Wage demands threaten debt exchange gains

The Jamaica Teachers’ Association (JTA) must be in another world. Last week media reports indicated that the teachers’ union was preparing its two-year wage claim for Government.

This, when the International Monetary Fund is on the verge of signing a 27-month stand-by agreement with the Jamaican Government. The agreement calls for, among other things, the freezing of public sector expenses which by extension includes salaries.  Also, as part of budgetary constraints, the Government has announced that the allocation for tertiary education will remain at 2009/2010 levels, which means it’s likely that tuition fees for students at the University of Technology, and the University of the West Indies are likely to go up.  The prospect of this prompted UWI students to demonstrate preemptively last week.

So against this background, I view the move by the JTA at puzzling. Is the JTA not part of the discussions the Government has held with the Jamaica Confederation of Trade Unions under the memorandum of understanding?

Paying the JTA and other public sector employees higher wages will only  reverse the gains of the Jamaica Debt Exchange programme and push the Government to borrow from the local market at increased rates; so we’ll be back at square one.

It is, therefore,  critical for Government to keep inflation low in order to discourage pressures for increased wages. This means keeping the foreign exchange rate stable, as well as being prepared to roll back the latest petrol tax if the price of oil rises significantly on the international market. Government should also tread carefully in the proposed increase of property taxes and user fees in government agencies.

Warning: if inflation rises significantly, then local investors will begin to demand higher returns on their investment income. We’ll be back at square one.

What say you?