Editorial | Golding, Phillips make case for labour market review

On the face of it, the observations by former prime minister, Bruce Golding, and the opposition leader, Dr Peter Phillips, in speeches over the past week are only tangentially related. But on closer inspection, they represent linked policy issues that are deserving of serious debate. They also raise questions about the Government’s labour market reform project, which appears to have stalled. At least, not much has been heard of it for a long time.

For transparency, this newspaper has long been an advocate of lowering the public sector wage bill, which, having declined in recent years, stands above 10 per cent of gross domestic product (GDP) and consumes nearly 40 per cent of taxes, but which, under the fiscal accountability laws and Jamaica’s agreement with the International Monetary Fund (IMF), the administration is committed to lower to nine per cent of national output.

Like the Fund, we have held that an inefficient, and, in some sections, bloated public sector, has contributed to economic inertia and the low growth (annual average of below one per cent) the island returned over the better part of four decades. Spending less on wages would free resources for investment in infrastructure and other services that would help to drive output.

Last week, Dr Phillips, whose 2012-2016 stint as finance minister is most associated with reversing the high-debt fiscal profligacy that characterised the Government’s economic behaviour, suggested, based on the patchy results from more than two decades of economic reform, a review of the nine per cent wage-to-GDP target.

“While there can be no doubt that we need to be realistic in ensuring that public sector costs are contained within a range that the country can afford, it is clear that the precise wage-to-GDP target is only likely to be honoured in the breach,” he told a capital markets and investment conference, hosted by the Jamaica Stock Exchange.

The core of Dr Phillips’ argument is that given that around 80 per cent of Jamaica’s wage bill is consumed by the island’s police force, teachers and medical personnel, where staff is already insufficient, there is precious little room for the Government to cut.

An additional argument, perhaps, which Dr Phillips did not advance, but one that public sector unions often make, is that Government workers are under-paid. Which is where Mr Golding and Dr Phillips intersect.

VAST DIFFERENCE IN MONTHLY INCOME

In a speech to Rotarians Monday night, referencing a 2016 University of the West Indies tracer study of Jamaican graduates of its Mona campus two years earlier, Mr Golding lamented the difficulty many degreed graduates found finding jobs (53 per cent of the 24 per cent of the respondents were unemployed) and the relatively low pay they received. The largest number of the graduates (39 per cent) were in the social sciences. Only 20 per cent were in science and technology.

“Among graduates working in Jamaica, the median monthly income was $100,000 with a range of $13,000 (part-time) to $400,000. The highest monthly salary in Jamaica was earned by a medical doctor,” the university reported.

According to Mr Golding, apparently quoting data now shown in the published report, 25 per cent of the graduating class earned less than J$50,000 per month, which, he believes, comprised their life prospects.

We agree with Mr Golding that course choices of Jamaican university students appear not be in synch with current and future job availability, leaving many graduates frustrated, or having to lower expectations.

This is why we believe there is need for an accelerated and robust labour market review, taking into account not flexibility in employment and work practices, but the kinds of jobs that will be required in Jamaica’s 21st century economy, including in the public sector.

The basis of which the government pays its employees, taking into account of the need to attract talented staff, ought to be part of that analysis.

A good thing about Dr Phillips’ intervention in the public sector wage-to-GDP ratio is the likely depoliticisation of any such discussion.