“Despite massive and growing oil revenues, life remains a daily struggle to make ends meet for many citizens and households.” So said the A Partnership of National Unity and Alliance for Change (APNU+AFC). Addressing the media last Thursday, the coalition noted the living standards of many Guyanese families continue to decline as their incomes have reduced or stagnated, and the cost of living continues to increase and is increasingly burdensome. “As a result, Jagdeo and the PPP government are facing mounting pressure from a dissatisfied populace.”
The coalition went on further to say that despite Guyana’s oil wealth, “the incompetent and uncaring PPP government continues to deny livable incomes to workers and other struggling Guyanese by hiding behind two big hoaxes. The PPP’s first hoax is to claim that higher wages and more generous social programs will spur higher inflation. Realizing that this hoax is no longer fooling anyone, Bharrat Jagdeo and the PPP have more recently resorted to the Dutch Disease as their new bogeyman. At our Press Conference today, we intend to bury both hoaxes once and for all.”
To this end the APNU+AFC made known the following:
Inflation
We start with the PPP’s inflation hoax. Let us remind Guyanese of two occasions where substantial salary increases did not lead to higher inflation. The first occasion is the Aubrey Armstrong Arbitration Panel Award for public servants and the Malcolm Rodrigues Arbitration Panel Award for teachers, both of 1999. The Armstrong panel awarded 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.
The PPP government then (as now) invoked doomsday scenarios, declaring to the nation that the awards would precipitate economic disaster by widening budget deficits and sending inflation through the roof. Yet, in the aftermath of the payouts to the roughly 30,000 public employees over a few months, inflation actually dropped from 8.6% in 1999 to 2.6% at the end 2001.
Wages/salary increases
On the second occasion, the 77% increase in public sector salaries from 2016 to 2019 under the Coalition government produced negligible price increases—that is, no runaway inflation.
We believe the government today can substantially increase the disposable income of Guyanese households without any great risk of higher inflation because 1) there are high volumes of unsold merchandise in the market, and 2) suppliers, importers and local producers can respond quickly to increased demand, once bottlenecks (such as delays in the granting of import licenses) are methodically removed.
The PPP’s excuse that an increase in disposable income will result in the DUTCH DISEASE is the second big hoax. The Dutch Disease mostly refers to the appreciation of a local currency and the resulting effect on the export sector and the non-tradable sector. An appreciation of the Guyana dollar, for example, could make our rice and other exports more expensive and less competitive, resulting in the overall decline of the non-oil sector. Paying livable wages or guaranteeing livable incomes has nothing to do with it.
What is paradoxical is that the government’s refusal to substantially increase the real incomes of most Guyanese in this time of plenty has created a dangerous gap between the economic fortunes of oil sector relative to other sectors. If workers can readily earn wages several times higher in the oil sector than any other, then our traditional industries will lose their existing employees and fail to attract new ones. The IMF describes this as being the “resource movement effect” of Dutch disease, in which labor and capital are drawn to a dominant industry, causing others to underperform. If we continue to keep wages low in the public and non-oil sectors, we may soon find that Guyana produces little else beyond oil. The government must therefore pay Guyanese workers a livable income.
Labour shortages
Recent complaints about labor shortages in the rice industry are an early warning sign of this. A recent editorial in the Stabroek News highlighted the fact that the rice sector in Berbice is currently faced with an acute labour shortage, including a shortage of tractor operators, likely caused by the migration of workers to the oil and construction sectors. Similarly, the GGDMA just last week sounded alarm bells over the migration of labourers away from the gold industry towards the coast.
Increasing salaries, raising the tax-free threshold, spurring the growth of small businesses, among other measures we have highlighted, will ensure that the labor market does not skew toward oil and gas activities.
The contradiction in the PPP’s position, therefore, is that suppressing wages and salaries could induce the very Dutch Disease conditions it is using as a big hoax. Increasing wages and salaries across the board prevents the emergence of such activities. But just as critical, higher wages ensure that the country can retain its teachers, medical workers, and university graduates.
The twin bogeymen of inflation and the Dutch Disease
At the end of the day, the PPP’s use of the twin bogeymen of inflation and the Dutch Disease to deny Guyanese a livable income merely exposes what’s fundamentally flawed and heartless with its approach. They do not see that guaranteed livable incomes to all Guyanese are i) the moral obligation of any proper government, ii) the human rights of citizens to a decent life, and iii) an economic investment in growth and development. The government continues to operate in a way that satisfies and promote the interest of their wealthy elite, friends, families and favourites.
