Robert Wynter, Contributor
Wynter
The third memorandum of understanding (MoU3) between the Government and the public sector workers runs from April 1, 2006 through to March 31, 2008. Already, the Jamaica Teachers' Association (JTA) has asked for a 100 per cent increase for the 23,000 plus teachers, while the Nurses' Association of Jamaica (NAJ) is asking for 150 per cent for the 8,000-plus nurses.
These requests seem a far cry from the three per cent agreed under MoU1 in 2004, and several persons have asserted that MoU1 and MoU2 were successful. I am not sure what yardstick is being used to measure their success, but the fact that teachers and nurses are requesting increases of over 100 per cent while the national economy continues to struggle is a glaring testimony of the failures of both MoUs. From the very outset it did not take a rocket scientist to predict that this would be a natural outcome. Let us examine what really happened.
One recalls former finance minister Dr Davies' mea culpa in early 2003 when he admitted to 'reckless' spending leading up to the 2002 general election with an eye on securing the fourth term. Part of that spending was a huge increase in public sector wage levels a few months before the election.
Cracks appeared
Shaw - File
The campaign slogan at the time was 'Don't stop the progress' and the nation trusted the People's National Party (PNP) for another five years. However, shortly after retaking office the cracks started to appear. In Parliament in December 2002, then Opposition spokesman on finance, Audley Shaw, asked the then finance minister, Dr Davies, if the economy was heading in the right direction. Dr Davies replied no and proceeded to correct the problem.
A $14 billion tax package was announced in the 2003 budget presentation, being among the highest ever in the country's history. Two years later, a further $9 billion tax package was introduced.
Having dealt with the revenue side in 2003 and with plans to do so again in 2005, the minister decided to work on the expenditure side in 2004. Realising that the public sector was oversized and inefficient, rumours circulated that up to 10,000 jobs would be cut.
Although this would have been a logical economic decision, it would be a tough political decision for any government. The then minister's life was made that much easier by the trade unions. A deal was struck where the unions agreed to accept a three per cent increase across the board and the Government agreed to no layoffs.
The famous memorandum of understanding (MoU1) was born. Minister of State Fitz Jackson told me at the time that MoU1 would save up to $5 billion by keeping increases to three per cent. I told him that the Government had failed to capitalise on a further $10 billion-$15 billion savings annually, had they properly restructured and right-sized the public sector.
Individual trade unions had little say as then JTA president, Wentworth Gabbidon, held out for a while but was told in no uncertain terms that teachers would be bound by the agreement whether or not he signed the agreement. He subsequently signed the agreement. Having convinced the country of the success of MoU1, despite a few rumblings, the Government and the trade unions entered into MoU2.
MoU1 promised growth in the economy, increased levels of investment and employment and reduced inflation. This seemed far-fetched when unproductive and non-value-adding employees would be retained, while those who were productive and added value were limited to three per cent increases.
Bureaucracy
Nelson
MoU1 created another level of bureaucracy in the form of a monitoring committee which, among other things, would have to agree on any redundancies arising from restructuring in any Public Sector entity. This monitoring committee lived up to its bureaucratic reputation as I know of no approval for redundancies since 2004 until Minister Mike Henry, along with the Lambert Brown-led University and Allied Workers Union (UAWU), was successful in getting approval recently for redundancies at JUTC. MoU1 also promised extensive retraining in preparation for those employees who would have lost jobs due to restructuring.
However, because there was no restructuring, no retraining was done. Since 2004 several senior public sector officials have expressed frustration as they tried to restructure for increased performance but were prevented in doing so by the MoU monitoring committee. In other words, the MoU was actually designed to keep the public sector inefficient, and we wonder why the macroeconomic situation is as it is. Had Dr Davies taken the tough decision in 2004 to rationalise the public sector it would have produced a much different result today.
Negotiations for MoU3 have begun. Ministers Ruddy Spencer and Pearnel Charles are on the other side of the table. Most important, Minister Dwight Nelson who previously led negotiations for the trade unions now leads negotiations for the Government. These table position changes are less significant than they appear to be as neither the Government nor the trade unions had public sector efficiency as its main objective during MoU1 and MoU2 negotiations. Instead, the main objective appeared to have been to maintain the status quo.
Insanity has been defined as doing the same things over and over and expecting different results, and it is within this context that MoU3 must be different. Unfortunately, we are getting mixed signals from the Government. Pre- and post-election pronouncements by Prime Minister Golding indicate the need to have a lean and efficient public sector. However, Finance Minister Shaw has suggested there will be no redundancies; the intention instead is to maximise productivity of the current workforce.
Despite this, Minister Mike Henry has acted decisively to remove over 350 persons from the JUTC. Based on Minister Shaw's assertion, they should have remained and their productivity maximised. Minister Don Wehby has indicated a zero-based approach to budgeting; however, in response to the NAJ's claim that Minister Shaw promised 100 per cent increases, Minister Nelson is reported to have said that promises will be honoured.
Need to restructure
The public sector wage bill has been ballooning over the past several years. When compared to the anaemic GDP growth over the period, it is clear that public sector effectiveness and efficiency leave very much to be desired. The current administration cannot waver on this one, as there is a need to restructure and right size the public sector removing some 10,000-15,000 employees who are adding little or no value.
I am not blaming these employees as I am sure most of them are doing their best. However, the duplications and the unnecessary functions being carried out in the public sector not only prevent value-adding employees like our teachers, nurses and members of the security forces from being paid decent wages, but it affects the economic and social environment in which firms and citizens have to exist, including but not limited to the high tax levels, high interest rates, poor service delivery and poor education outcomes.
Reductions in the size of the public sector should not be limited to bodies alone, as several of the over 150 public sector entities need to be closed. The mistakes of the past government are driving the teachers and nurses, who dutifully and naively accepted three per cent increases in 2004, to request well-deserved increases.
The fact is that the public sector has a critical role to play in national development; however, for the most part the sector is oversized, bureaucratic, ineffective and inefficient. Previous memoranda of understanding between Government and public sector employees have been hindrances to making the sector effective and efficient.
While I agree there will be serious dislocations in moving towards a lean, mean, efficient public sector, the failure to do so will have greater consequences on the country. Shirley Williams displayed decisive leadership in the 1980s in cleaning the mess on the streets of Kingston, and has recently displayed decisive leadership by starting to clean the mess at Air Jamaica, so has Minister Henry at JUTC.
Little hope
Regarding decisive leadership required to restructure the public sector, I hold little hope for Minister Dwight Nelson, who is entrenched in the union mindset; while the recent pronouncements of Minister Audley Shaw suggest he doesn't have the stomach for it. Tough times call for tough leadership and the prime minister needs to take decisive action in getting this sector right.
The reported pending appointment of Ambassador Douglas Saunders to the post of Cabinet Secretary, who displayed decisive leadership on the field of play as a star at football, athletics and cricket at Jamaica College in the mid-1960s, may just be the spark needed to move the public sector forward.
Robert C. Wynter, is a partner in the firm Growth Facilitators, who may be reached at robwyn@cwjamaica.com
