Alfred Dawes | Civil servants: The real MVPs
Jamaica’s economy is taking off. Unemployment and inflation are low, consumer confidence is high, and the stock market is booming. International accolades are pouring in on how well we have reversed our fortunes as one of the most indebted countries in the world at the brink of default, into one where, for the first time in our history, we are seeing high rises and impressive roadworks across the country.
While our leaders tussle for the credit for the turnaround, we forget the true heroes whose sacrifice has made this all possible. The nurses, doctors, police, teachers and other government workers who shouldered the burden of the austerity package that laid the foundation for our economic optimism.
It is no secret that the government of the day underestimated the effects of the Great Recession. Mismanagement of the country’s finances and external forces conspired to see our debt to gross domestic product (GDP) ratio balloon to 147 per cent of GDP. We were in the company of countries like Greece, where civil unrest and near anarchy reigned.
Failed International Monetary Fund (IMF) tests and a Kafkaesque economic uncertainty highlighted that chapter in our history. With two debt exchanges and renegotiations of deals with the IMF, we entered into a structured debt reduction programme. The critical components of this agreement were a primary surplus of 7.5 per cent of GDP – the highest such requirement of any country seeking IMF assistance at the time; and to increase this difference between government revenue and expenditure – a draconian tax package, and wage restraints for government employees.
These burdens were placed on civil servants who had already been subjected to years of wage freezes. Sacrifices in the name of economic stability and promised deferred gratification led the workers to accept the freezes and later on the bitter medicine of austerity. During that time inflation and devaluation ate away at their wages. The grocery bags became lighter and lighter as the pay cheques shrank in value. The NHT benefits seemed to always be just out of reach and the meagre savings became less each year. New taxes meant even less to squirrel away for a rainy day. They became poorer and poorer in real terms but they held strain because there was no other way to get the country out of debt. The unions grudgingly bought into the freezes with the hope that once things improved, they would be licking their chops at the negotiating table.
The wage freezes and increased taxation worked. Government income went up and expenditures went down over the life of the IMF agreement. The debt to GDP ratio steadily declined and is currently below 100 per cent of GDP for the first time in two decades. International rating agencies took note and steadily improved our debt ratings, making it cheaper for the Government to borrow. With lower interest rates on government paper, private money looked for alternative investments for good returns.
The anaemic stock market suddenly became attractive and asset prices began to soar by thousands of percentage points. Naturally, a real estate boom was to follow and housing starts became more and more expensive. Jamaica became the poster child for IMF interventions in indebted countries. As a reward for our fiscal discipline, the primary surplus target was reduced, allowing the Government to spend more. And spend they did.
But was any meaningful effort then made to fulfil the promise that if civil servants held strain during the rough times they would be rewarded when the economy was more stable?
The answer is a resounding no.
The real value of civil servant wages is still less than what it was prior to the wage freezes and austerity packages. With this salary cut, a significant portion of their take-home pay is spent on subsistence – food, clothing, shelter and transport.
With no meaningful salary increase in sight, there is no hope for a teacher or nurse to aspire towards the luxury apartments or cars flooding the wharves. There is no way of partaking in the economic boom that is confined to those in certain echelons of the private sector.
Yes, the stock market can deliver significant returns. But what is a 90 per cent return on the $10,000 invested in Wigton compared to a one-percenter’s $10 million earmarked for investments.
WORST PART YET TO COME
The truth is that it is the sacrifice of the government worker that has led to the economic stability that in turn has paved the way for tremendous wealth for those in the private sector. It is the sacrifice of the middle class that has ironically led to a widening of the gulf between rich and poor.
Economists will lay out enough reasons why even lifting the real value of the wages of the civil servants to pre-austerity levels will derail the economic programme. And that would probably be true, because that is the way of free market capitalism.
The worst part of this story is yet to come. There are indicators pointing towards a recession in the United States. Our explosive growth in stock prices is not sustainable, especially in a world where the US is experiencing negative growth.
Eventually, Jamaica will experience a downturn in the economy. When that happens and government revenues fall, we can guess who will be again called upon to make the sacrifice to ensure that the economy recovers. And for that I want to say thank you in advance to the real MVPs of our economy – the government workers.
- Dr Alfred Dawes is a general, laparoscopic and weight loss surgeon; Fellow of the American College of Surgeons; former senior medical officer of the Savanna-la-Mar Public General Hospital; former president of the Jamaica Medical Doctors Association. @dr_aldawes. Email feedback to firstname.lastname@example.org and email@example.com