Dear Editor,
Now that lack of funds is no longer a good excuse, the government’s presently-favoured rebuff of demands by public servants and teachers for large salary hikes is that such hikes spur inflation. As this pretext can be used forever, it follows that no pathway to prosperity through paid work exists for many Guyanese under a PPP regime. But is it true that large salary increases would fuel runaway inflation in Guyana, as the PPP claims? Does the PPP truly believe this? Let’s turn to recent history as one source of answers.
The best case studies are, of course, the Aubrey Armstrong Arbitration Panel Award for public servants and the Fr. Malcolm Rodrigues Arbitration Panel Award for teachers, both of 1999. The Armstrong panel awarded the 11,240 public workers salary increases of 31.06% for 1999 and 26.66% for 2000. The Rodrigues Panel awarded teachers an increase of 10% at the bottom scales and 12% at the top for 1999 only. As would be expected, the PPP government raised a ruckus, predicting that the awards would precipitate economic calamity through gaping budget deficits and skyrocketing prices. To determine what actually occurred (both in terms of economic numbers and government honesty), a review of the PPP Budget Speeches between 1997 and 2001 would do. What do they tell us?
At the end of 1997 and 1998, inflation stood at 4.1% and 4.6%, respectively. The first payouts to workers were made in late 1999, retroactive to January 1999. At the end of 1999, inflation rose to 8.6%, but the then Minister of Finance in his 2000 Budget Speech in March 2000 explained that this uptick was due to several factors, foremost among which were a weakening Guyana dollar and increasing fuel prices. Absolutely no blame was cast on the salary awards. In fact, the Minister declared to the House that “through careful management the Government was able to neutralise the adverse effects these increases might have had on the economy.” So, within a few months after the awards, the apparent government fears over economic havoc mysteriously vaporised.
The Minister then announced the government’s intention to pay the awarded 26.66% pay hike for public servants, effective from January 1, 2000, and based on their wages and salaries at December 31, 1999. This payout was extended to teachers and members of the disciplined forces. Despite these massive outflows, inflation was projected at 9.5% for 2000, with the wage awards again conspicuously absent from among the three stated causes expected to fuel inflation (high oil prices again being one of them). In the 2001 budget, the government reported that inflation in 2000 was actually 5.9%, well below the projected 9.5%. Inflation in 2001 was projected to reach 6%. From the tone and content of the 2001 Budget Speech, the arbitration awards were already an economic and financial non-issue.
The 2001 projected inflation of 6% was however wrong too. At the end of 2001, it was actually 2.6%. So, after two large cumulative salary raises covering around 30,000 public employees, and paid out over a short span of time across 1999/2000, inflation in Guyana dropped from 8.6% in 1999 to 2.6% at the end 2001. Other economic numbers belied the predictions of economic collapse. The Central Government deficit decreased from 8.8% of GDP in 1998 to an average of 6% over the following 2-3 years. In addition, the anticipated “negative” impact on private sector wages never materialized. All the doomsday scenarios turned out to be myths. The unions were therefore correct to then remark that if the Government had the political will to pay the increases, a way could be found to do so. That remains true today.
As the historic evidence shows, the government’s repeated use of the inflation bogeyman is a hoax to deny Guyanese workers a living wage and to entrap ordinary Guyanese in a perpetual state of dependency on Freedom House.
Sincerely,
Sherwood Lowe
