The wage increases and retroactive payments that are now due to public sector workers with the signing of the new compensation agreement will not significantly impact the current inflation rate.
So says Bank of Jamaica (BOJ) Governor Richard Byles.
Byles was responding to questions on the matter at the bank’s Quarterly Monetary Policy Press Conference last Friday.
“It will have an upward effect on inflation, that’s a natural conclusion. How much of an effect is another matter,” Byles said.
“We have looked at it and we have done a deep dive into what the potential impact is and whilst it will raise inflation, we don’t see it as having a terribly significant impact,” he said noting the government’s financial obligation toward the wage negotiations.
He continued: “We will take it in stride and we will find ways to take that inflation impact out of the economy.”
Between November 15 and November 17, 14 unions signed with the MOFPS on the new compensation package. They include the Nurses’ Association of Jamaica (NAJ), the Jamaica Civil Service Association (JCSA), the Jamaica Workers Union, the Union of Schools Agricultural and Allied Workers Union, the Union of Public and Private Employees, the Jamaica Association of Local Government Officers (JALGO), the Jamaica Midwives’ Association, the Council of Paramedics, and the Bustamante Industrial Trade Union (BITU).
The finance ministry has agreed to a guaranteed minimum increase of 17.5 per cent on net pay for all public sector workers with effect from April 1, to be paid over three years.
The mileage rate for travel officers will increase to $100 per kilometre, up from $56/km at present.
Eight months of payment already passed before the signing of the compensation deal, creating the added obligation of retroactive payments.
Finance Minister Dr Nigel Clarke has stressed the need to have the negotiations concluded in sufficient time so that the payments that are due for 2022 can be made in the fiscal year 2022/23.
The Finance Minister has also proposed a $60-billion increase to the national budget in the First Supplementary Estimates 2022/2023, which he tabled earlier this month.
This is comprised of increases to the non-debt recurrent expenditure of $52.7 billion, capital expenditure of $1.3 billion and debt service of $6 billion.
Jamaica’s inflation rate for October stood at 9.9 per cent, higher than the outturn for September when it was 9.3 per cent.
“Over the remainder of this calendar year, assuming no additional shocks, the bank forecasts that inflation will continue to fluctuate between 9.5 and 10.5 per cent, consistent with the consensus forecast for a fall in commodity prices and the bank’s overall monetary policy stance,” Byles told the meeting.
For Senior Deputy Governor, Dr Wayne Robinson, the central bank will have to watch to see what other areas of the labour market [such as] the private is will do.
“Will they follow with similar increases…and as the incoming data will guide us, we [will] then adjust our forecast and policy action,” Robinson said.