Economist: No fiscal space for salary increase

Although a salary increase for public servants is merited at this time, Government simply cannot afford it.

That is the view of economist Jeremy Stephen who does not believe the Mia Mottley administration has the financial resources to increase wages as it continues to recover from the COVID-19 pandemic.

He made the comments on Wednesday afternoon while speaking at a panel discussion hosted by the Barbados Employers’ Confederation (BEC), entitled Labour Legislation and Business: Are We on Opposite Sides?

Both the Congress of Trade Unions and Staff Associations of Barbados (CTUSAB) and the National Union of Public Workers (NUPW) recently signalled their intention to engage Government on discussions regarding salary increases for public servants.

However, Stephen said while he agreed they were deserving of a raise in pay, it was not practical.

He said the construction projects that Prime Minister Mottley had referred to prior to the general election, and which could have been used by Government to facilitate a salary increase, had not yet got off the ground and it was highly unlikely they would do so this year.

“That isn’t forthcoming and can’t be forthcoming despite the massive amount of projects that were spoken to in the lead up to the recently concluded elections here in January. That’s not going to happen this year, it’s almost impossible given where interest rates are going,” he cautioned.

“So, you don’t have those mechanisms in place that would support a wage increase, frankly because Government doesn’t have the capacity to support the economy as it once did, being overextended by COVID, by its need to support the economy during COVID, and also being debt ridden before that and that having been disturbed because of COVID.”

Stephen said the only way for Government to have the fiscal space, is for massive investments to come from business persons outside Barbados.

Even so, he said, “you’re not going to get that massive drive of investment coming in that could replace what Government has been doing”.

“So, therefore, you’re left to the whims and mercies of inflation that is imported and then also shortages coming about because of the war in Ukraine and what that means down the line for prices and commodities that we do need that are necessary.”

Stephen said with no end to the war in Ukraine in sight, commodities such as fuel and wheat were expected to continue to rise.

The economist said because Government did not have fiscal space, it was unlikely it would reduce taxes any further to assist businesses or employers.

“…This entire belief that wages have to go upwards is warranted but it is not realistic without those factors I spoke about – those being Government not able to support the economy as it did during COVID and as it did 20 years prior to that – while assuming a lot of debt and, just frankly, having that outside investment coming through the door. That’s it, it really doesn’t get simpler than that,” Stephen said.

Meanwhile, chairman of the Barbados Private Sector Association (BPSA) Trisha Tannis, tied the high cost of living in Barbados to inefficiencies and a lack of productivity.

She said if those areas were addressed, Barbadians could see a significant ease in the cost of products and services.

“From a private sector perspective, none of us is going to be able to live in this country if we do not get our efficiencies up, our productivity up, public sector reform, digitalisation, getting our port essentially from one of the least productive ports in the region to one of the most productive ports.

“The cost of the average good in the supermarket and service is influenced so heavily in terms of the value chain by these inefficiencies. It is unbelievable and actually mindboggling that we’re not actually looking to bring those costs down urgently, so we can at least control what we have in our hand to control and mitigate against these external shocks,” Tannis said. (RB)