THE MEMORANDUM of Understanding (MoU) between the government and the Jamaica Confederation of Trade Unions (JCTU) on wage restraints in the public sector is an unprecedented move toward the formation of a social partnership in Jamaica. Social partnership here can be construed as a process of consultation and/or negotiation between various stakeholders in a society, with one aim being integrating marginalised people on the labour market in a way that benefits all involved parties (government, trade unions, private sector and civil society).For the Government, this agreement is deemed as essential toward cutting the burgeoning fiscal deficit, but also a first step toward a more holistic partnership incorporating government, the private sector, workers and civil society. This method of achieving sustained economic development has been very successful in not only Europe (Ireland) but other developing countries within the western hemisphere with similar structural and colonial past as Jamaica, namely Barbados.
THE BARBADOS EXPERIENCE
Sir Roy Trotman, Barbadian trade unionist, states in his presentation on the Social Partnership Ten Years on: A labour Perspective, that in 1991 when Sir Lloyd Sandiford, then Prime Minister, informed the union leaders that the country was under threat of economic depression, the reaction by all was not who to blame, rather it was how they can singularly or collectively, working alone or with others, resist the threat while building up defences to prevent the return of this threat.
To this end, there was a need to limit government expenditure while increasing revenues, to reduce public wages and salaries, and to increase national competitiveness while removing subsidies and other protectionist measures from local industries.
Another threat that prompted the unification process was the perceived invasion by the IMF and the World Bank. The IMF method of rescuing the country out of its economic imbroglio involved devaluation and reductions in social benefits, particularly severance and pensions remunerations. The IMF also proposed that there be reductions in unemployment benefits and levels of expenditure on education, removal of free health provisions, and significant increases in water rates, public transport charges and public housing rentals.
For Barbadians, this would have been too much to bear, and the long term results were uncertain. This fear of uncertainty acted as great motivation to collaborate.
THE AGREEMENT
Consequently, the first social partnership in Barbados was formed in 1993 for a period of two years. This was the first negotiated protocol on prices and incomes policy for that country aimed at achieving sustained economic growth. As part of the agreement the exchange rate was maintained at Bds.$2.00 to US$1.00 and public sector workers took a eight per cent cut in wages which was repaid at the end of the agreement, with interest.
Additionally, public awareness and fear supported the view that by purchasing locally it would secure jobs for more people and that by seeking to export, the country would regain its stability. The government and other interest groups to the agreement recognised that labour was an important asset and, therefore, they took great care to protect the rights and interest of this group.
In fact, clause 2c in the first protocol stated, "labour shall not be required to vary the benefits and conditions, which it currently enjoys, unless it is for immediate general improvement, or by any such variation labour assists in effecting the long-term improvement in the conditions of those employed and creates jobs for the unemployed." The partnership is credited with achieving much.
The unemployment rate that was 20 per cent in 1992 fell to less than 10 per cent in 1999. The growth of the economy per annum ranged from three to five per cent and per capita GDP now stands at around US$10,000, placing Barbados in the category of high middle income countries or to put another way, just below a developed country.
Subsequent to Barbados' "social partnership" success, four protocols have been negotiated. The results of these protocols have been tangible.
For us, the big question is, can Jamaica achieve similar levels of success?
THE JAMAICAN CONTEXT
To begin with, the Government would need to exercise a great deal more fiscal discipline. There are too many incidences of missed targets, and when combined, these have all contributed to the problems we now face. For example, the Jamaican government's Medium-Term Economic and Social Policy framework (MTESP 2002) made specific reference to the control of real wage increases, that is, the government intended to exercise restraint in the growth of the public sector wage rates. Also, a commitment was made to reduce the central government's fiscal deficit, "specifically, the targeted medium-term fiscal profile [was] for the deficit of 4.4 per cent of GDP in 2002/03 to be turned into a small surplus by FY 2004/05" (MTESP 2002).
However, subsequent to these targets, the Minister of Finance has indicated that the government's wage bill has increased by 61 per cent over the period 1999 to present, which brings our public sector wage bill to 12 per cent of GDP, compared to the norm of eight to nine per cent for other similar developing countries. Also, from 1996 to 2002, Government employment rose to over 100,000 persons.
Additionally, before the drafting of the MoU, a commitment was made to begin a three year programme to bring civil servants salaries to within 80 per cent of their counterparts in the private sector. This increase in salary, coupled with the increase in the number of paid government employees has made the situation untenable.
THE MOU
So in December of 2003, when the government's gross overspending and loose employment culminated in a call for a public sector wage freeze, the trade unions representing public sector workers indicated that they were willing to accept a freeze or as they put it, constraints in wages, as a trade-off, if the Government was willing to forego job cuts as part of its cost-saving measures to cut public spending.
From this, an agreement was made between the Government and the Jamaica Confederation of Trade Unions (JCTU), in February of this year, to a two-year pay freeze in exchange for job security.
The deal is supposed to cover 42,000 public sector workers at all levels, including teachers, nurses, the police, civil servants, employees of public agencies, statutory bodies and government-owned companies.
The policy of wage restraint would be put in place for the period April 1, 2004 to March 31, 2006. Over the period there will be no creation of new jobs, filling of vacant posts or reclassification or upgrading of existing posts in the public sector; retroactive payments will be made in fiscal year 2005/2006 except where a payment schedule has already been committed; for those groups with a current contract that extends into fiscal year 2004/2005, further implementation of that contract to be delayed until 2006.
In exchange for the general policy of employment restraint with the exception of critical groups and the implementation of cost saving measures throughout the public sector, the partners have also agreed that the rate of inflation would be maintained within targeted bands of eight to nine per cent in fiscal year 2004/2005 and six to seven per cent in fiscal year 2005/2006. The aim is for growth rates of three per cent per annum over the period.
Dr. Davies is projecting a deficit of three per cent of GDP in 2004/2005 before eliminating the deficit altogether in 2005/2006. To realise these targets the Minister, who imposed a $14-billion tax package at the start of the fiscal year, would have to further raise revenues, more prudently manage the wage bill and reduce debt servicing costs. The MoU is being seen as an important step towards this end. It will require much discipline on the government's part.
SOCIAL CAPITAL IMPORTANT
One should take note, however, that in recommending the concept of a social partnership in Jamaica, Barbados' success hinged on its possession of a huge amount of social capital, defined here as the degree to which a community or society collaborates and cooperates (through such mechanisms as networks, shared trust, norms and values) to achieve mutual benefits.
The big question for us is does Jamaica posses this social capital? In addition to social capital, the nature of politics or political culture, policy style and the capacity of the state for effective policy management are equally important.
In moving forward, the attempts at a partnership to pull Jamaica out of this crisis should not be condemned, rather, greater effort and spotlight should be placed on ensuring that the state is consistent and effective in pursuing programmes that encourages fiscal prudence, transparent and accountable governance, and effective representation.For let us be clear, the crisis experienced by Barbados was cauterised by their partnership agreement. However, continued progress was guaranteed only by ongoing fair, effective and competent governance.
After 15 years in office, this government continues to fail in this regard, hence the need for a partnership. The trade unions have provided them with an opportunity to restore confidence. Let's see if they deliver this time.
Generation 2000 is an organisation of young professionals aligned to the Jamaica Labour Party. Send your comments to g2k@anngel.com.jm
