Public servants wage increase a bad omen says ECA head

Dane Dabasie, Prestige Holdings CEO, thinks TT is facing a bleak future. “A look at the present situation of Trinidad and Tobago is enough to force one into the usual conclusion of a bleak and unenviable economic future — a future of permanent structural emergencies and reactivity,” he told business people attending the ECA forum at the Hilton Trinidad. And it all has to do with  the current trends of increasing wages and salaries, he said. Referring to the boom period of 1973-1982, he said the rate of increase in wages was much faster than the rate of increase in real GDP and productivity. Wages then, he said,  increased from as low as 341.5 percent for labourers in the miscellaneous food preparation sector to as high as 1168.5 percent for salesmen in the soft drinks sector. 

“Such wage increases were arbitrary and unsustainable and could have meant only dire consequences for the economy. What therefore resulted was fairly obvious — increasing wages that were not met by a corresponding increase in productivity and which led employers to increase prices. This triggered an inflationary spiral and formed the basis of the harsh recession. In November 2003, the 15 percent wage increase secured by public servants for the period 2002-2004 was a significant occurrence in industrial relations, he said. “This wage increase was not in keeping with trends in the average level of wages in the economy as a whole, cost of living and productivity,” “Worse yet, it is feared that this 15 percent wage increase has established the new trend and benchmark for wages increases in the country over the coming years. If this comes into fruition, as the early signs are already indicating, Trinidad and Tobago would be destined to endue a faith similar and even worse than the1980s.” To boost his argument, he presented a graph showing the trend of collective agreements :   In 2002, 100 collective agreements from 11 sectors were registered at the Industrial Court of Trinidad and Tobago. The Manufacturing sector accounted for the majority of the collective agreements registered 30 percent, while the Construction and Recreational and Cultural Services accounted for the least number of collective agreement registered 1 percent.

The Oil, Transport, Communication and Storage and the Personal Services sectors registered collective agreements where no wage increase 0 percent was granted to workers. The Manufacturing sector accounted for the highest wage settlement 45 percent in a collective agreement. Overall, the Oil sector 7.25 percent had the lowest total average wage settlement and the Finance sector 12.3 percent had highest total average wage settlement of all the collective agreements registered at the Industrial Court in 2002. The total average settlement of all the sectors from the collective agreements registered in 2002 was 9.52 perent. After the increase to public servants, the ECA president said there were  double digit increases. Though it is still too early to establish a definitive relationship and trend in wage settlements following the 15 percentpublic service wage settlement, “there is already developing an inclination towards double-digit increases in excess of the average of settlement in 2002.” Further more, if a comparison is made between the settlements made post the public service settlement (2003) and the various industry averages in 2002, one would observe a substantial increase.

The impact of double-digit wage increases on business and the economy would be very much similar to the harsh economic, social and political conditions that prevailed in this country during the1980s, he said. This type of increase in wages will raise inflation, and that is unfortunate “as we have held the inflation rate well within acceptable levels since year 2000.” Based on the experience of previous years, it would seem that an inflationary spiral is heading our way, he said. In offering recommendations to employers, he said “the basic criterion of fixing wage rates for employers should be to promote employment.” The minimum wage, he said,  must not be raised arbitrarily. Employers must be able and encouraged to put the present unemployed into some measure of productive employment — to increase their employment levels, he added. It is suggested though, that Government intervention “should try to avoid as far as reasonably practicable measures that make higher wages arbitrarily accessible to unskilled workers.” Eployers, he noted, should feel free, and be encouraged  to implement productivity incentives.