Monday 6 July, 2020

Finalising public sector wage negotiations is vital – IMF

IMF Mission Chief for Jamaica, Uma Ramakrishnan , with Finance Minister Audley Shaw. (PHOTO: JIS)

IMF Mission Chief for Jamaica, Uma Ramakrishnan , with Finance Minister Audley Shaw. (PHOTO: JIS)

The IMF in completing its second review under its Stand-By Arrangement with Jamaica is calling on the government to come to a decision on its public sector wage negotiations in an effort to provide more budgetary certainty.

Public sector workers have been pressing for wage increases citing rising inflation and a depreciating dollar. The government has for some time now been unable to come up with an arrangement that is satisfactory to all concerned.

The IMF has made it clear that the public sector wage bill should be no more than nine per cent of GDP by  fiscal year 18/19. However, Minister of Finance Audley Shaw, in his budget presentations earlier this year indicated an estimated two to three per cent increase in the salary of public sector workers.

The proposed increase in public sector wages already pushes the budget over the required wage bill to GDP.

At the end of last month the Deputy Managing Director of the IMF and the Acting Chair of the Executive Board Tao Zhang said on the matter: 

“Concluding the ongoing wage negotiations is necessary for budget certainty. More generally, fiscal sustainability requires a continued reduction in the public wage bill, particularly as the government rethinks its role, responsibilities, and size of its workforce.

“ Overhauling the pay structure and reviewing the complex  system of allowances are vital  foundations to a modern public sector that can attract and retain talent.

“In addition, a smaller public sector remains essential to create space for much-needed spending on health, education, social safety nets, public safety, and growth-enhancing capital projects.”

Only last week at a press briefing at the IMF’s office in the Bank of Jamaica in downtown Kingston, Mission Chief for Jamaica, Uma Ramakrishnan said the government is committed to meeting the goal of nine per cent of a GDP wage  target by March 2019 which is in the Fiscal Responsibility law.

“ From everything we know so far, a bigger goal as a long term sustainable issue for the public sector as a whole is being able to address its wage bill fundamentally.

“We do see the pay structure as not consistent with retaining good talent in the public sector.”

Turning her attention to allowances Ramakrishnan declared that allowances as they currently stand are complex. She noted there are at least 170 allowances across employee groups in the government which are certainly not necessarily equitable.

“ We think there is a need to fundamentally rethink the wage structure. The question must be asked how is the pay structure designed for the  public sector?

“In that context we believe that performance should be rewarded as opposed to being just there because the public sector is now treated as the engine of growth. The public sector is not the engine of growth – that should be the private sector,” said the IMF Mission Chief for Jamaica. 

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