ONE?REASON why the current discussion on the proposal to freeze public servants’ wages is so contentious is that public servants have become conscious of the excessive burden they are asked to carry whenever there is a hiccup in the economy.
The truth is that given the current reality, there is very little else the Government can do to avoid economic catastrophe.
We are operating in a system that measures Government success by the number of jobs that it creates and the level of workers’ emoluments.
Where the only levers at its disposal are derived from its capacity to tax and spend, with wages the largest expenditure.
Therefore, wages become the natural nemeses. The more Government spends on wages, the more it must take in taxes.
Did we learn anything from the situation in the early 1990s when public servants’ wages were cut as a viable alternative to devaluing the currency? We certainly did not learn the lesson of prudence, otherwise we would have translated the concept of saving for a rainy day into actual practice.
Instead, in our time of buoyancy we spent lavishly and brought our unemployment rate down to single digits. This development was commendable. But we are beginning to reap the whirlwind of the era.
Barbados is a small, very open democracy with a private sector-led emerging economy. The firm is the locus of business activity, catering to four designated categories of citizens: households for consumption, businesspersons for investment, Government and its subsidiaries for social services, and foreigners.
All may be motivated by self-interest but are bound by a common constraint – the rate of economic growth.
In times of economic buoyancy, the self-interest of all tends to harmonise diligently. But during periods of recession it can appear as if they are singing from different hymn sheets.
This divergence from the common interest often results in the economy’s underperforming. As a result there is utilization of some resources, which is usually manifested in increased unemployment.
In such circumstances the economy can become temporary stuck at a sub-optimum level where it exhibits the twin social ills: under-utilized productive resources, and some citizens without money to create effective demand for even essential goods.
When this situation occurs, and it would seem that we are there now, all categories of citizens are required to make the appropriate sacrifice commensurate with their means.
Government, as the overseeing institution for most economic activity, is duty-bound to design and execute policies that strategically regulate the inflows and outflows of all income and expenditure so that savings and investment, domestic consumption and productive capacity complement each other in a manner that utilizes as fully as possible the resources of the country, especially workers.
Government employees must review their historical claim to entitlement in the interest of the economy at this time. In their deliberations for salary revision, they must compute the impact of the outcome on the performance of the private sector.
We have relied on the private sector to create the bulk of sustainable jobs. We expect it to be as lenient as it can in severing employees as a short-term cost-cutting measure. Working together, we can fix our economy.
