Jamaica Gleaner
Published: Sunday | February 1, 2009
Home : Commentary
Recession requires creative response
Those nasty global economic winds from which Jamaica is already reeling have begun to concentrate minds here, leading in some instances to new and creative ways of doing business.

This nimbleness, on the evidence so far, is primarily the preserve of the private sector as firms and their employees seek ways to save jobs.

There was, for instance, the agreement last week between Berger Paints Jamaica Ltd and the trade unions representing its employees under which most staff will work four eight-hour days a week. The result from this rotation system will be to save scores of jobs and about $70 million in expenditure by the company over the next six months. In other words, here is an effort at enhancing the financial viability of Berger, with positive consequences all round, including for the broader economy.

less work time

There is, too, an arrangement at Alumina Partners which, in the face of the collapse of the market for its products, has to cut output by 50 per cent. To forestall the loss of hundreds of jobs, employees agreed to less work time, which will save the company compensation costs. Similar schemes are cropping up across the private sector.

We make no pronouncement on the longer-term efficacy of such deals, but they demonstrate a willingness of people to think outside of the box and to make sacrifices in an effort to ride out the crisis. Unfortunately, no such approach, or worse, no hint that something ought to be done, is as yet evident from the public sector. Yet, nowhere is the crisis so clear as in the Government's finances.

fiscal deficit higher than projected

Between April and December, the first nine months of the fiscal year, the fiscal deficit, net of loan receipts and amortisation, at $58.3 billion was $10.9 billion, or 22 per cent worse than it was projected to be. Indeed, the projected deficit for the entire fiscal year was $43 billion.

There are three primary ways to close that gap: for the Government to borrow more; cut back on spending; or improve its flow of revenue, including its tax take. Or, the Government could opt for a combination of all options.

The Government has already ramped up its borrowing and has reduced spending. It is expected to bring new tax measures when it presents a new budget in April. But there is much more to be done if the administration is to avoid a public revolt against higher taxes, including by workers, like those at Berger, who would have to pay more on lower wages.

public sector wage bill

Managing the public sector wage bill is one area to which the administration has to pay attention. That will demand determination and toughness.

For example, the projection for the entire fiscal year was a wage bill of $107 billion. In December, after nine months, $83 billion had already been spent, $5.44 billion, or seven per cent above budget. Those numbers will worsen.

A clear requirement, as we have pointed out before, is to cull the bloated public sector, starting by reassigning employees with the requisite qualifications from overstaffed agencies to those in deficit. The Government must also accelerate the divestment of state-owned enterprises to raise money and free itself of loss-making entities - but handled with greater skill than the botched sale of the Sugar Company of Jamaica.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.

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