BOJ clarifies position on wage increases
Published:Friday | August 25, 2023 | 12:08 AM
Bank of Jamaica has issued a statement clarifying its position on the potential impact of private-sector wage increases on inflation, following news reports on Wednesday.
The full text follows:
Bank of Jamaica takes this opportunity to provide the full context of the bank’s responses to questions about the possible impact of wage increases on inflation at the Quarterly Monetary Policy Report press conferences of August 21, 2023, and May 22, 2023.
Bank of Jamaica’s position as reflected in the statement delivered by the governor at the August press conference, the responses to questions, and contained in the Monetary Policy Committee press release and the summary of decisions is that:
● At this time, large future wage adjustments in the context of the tight domestic labour market, constitute one of the potential headwinds that could result in higher-than-projected inflation in the future;
● If large wage increases translate into increased prices, there will be a cost-push effect on inflation;
● If wage increases are accompanied by commensurate increases in productivity, such wage increases will not impact the inflation rate;
● Generally speaking, wage increases at the level of the current inflation rate will not have a significant inflationary impact.
At the May press conference, the bank’s responses to questions about public-sector wage increases noted that:
● Wage adjustment to specific groups is not a matter on which the bank comments;
● All wage increases will impact inflation to some extent;
● Wage increases have a demonstration effect, which means that they could motivate persons who were considering a particular level of increase, to consider a higher level of adjustment;
● Bank of Jamaica assesses all wage increases, and the bank’s statements on the impact of wages on inflation take into account wage increases generally: the minimum wage, wage increase to civil servants, wage increase to parliamentarians, and wage increases in the private sector;
● Within the context of all prices and their contribution to inflation, the total figure reported for all recent public-sector wage increases did not constitute a large numerical impact on inflation.