A Contextual Analysis of the Public Sector Wage Increase

The Oil Revenues
THERE is another view by some proponents that the government should tap into the Natural Resource Fund which has just over US$500 million to pay a better increase to the public servants. While this may sound like a good idea, it is not prudent to do so for several reasons.

1) The Natural Resource Fund’s legislation in its current state was enacted during a period in which the legitimacy of the government was questionable to do so–that is, the period under which the government was in a caretaker mode having lost the no-confidence motion brought against it in 2018.

2) The current government has committed to revising the legislation of the fund to ensure greater transparency and accountability, and, overall, allow for prudent management of the fund. Until this is done, it is not prudent to spend, withdraw or invest any monies from the fund.

3) The revenues earned from the oil resources ought not to be treated as the traditional, organic revenue of the State. Oil as a commodity is volatile, the global industry is declining and therefore, the larger part of the fund needs to be utilised to accelerate Guyana’s development in physical infrastructure, social infrastructure, national security, improved competitiveness etc., all of which will ultimately result in long-term sustainable income being generated for years and generations to come well after oil no longer a lucrative commodity. This reality is quite inevitable premised on the global agenda of energy transition to cleaner and renewable sources of energy.

4) In other words, it must be understood that with the oil wealth, policymakers have a responsibility to utilise and manage the resource wisely and prudently to fast track Guyana’s development, wherein what Guyana could potentially achieve in 50 years without oil, we should be able to achieve in half the time, 25 years. This is essentially what the oil resource means and how it should be treated. So, for example, if it would have taken Guyana 50 years to achieve per capita income from US$5k to US$60k, we should be able to achieve this in 25 years.

Conclusion
Having conducted a fairly comprehensive contextual analysis herein on the public sector wage increase, the incremental increase of seven per cent which is above inflation at mid-year of 5.6 per cent is decent. The total employment cost for public servants is within the highest range that can be fiscally permitted relative to the State’s current revenue.

It should be appreciated that the reality is such that to pay better wages to public servants and to increase the overall wealth of the country, it is critical to focus on private sector development, continue to incentivize the private sector and to attract new investments both locally and from FDIs. In so doing, the organic revenue of the government will grow in a more broad-based and sustainable manner (horizontal growth).

Any other approach to growth (vertical growth) other than that which is the current philosophy, will be a recipe for bankruptcy and economic devastation in the long-term, not only for public servants, but for every household and private enterprise. The analyses presented herein provide sufficient empirical evidence to corroborate this view.