Low public sector wage offer means billions of dollars savings in the Private Sector

The rather unusual call from various sections of the private sector for the public sector workers to take the 5% offer over two years had me thinking for a second. The private sector is claiming that keeping public sector wage increases is key to the GOJ meeting IMF policies and any large scale increase would derail the “progress” made thus far.

One would be led to believe that the private sector by virtue of these announcements are firmly in the corner of the PNP and will in fact support the governments effort to keep wage increases as low as possible.

Dennis Chung noted that any large increases granted would be wiped out in no time due to rise in inflation as a result of increases in the prices of good and service as the GOJ would now raise taxes to support the salary increases and guess what he is right on that score.

I decided to dig a little deeper however as I know the private sector in Jamaica does not support anything unless that group stands to benefit in some way or the other . My assessment could be wrong, but more often than not I have gotten it right so here goes.

The CIA World fact book, puts the work force in Jamaica ( 2014) at 1,311,000 million. Now that should be the number of people employed and not the number of people employable.  I am going to however use the figure as the number of people who are at the age to be employed ie employable.

They also state the unemployment rate as 13.6%, so I will use this figure to determine the number of people who are actually (estimate). Using the figures above, it would that the actual number of people employed is about 1,132,704 but I will  1,132,000 for ease of calculation.

The Private Sector Assessment Report conducted by the Inter – America Development Bank in 2014 ( http://competecaribbean.org/wp-content/uploads/2015/02/2014-Jamaica-Private-Sector-Assessment-Report.pdf)  says that 90% of the work force is employed in the private sector.

They further breakdown the figures as follows.

• Agriculture, forestry and fishing 16.4%
• Manufacturing 6.0%
•  Construction 8.3%
• Wholesale and retail 18.8%
• Hotel and restaurant services 7.9%
• Transport, storage and communications 6.3%

Statin in its 2013 report have the number of workers employed in the major industry group at 173,000, these include mining and finance, which were not highlighted about.

In its 2013 report Statin states that the average worker in the major industry groups ( salaried and hourly) took home an average of $19,600 per week. If we assume that workers wages went up by 5% between then and now, then the average weekly wages would be in the region $20,500 per annum.

Using this estimate and the total work force  of 173,000 it means the annual wage bill in the private sector( as described above) would be about Ja$184.42B .

I will use this figure as a conservative estimated of wages in the private sector ( formal) and the group that people like Dennis Chung and other represent.

Now every 1% the government increases public sector wages by, it adds $1.65B to the existing wage bill of $165B.

The wages that are offered to and accepted by the public sector will in my mind set the benchmark for salary increase in the private sector. If we look at the numbers, it would show that for every 1% of wage increase, this will add a whopping $1.84B to the wage bill in the private sector.

A settlement of the public sector with government of 5% and not the 7% now on the table, would have meant a savings of $3.68B over the next two years in the private sector.

So, the private sector vociferous appeal to the public sector worker to be patriotic and accept 5% , really is about that group saving in the order of $1.84B for every 1% the government adds to its offer and that is just not acceptable.

The private sector is therefore putting its mouth where its money is. ( it used to be put your money where you mouth is)

The above is not all, because for every $1.00 earned in wages the private sector, there is another $0.30 – $0.35  paid in benefits to these workers ( health insurance, laundry, clothing, meal, transportation, uniform, shift premium, height and heat allowance etc).

When factored in, the total payout could be in the order of $2.2B in additional pay.

It there means the private sector leaders have 2 Billion reasons to speak 🙂

Bless