Bigger pay hike and increased productivity go hand in hand, says PM Loop Jamaica

The content originally appeared on: Jamaica News Loop News

Prime Minister Andrew Holness has cautioned that for the Government to grant higher levels of salary increases to public sector employees, the country must increase its productivity levels.

He gave the caution while addressing Wednesday evening’s launch of the Amber UTech Launchpad event to encourage entrepreneurship.

The prime minister stressed that, in the absence of increased productivity, the country’s fiscal position could collapse, and the Government could be forced to introduce new taxes.

“The problem with why we have to keep reminding people about the importance of maintaining fiscal discipline is that the indiscipline of expenditure, driven by political expediency, is always there,” Holness said.

He added: “Politicians are always going to be tempted to win over the electorate by making expenditure promises that will end up ultimately, inevitably, in new taxes …because the electorate does not always make the connection that every new dollar of expenditure, if it does not come from economic growth and expansion, it must come from borrowing or new taxes.

“If it comes from borrowing, inevitably, it is going to come from new taxes,” he insisted.

Continuing, Holness said he wished that the Jamaican electorate would not fall for this.

“It is time that our electorate makes the connection that any increase we’re going to have in government revenues, in what we’re able to spend, it must now come from productivity,” he argued.

The prime minister appeared to be responding to criticism from the parliamentary Opposition during campaigning for the February 26 Local Government Election, that the Government gave cabinet members salary increases of up to 250 per cent, while civil servants had to fight for, and sometimes disrespected, while being granted an average increase of 20 per cent.

Holness reminded that those were the highest increases any government has ever granted and cautioned that to do more could collapse the country’s fiscal position.

He outlined the movements in Jamaica’s public sector wage bill since 2021, when it was $241.75 billion, increasing by 39 per cent to $338.13 billion in 2022.

In 2023/2024, the wage bill increased by $66 billion or 19 per cent to $404 billion, and the projected wage bill for the current fiscal year is $442 billion, an increase of $37.5 billion.

The cumulative increase between the 2021/22 fiscal year to present is $200 billion. Since the Government’s controversial compensation review, which took effect last year, the wage bill has increased by 82.9 per cent.

“This must be placed in context to everything that is said in the public domain, as the arguments suggest that $200 billion “is not now in the pockets of public sector workers.

“I’m not saying that this solves the problem of low wages, which we have traditionally suffered from. I’m not saying that this is the limit (20 per cent) that you should get. I’m not saying that this solves the anomalies that exist, but the context of the conversation has to incorporate that a massive shift in the fiscal arrangement of the budget has been done in favour of labour,” said Holness.

“I will be the first to tell you that more must be done, and the Government commits to doing more and will do more, but there is a parallel conversation that must happen; the only way to do more without collapsing the fiscal stability is to increase productivity,” he added.

He emphasised that any conversation about a bigger increase for public sector workers must include talk about increased productivity. And the prime minister also highlighted that the history of wage increases in Jamaica is that the government gives the wage increase and then takes it back with a wage freeze.

“In fact, almost every time there’s a wage increase of any massive, significant jump, a year or so after, there’s a wage freeze because the wage increase also increases the fiscal pressures,” he said.

Holness noted that this occasion marks the first time that the government has been able to plan properly “so that we can even present the budget without the pressures”.

The prime minister said that, as a country, we must be careful how we exert pressure “because it will collapse our fiscal ecosystems and governments have to be strong to manage this, not to be disrespectful, not to appear not to understand what our workers are saying, but we have to be …able to raise the issue with our workers to say, ‘Listen, we want to do more, and we have demonstrated that we want to do more by virtue of what we have done, but to do more, we have to grow the economy’.”