Public sector wage target at risk
Published:Wednesday | October 24, 2018 | 12:00 AM
The Jamaican Government is largely on track with its fiscal programme, but the wage bill remains a problem it still cannot tame.
Auditor General Pamela Monroe Ellis has deemed to be at risk the target to reduce the ratio of wages paid to public-sector workers to nine per cent of gross domestic product, or less, by the end of this fiscal year.
In a review of the interim Fiscal Policy Paper for 2018-19, Monroe Ellis notes that the report projects compensation of employees to be in line with the original budget, but in breach of legislated targets.
That projection for wages and salaries, being 9.1 per cent of GDP, would be above the legislated target of 9.0 per cent set out in the Financial Administration and Audit Act, as amended in 2016.
The wage target is a primary objective of the economic reform programme that the Government is committed by law to achieve, Monroe Ellis noted in an examination carried out earlier this month of the interim Fiscal Policy Paper laid before Parliament on September 25.
The wage target was the only fiscal goal branded as "at risk" in Monroe Ellis' report. The targets for fiscal balance as well as cutting the debt ratio to 60 per cent of GDP by 2026 are on track, while she is maintaining watch to ensure that deviations from the national Budget does not result in negative outcomes for the legislated fiscal programme.
The report projects wages and salaries to increase to 9.1 per cent of GDP, or $185.27 million, by end-March 2019 from the 9.2 per cent, or $178.36 million, recorded at the end of fiscal year 2017-18.
he nominal wage bill accords with the budget, but the finance ministry "concedes that should the outstanding wage settlements with some smaller bargaining units and the Police Federation exceed the provisions made in the four-year offer, this would pose a risk to the expenditure budget, the overall fiscal programme, and the achievement of the 9 per cent wage to GDP target," the auditor general noted.
The ministry's monthly reports on central government's operations place the expenditure on wages up to July at $61.27 billion. That's $236 million less than budgeted, but it comes within a context where the Government shaved $7.42 billion overall from its planned expenditures in the same period. Government spend totalled $188.5 billion over the four months, less than the budgeted $195.96 billion.
"Even with a trend decline in wages and salaries for April to July over the last five years, the category continues to command the largest share of the expenditure budget since FY2013-14, highlighting the importance of the government's targeted realignment of this expenditure item to increase fiscal space," Monroe Ellis added.
She also noted that while statutory deductions may rise due to wage increases, the adverse impact of higher-than-planned wages and salaries significantly outweighs the additional tax receipts.