PRIME MINISTER Portia Simpson Miller and her Finance Minister Dr Omar Davies are, as expected, clearly pleased with Tuesday's signing of the agreement with most of the major trade unions which will, over the next two fiscal years, place a cap of 20 per cent on the growth of wage bill for public sector employees.
Given those unions which have already signed the pact, it is reasonable to expect that the recalcitrants, particularly the teachers and nurses union, will eventually be forced to come aboard -- and sooner rather than later.
It all makes sense for Mrs Simpson Miller and the administration. For the MoU will help to keep the growth of the wage fund below the projected level of inflation up to fiscal 2007/2008, and assuming the absence of a pre-election madness and another decision by the administration to "run with it", the Government could very well achieve some of the targets set out in the MoU. It could very well hold the public sector deficit to three per cent or under this fiscal year and perhaps balance the budget next year. Single digit inflation is not beyond the realm of possibility for 2007/2008.
The wild card, given the Government's record on such matters, is the issue of economic growth -- projected at between three and four per cent over the next two years. This raises other issues about the agreement with the trade unions and whether some of of its critical objectives represent the most efficacious public policy.
Indeed, a recent study of the performance of the Jamaican economy by the Inter-American Development Bank (IDB), presented at a conference in Kingston this week, underlined some of the critical issues. The country has, in recent years, enjoyed high levels of foreign direct investment (FDI), at a rate of up to 30 per cent of Gross Domestic Product.
Other countries with similar levels of FDI tend to enjoy growth rates of up to six per cent. In our case, economic growth rates have, at best, been anaemic. We have struggled to get growth of two per cent a year.
Part of the problem, the study suggests, are the built-in incentives to perpetuation, if not expansion, of economic informality; the growth of the grey sector at the expense of the formal economy. Doing formal business is expensive, with low levels of returns compared to the informal sectors.
A significant driver for this, we suspect, is the bureaucratic inefficiency and the significant levels of corruption that are invasive in Jamaica, caused, in no small measure, by the quality of the public bureaucracy. It has been politically expedient to maintain a large, but not necessarily the best or most efficient bureaucracy.
The critical questions, it seems to us, is whether labour market arrangements and the maintenance of the public bureaucracy as contemplated by the MoU are in the best interest of Jamaica. Perhaps it is time to determine what is the most effective employment level for the public bureaucracy, who would be the most efficient and the real cost of maintaining them. The next step is to do what is right.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
