Wage policy and negotiation

It certainly can be argued a Finance Minister needs to convey the economic reality to the population, which simply answers the question are there enough revenues to sustain an increase in wages? He must also assess the economic impact of the wage demands on the economy. Over the three-year period he has to convey what the expectations are for economic recovery, what are the down side risks to the economy; would we have to borrow to pay for increased wages in the public sector? He must ask also what will happen to the external accounts if there are salary increases and if the anticipated increase in the prices of our hydrocarbons does not materialize. What will happen to the exchange rate if aggregate demand increases and imports rise without the commensurate increase in exports? Does the Minister run the risks of increasing the likelihood of a down grade if aggregate demand is not curbed and the foreign exchange decreases at too rapid a rate?

The Minister must also be concerned about the increasing unemployment rate and the impact increased wages can have on employment in a recession. What is the priority preserving jobs or gaining political popularity through wage increases? The Minster must separate the demands which he has no intention of fulfilling or giving, either on a question of principle or due to economic incapacity.

If we are honest we can identify the factors or criteria which have influenced pay increases through collective bargaining to include enterprise profit, job evaluation, seniority, cost of living, manpower shortage or surplus, the negotiating strength and skills of the parties. Admittedly we have never given priority to performance measures such as productivity or profit related to groups or individuals in collective bargaining, or have we?

A critical aspect of wage negotiations is good faith. The ILO has argued that collective bargaining is workable only if the parties bargain in good faith. If not, there will be bargaining without a possible agreement. The ILO has stated that good faith is most possible when certain attitudes are shared among employers, workers and their organisations eg a belief and faith in the value of compromise through dialogue, in the process of collective bargaining, and in the productive nature of the relationship collective bargaining requires and develops. It appears that unions may with some justification believe that there is a lack of good faith displayed by the Minister hence the need for an intervention by the Prime Minister. Let us not damage beyond repair dialogue among two key stakeholders during a difficult economic time. We have entered the realm of political economy which is as much a science as it is an art