Don’t rule out imposition of wage freeze, says top economist

BRIDGETOWN, Barbados, CMC – One of the region’s top economists says in the face of the global economic downturn Caribbean governments cannot rule out the imposition of a wage freeze as a means of controlling expenditures.

”It is one of the options that ought to be considered. It ought to be on the table,” President of the Caribbean Development Bank (CDB), Professor Compton Bourne, told reporters on Friday in response to a raging debate in Barbados over the proposal.

The David Thompson administration has mooted the idea, while warning that any slight increase in the public sector wage bill will have serious implications for the island which is presently seeking to avoid layoffs, a reduction in wages and a cut back in social spending.

The matter is already generating much public discussion with the government expected to present its wage freeze proposal at the National Economic Consultation in March.

However, asked to give his views on the matter, Bourne said while he did not have all the Barbados numbers, he believed an argument could be put forward for keeping the issue on the table.

“I don’t think that any government now can start…by saying a particular option is not for consideration. I think it has to look at all the major blocks of expenditures and make a decision,” he said, noting that Jamaica has already taken the leap in imposing such a measure.

“It has its wages, it has its debt service and it has to decide where it can maneuver,” the economist said.

The CDB President also commented on the newly-signed agreement between Jamaica and the International Monetary Fund (IMF), saying he has not seen anything “objectionable” about the US$1.27 billion agreement that will be implemented over 27 months.

“I saw a clear understanding of the need and acknowledgement by the government to seek to increase social spending in particular areas to protect the severely disadvantaged so I don’t see the agreement as being the devil’s work,” he said, while suggesting that the IMF has come a long way from the bad name it got in the 1970s and 80s when it was associated with austerity programmes in the Caribbean.

With other Caribbean countries such as Antigua and Barbuda likely to go the IMF route, Bourne said there was a definite need at this time for countries to control expenditures.

“In a situation where revenue position is being continuously weakened by the downturn in the domestic economy and in which their access to international financing other than through the new expanded IMF quotas is difficult, they have to manage their expenditures more carefully and their expenditures cannot grow significantly and I think in that context governments have to look at where do they make the adjustments where is there scope for restraint in public expenditures,” he said.