increase further during the year.
Consumers could come under even greater pressure should the Barbados Light & Power Company (BL&P) be granted an increase in electricity rates, for which it has applied.
The utility company is seeking an overall 11.9 per cent increase, which would see customers paying between five per cent and 20 per cent more on their electricity bills.
Haynes acknowledged that this would also increase the cost of doing business.
However, he stressed the decision would rest with the regulator, the FTC.
In any event, the Central Bank Governor said, depending on the steepness of any increase granted, some businesses may try to absorb it while others may not be able to.
“It depends on the nature of the business,” he noted.marlonmadden@barbadostoday.bb
