Tuesday, April 26, 2011

In Trinidad Unions for Public Service Employees Strike Over Government Wage Increase

Sources:
GuardianMedia: Need to Stabilize Economy, Encourage Growth
Trinidad Express Newspapers: Dookeran: Wage Bill Will Increase to $8 Billion
Guardian Media: Delays at Port of Point Lisas
Guardian Media: Oil Slips on Japan
Guardian Media: OWTU Members Turn on Labor Minister
CNews: Labor Leaders Debate State of the Unions
Guardian Media: Agriculture Faces Declining Production, high Food Prices

Protests continue in Trinidad as public service employees united with the Public Service Association to reject the 5% wage increase offered by Chief Personnel Officer, Stephanie Lewis. Originally, the Public Service Association (“PSA”) requested a 60% increase, while the Chief Personnel Officer Lewis only offered a 1% increase. The gaping disparity between the two figures can be attributed to three major factors. One is consideration of core inflation over headline inflation by the government, second is the rapidly increasing food prices in Trinidad, and third is a provision in Trinidad’s Industrial Relations Act that only adjusts wages to account for inflation every three years.

Headline inflation measures the rate at which the cost of living rises while core inflation measures total inflation excluding the price of food and energy. It is common for governments, not just Trinidad’s, to use core inflation as a better indicator of domestic inflation, since food and energy prices are highly volatile and subject to rapid decreases or increases due to weather or political crises. Usually in the long run, headline inflation and core inflation average about the same increase rate. However, in the past ten years, headline inflation has increased at a consistently higher rate than core inflation. This disparity is attributed to the rise in cost of oil per barrel from $20 in 2002 to roughly around $100 today. Consequently, this has raised the price of shipping and food imports into Trinidad, which has led to higher food prices in grocery stores.

Currently in Trinidad the headline inflation rate is at 12.5%, mainly spurred by food inflation which was at 29% just this past December. However, core inflation, which excludes food prices and which the government gives higher priority to, only increased by 4.7%. While food prices in Trinidad and Tobago have been consistently rising over the past 5 years, food prices peaked this year due an exceptionally large amount of flooding that lowered domestic agricultural supply and forced greater dependency on expensive food imports. Food prices further increased in the past few months due to the political unrest in major oil producing countries like Libya and Saudi Arabia. Additionally a recent discovery of $33 million worth of marijuana in two shipping containers in Trinidad’s major port, Port of Point Lisas, has led to more thorough checks of incoming containers, causing delays in offloading cargo. The delays lead to higher storage cost of goods at the port and will further raise the price of those goods in grocery stores.

In the face of these dramatic food increases, Chief Personnel Officer Lewis’ offer of a 1% wage increase was viewed by critics as disrespectful and deceitful. In an attempt to find a compromise and end the unrest of public service employees, the CPO made a reoffer to the PSA of a 5% increase. Again, given the extreme and increasing rate of food and goods, critics viewed this meager increase as further disrespect. In response to the CPO’s reoffer, labor unions in the public sector began striking. Finance Minister, Winston Dookeran, has appealed to unions to accept the offer by stating that a 5% increase for all public sector employees will mean that salaries and wages account for 19% percent of the government’s annual budget. Any further increase would hamper growth and create instability for the economy and government. However, labor leaders debate Dookeran’s theory on increasing wages. Senator David Abdullah, also President of the Federation of Independent Trade Unions, states the government should not be afraid to run a deficit to increase wages given the current economic conditions for consumers. He states that though there may be an initial deficit, income will return to the government through increased activity and spending made possible by the wage increase.

In an effort to avoid future disputes between labor unions and government, employment law specialist Lennox Marcelle advocates revision of the wage increase law in the Industrial Relations Act. He says that only reviewing for wage increases every three years inevitably leads the government to consider only current economic frailties, rather than the economic conditions as they existed during the previous three years. He states that review for wage increases should occur annually to ensure that wages are based on the “economic conditions of their respective periods.”