The interminable tug-of-war

Mar 10, 2024 Features / Columnists, Peeping Tom

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Kaieteur Sports – In most countries, it is normal for public sector and private sector employees to receive a cost-of- living adjustment on their salaries and wages each year. If inflation however is negative, no increases are usually paid.

In Guyana, however, it has become a norm that government must pay salaries and wages’ increases each year. Even the private sector waits to see what the government will offer public sector workers before it makes an offer to its employees.

Essentially what is offered to public sector workers is a combination of compensation for inflation plus a small marginal increase on top of that. But given the lack of confidence in Guyana’s inflation numbers, many workers believe that in real terms their salaries and wages are declining since what is offered to them do not reflect the realities of the cost of living.

In 2015, the inflation was recorded at -1% which meant that there should have been no increase. But there was an increase offered by the new government. In 2021, inflation was nearly 1% and again an increase was offered.

The expectation therefore is that there will be annual salaries increases regardless of inflation. If this trend continues and inflation is moderated for an extended period, the cost of labour will become uncompetitive cost of labour.

This is why the expectation of annual salary and wage increases must be checked. Guyana cannot continue along this path of paying increases every year apart from that offered to compensate for inflation.

But this practice of offering increases in salaries and wages each year had to do with the fact that dating back to the mid-1970s there has been a massive wage gap with real wages falling appreciably during the decade of the 1980s.

From 1976 right through to the end of the decade of the 80s, there was an assault on workers’ living standards. Noted Guyanese economist Clive Thomas pointed out that from the mid-1970s this assault took the form of the removal of subsides, increases in indirect taxation, increased prices [and scarcities]; retrenchment, shortages of foreign exchange and cuts in social spending and wage freezes.

In 1980 the then PNC government made it clear that wage increases had to be tied to production. Thus, it said, that if there were no increases in production, there could be no increase in wages.

A massive wage debt developed which the PPPC governments have tried to narrow and even eliminate by offering increases to public sector workers that were a combination of a compensation for inflation and a top-up of that. But even this approach did not stem the decline in real wages under the Jagdeo administration.

The International Labour Organization reported that between 1999 and 2005, the real minimum wage declined in Guyana from G$ 12,338 to G$11,800, a decline of about 4% despite public service workers receiving a 26.7% increase in wages because of the Armstrong Arbitration ruling.

Both the PPPC governments and the APNU+AFC have neglected to institute a wages policy. If there was a wages policy, all the demands that the government is facing would be eliminated. A wages policy would allow greater predictability in terms of wage and salary increases.

A wages policy has to commence with the determination of a living wage, constant surveillance of prices in the economy and an independent assessment of inflation. The International Labour Organization (ILO) considers a living wage as one that is “sufficient to maintain, in the circumstances of each country, an adequate standard of life.”

While the definition of a living wage is imprecise, international labour standards have sought over time to narrow down the essentials of a living wage, and these can be used to establish a baseline living wage which is then adjusted each year.
The ILO for example proposed that the living wage include the cost of basic necessities, the cost of basic housing with amenities including decent housing and water, the cost of transportation, children’s education, health care, child care and with a small margin to cater for unforeseen circumstances.

Second, there needs to be constant surveillance of prices in the economy. No one with a proper understanding of the movement of prices in the economy, will accept an inflation rate if 2% for 2023. An independent assessment of the rate of inflation should be undertaken to boost public confidence in the government’s declared annual inflation rate. This must be preceded by measures to ensure the proper surveillance and weekly reports on the movement of food prices, transportation, rentals etc. In this interest of transparency these should be published.

There will be a constant tug-of war each year between government and unions unless these issues are settled and a wages policy instituted. But perhaps there is a wages policy. And perhaps, like that National Depletion Policy, it is confined within somebody’s head.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)

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• adjustment, Government, inflation, interminable, Private

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