Fiscal commissioner sounds alarm over risk if expenditure on public sector salaries not anchored to economic growth
Fiscal Commissioner Courtney Williams is suggesting that the Government reintroduce what he describes as a “fiscal rule” on wages and salaries in order to “hold wages and salaries expenditure in check”
At the same time, the Independent Fiscal Commission, headed by Williams, has recommended that the administration make urgent steps to accelerate other targeted areas of the public sector transformation programme, including shared services and outsourcing selected services. These steps would complement the overall compensation restructuring exercise, he added.
In his first Independent Fiscal Commission’s Economic & Fiscal Assessment Report (EFAR) to Parliament, Williams outlined that compensation of government employees is programmed at nearly $496 billion for financial year 2025-2026, comprising new rates of pay for several groups as well as retroactive payments due to medical consultants and the judiciary.
EFAR reviewed the Government’s fiscal policy paper (FPP), which is provided for in the Independent Fiscal Commission Act, 2021 (IFC Act) and the Financial Administration and Audit Act (FAA Act).
In its review, the commission noted that all expenditure categories for the central government are budgeted to decline relative to gross domestic product (GDP) in 2025-2026, except wages and salaries, which remains elevated and presents a source of fiscal risk if not anchored to growth in the economy.
The Planning Institute of Jamaica (PIOJ) has projected that the economy is expected to contract within the range of 0.5 per cent to 1.5 per cent for the 2024-2025 financial year.
The review of the FPP was previously done by the auditor general of Jamaica.
Williams noted that wages and salaries are projected to rise by $38.7 billion to $463.4 billion compared to the $424.7 billion estimated to be spent in fiscal year 2024-2025.
Wages and salaries as a share of GDP are projected to end 2025-2026 at 13.3 per cent and remain unchanged through the medium term.
According to the fiscal commissioner, the medium-term trajectory is for a flat wages-and-salaries-to-GDP ratio, at an elevated 13.3 per cent.
However, he observed that wages and salaries as a percentage of GDP [or expenditure] have been on an upward trajectory in recent years.
However, St Patrice Ennis, president of the Jamaica Confederation of Trade Unions (JCTU), questioned any proposal that could lead to wage constraints or wage freezes.
The JCTU head argued that public sector workers had been through a long period of wage freezes and wage constraints from 2000 that led to a massive exodus of personnel with critical expertise from the service.
He cautioned that before any consideration is given to wage constraints and wage freezes, the country must decide what kind of public sector it wants.
Ennis said the country must decide what the public sector should do and pay for. Secondly, he said Jamaica should determine what the public sector “should not do and should not pay for”.
On the question of what the public sector should do and pay for, Ennis cited areas such as health, education, fixing roads, and public transportation.
He said if health services and bus service are expanded, the wage bill in the public sector would also increase.
The union official noted that the health ministry held a job fair recently, saying it wanted to fill more than 600 vacancies in the sector.
“The Government has clearly identified the need for more public sector workers – holding job fairs to fill vacancies, expanding bus routes, and proposing to build a new hospital in Portmore. What are you going to do? Take the doctors and nurses from another hospital and staff it?”
Operating in a global economy, Ennis said persons who have skills that are in high demand are going to go to places where they are paid more or otherwise rewarded more handsomely.
Pointing to a World Bank study, the JCTU boss indicated that about 80 per cent of graduates of tertiary institutions in Jamaica leave the country for greener pastures.
“No country can develop by exporting its talents. Nonsense! I have never seen any country develop on remittances. Nonsense! The greatest assets of any country is its human resources. We must keep them here,” Ennis said.
“I don’t know where we get that argument and who is perpetuating it, but somehow it seems to have found roots here where we believe it is OK for our best talents to leave us and leave who, lumpens?”
He said one of the reasons that a compensation review exercise was initiated was because the public sector could not retain people with skill sets that are in demand.
