THIS country’s economic fortunes won’t change by simply imposing a freeze on public sector wages, says economist Tony Johnson.
He argues that any shutdown of wages has to be accompanied by a freeze on food prices.
It’s a view that contrasts with the recent call by former Governor of the Central Bank, Sir Courtney Blackman, for a freeze on public sector pay with no mention of a lid on supermarket prices.
Johnson told the WEEKEND NATION that a prices and incomes policy would be a better proposal.
“You can’t have a wage freeze without having a price freeze as well. You can’t have one without the other. Because the economy is contracting, you are losing value and therefore people are going to be worse off.
“Inevitably, it affects people at the bottom of the ladder hardest. In order to protect those vulnerable groups, if you are going to impose a wage freeze, you also have to impose a price freeze.”
Johnson said new Minister of Finance and Economic Affairs Chris Sinckler should tackle deficit and debt reduction.
“By all means, the fiscal deficit has to come down because if that does not happen, it creates more problems relating as to whether to borrow domestically or externally. It puts pressures on the dollar and maintaining our parity that we hold as sacrosanct.
Tackle high debt
“The debt, which is in the high 80s of gross domestic product has also to be tackled. That has to be reduced as well,” he said, adding: “We also have to raise the level of productivity so that those who are employed can generate more with less.
“To the extent that you can increase output, then that will act as a constraining influence on prices because in a market situation if you have more money chasing fewer goods, then the price will rise, but if the level of output is increasing, then to some extent that is going to cushion the increase in price level, so this is where productivity plays its part,” he said.
Johnson, the immediate past president of the Barbados Economic Society, said all of the stakeholders had to be more proactive in trying to revive the struggling Barbados economy.
