Dear editor,
Further to my letter published in another section of the media on December 11, 2023, and in the print media on December 12, 2023, I would like to address some other aspects on the subject of “public sector salary increases” for your readers.
A few prominent commentators suggested that the percentage increase could have been higher than 6.5 per cent to 10-15 per cent since the cost-of-living situation remains elevated.
Be that as it may, it is of importance to remind observers that with regard to the issue of cost of living, the government instituted a number of measures, subsidies included, in response to this reality, and those measures have largely been maintained to date.
These include: The several cash grants including for the school children; reduction of the excise tax from fuel imports from 50 per cent to 0 per cent ; reverting the shipping freight computation to be based on the pre-covid formula; subsidising the increased generating cost, i.e., the fuel cost for GPL and GWI; maintaining the subsidised electricity in Linden; Increasing the tax threshold; increase in old age pension and cash grants provided to other vulnerable groups; the part time jobs; and subsidy (building materials) for first time home builders.
One would also recall that in the first “emergency budget” by the government in 2020, that they had reversed a plethora of punitive taxes, fees, and VAT on a long list of consumable goods and services.
The reversal of these taxes alone resulted in an instant reduction in the tax burden for taxpayers to the tune of nearly $60 billion annually.
This in turn would have translated to an additional disposal income of $80,000 per person or $200,000 per household annually. With that in mind, the combined cost of all of the above, together with those that would translate to foregone revenue to the national treasury, such as the reduction of excise tax on fuel from 50 per cent to 0 per cent ($20 billion annually), is an estimated $200 billion per annum.
Effectively, this has an indirect impact per household that is almost akin to a cost-of-living subsidy of roughly $667k annually/per household.
Furthermore, readers would recall that in my previous letter on the subject, I had illustrated that the cumulative salary increases that the government implemented since 2021-2023, taking into account the upward adjustments for various categories of public sector employees, is an average of 46.1 per cent.
This would translate to an average annual (nominal) increase for the period (2021-2023) of 15.4 per cent. However, in real terms―that is, when adjusted for the total inflation for the period (2021-2023), which was 17.7 per cent, the real average increase for the period observed is 28.4 per cent or an average of 9.5 per cent annually.
Henceforth, considering the analysis presented herein and in previous referenced article, it is safe to conclude that the average annual salary increases in nominal terms for the period 2021-2023 is 15.4 per cent; and in real terms is 9.5 per cent on average. With respect to the cost-of-living measures instituted by the government to help cushion the impact at the household level, these measures altogether have the equivalence to an annual subsidy of $667k per household (indirectly) or $200 billion annually in costs to the national treasury, inclusive of foregone revenues.
Yours respectfully,
Joel Bhagwandin
