`Why Govt cannot now pay $14 minimum wage'
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`Why Govt cannot now pay $14 minimum wage'
Guyana Chronicle, Tuesday, March 13, 1979Flashback
Guyana Chronicle
September 4, 1999
GOVERNMENT cannot "reasonably implement" the planned $14 a day minimum wage this year.
This was announced by Economic Development Minister Desmond Hoyte in his Budget Speech yesterday when he declared that the economy has not got the capacity "to meet any increases in the minimum wage for the year 1979".
"The payment of this wage," he contended, "would require an additional $85m. There is no way in the absence of sharply increased production and productivity in which a bill of this magnitude can be met...Indeed such an increase can be paid only if the Government were to engage in massive retrenchment in the public sector and bring a halt to most of the capital projects. To do so would be an act of unforgivable irresponsibility. The consequences of such an act would be massive unemployment, runaway inflation, national bankruptcy, since the economy would grind to a halt."
Dealing with this aspect of the Budget in the 58-page presentation, Minister Hoyte said:
In August 1977, a Minimum Wage Agreement was signed between the Government and the TUC and implemented later that year. It made provision for the upward movement of the daily minimum wage from $5.50 to $8.40 in 1977, to $11.00 in 1978 and to $14.00 in 1979. The Agreement was part of a package which envisaged the institution of productivity-linked incentive schemes throughout the public sector in accordance with National Guidelines agreed between the Government and the TUC.
The proposed incentive agreements were a key element in the Agreement, inasmuch as they were intended to stimulate increased labour efficiency and generate higher production levels. This increase in production and in productivity was vital. It was agreed and understood on all sides that it was only from increased production that the economy could afford to pay the minimum wages and the consequential increases. Hence, the Agreement was described as an "act of faith."
Indeed, it was "an act of faith" since actual payouts were made before the National Guidelines for Incentive Schemes were agreed. It was "an act of faith" in that the parties to the agreement undertook to do everything in their power to ensure increased production and productivity. It was also "an act of faith" in that the Government was confident that the fact of a significantly increased minimum wage would in itself result in higher labour efficiency and in higher outputs.
The grim fact is that the Minimum Wage Agreement has not resulted in any improvement in the productive levels in the economy. In the meantime however, the public sector wages' bill has been ballooning disproportionately. In 1979 the wages bill is expected to be about $200 million over 1976 with the full implementation of the Minimum Wage Agreement. In 1978 the Minimum Wage Bill was $450 million, an increase of $125 million over 1976 and $80 million over 1977. In 1978 production was 5 percent lower than it was in 1976, but the public sector wages' bill was 47 per cent higher. In the circumstances of no growth, it is self-evident that the economy has not got the capacity to meet any increases in the minimum wage for the year 1979. The payment of this wage would require an additional $85 million.
There is no way, in the absence of sharply increased production and productivity, in which a bill of this magnitude can be met. To pay any increase in the circumstances of no growth would be to fuel an inflationary spiral. Indeed, such an increase can be paid only if the Government were to engage in massive retrenchment in the public sector and bring a halt to most of the capital projects. To do so would be an act of unforgivable irresponsibility. The consequences of such an act would be massive unemployment, runaway inflation, national bankruptcy, since the economy would grind to a halt.
The Government cannot abdicate its responsibility to all the people of Guyana or shirk its duty to preserve the integrity of the nation. The Government does not propose therefore to engage in any act of irresponsibility.
To allow the increased minimum wage of $14.00 to be paid out Government would be forced to retrench 10,000 workers now engaged on public sector capital projects in addition to thousands of other workers in both Central Government and other public sector. The payment of the increased minimum wage, in circumstances of no growth in 1979, would result in the major public sector corporations suffering heavy and unsustainable losses in their operations. Given the nature of their exports, these corporations would be unable to pass their increased costs by increasing their prices; and there would be no way in which these corporations could be subsidised. They would collapse with all the frightening consequences for their employees. GUYSUCO for example would make a loss of some $17 million and total losses and public sector corporations would be somewhere in the vicinity of $50 million..."
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