Practicality of pay hike pledges questioned

By Santhush Fernando

With the 2010 Presidential election round the corner, many eyebrows had been raised with Presidential candidates giving many pledges in a bid to woo more votes.

Some citizens are highly elated while many others are perturbed by candidates pledging to increase the salaries, not only of public servants, but also private and estate sector workers as well, even to the extent of promising increased benefits to Samurdhi beneficiaries and the elderly, questioning the feasibility of such pledges.
Among them, opposition Presidential candidate Gen. (Retd.) Sarath Fonseka has also pledged Rs. 10,000 salary hike to public servants, while promising to increase the wages of private and estate workers as well. Allowance for Samurdhi beneficiaries would be enhanced while people over 60 years of age would be paid a special dole to meet their expenses.
Senior Economic Advisor and Director of the Financial Service Cluster of the Strategic Enterprise Management Agency (SEMA) Dr. Ranjith Bandara said that pledges given by opposition Presidential candidate Sarath Fonseka were not feasible.
“It is not possible at all. There are nearly 1.2 million public servants and so an additional amount itself would be a staggering Rs. 1,440 bn a year. Then what about the 500,000 pensioners? The total tax income of the government is Rs. 580 bn.
If the government was to give such a pay hike to public servants, how can you find enough revenue to fund free healthcare and free education? So, this is only a petty political gimmick. Anyone who knows a bit of mathematics let alone public economics will know that this is not possible at all,” Dr. Bandara said.
Referring to the pledge to increase the salary of estate workers to Rs. 10,250, he said if that was done, Sri Lankan tea prices would become uncompetitive.
“Government had already committed Rs. 500 a day. But, the cost of production in Sri Lanka is the highest in the world. Unless we improve productivity in the sector, Sri Lanka will surely be uncompetitive. If you talk to private plantation companies they will say that there’s absolutely no possibility to pay a higher salary. Estate workers are being given free electricity, free water, free housing, free healthcare and free schooling so it is really not possible nor is it feasible,” he added.
Dr. Bandara said that it was an utter joke to say that pay hikes can be given by eliminating corruption.
“Reducing losses or stopping corruption cannot be continued for ever, whereas the government has to find extra funding every year. I don’t think that Sri Lankan voters can be easily fooled. That’s why UNP’s neo-liberal Regaining Sri Lanka economic policy was defeated in 2004,” he added.
Dr. Bandara added that no one could understand how the extreme-left JVP could come into common economic policy with extreme-right UNP.
The Head of the Department of Economics of the University of Colombo, Dr. Sirimal Abeyrathne told if the government was to increase wages of public sector, state earnings should also be increased significantly.
“Now the real problem before us is that the salary scales of public servants had been quite low. If you take university academics – in India for example – 20 years before, they were far behind us, earning lower salaries. However, during the last few years India beat us and now we are far behind them when it comes to salaries of university lecturers. Other than that, the Sri Lankan public sector is getting bigger but productivity has not gone up. Also, unless revenue side is improved and state spending is rationalised, this would not be possible,” Dr. Abeyrathne said.
When asked how private sector could be increased he said that it was irrelevant to Sri Lanka due to two reasons.
“Fundamental problem is when there is unemployment there is no pressure from supply side on salary to go up. However, for different categories, for instance those in management level, government regulations have become irrelevant with minimum wage imposed by law being lower than actual wages,” he explained.
Dr. Abeyrathne said that merely increasing Samurdhi or other social transfers would not serve the purpose of eliminating poverty.
“People have depended on subsidies for generations although the original idea was poverty alleviation. Although only 15% of our population is living below poverty levels, a staggering 33% of the population is enjoying Samurdhi benefits, which means there’s very poor targetting and proves that those who really need are not receiving substantial amounts. Main reason is that like in this case, pure political motives are behind these pledges,” he said.
Vociferous former Chief of Ceylon Chamber of Commerce (CCC) Chandra Jayaratne refused to comment as it was difficult for him to comment on any candidate’s policies without seeing his or her policy document.
“It’s difficult to say as its all hearsay until it comes out in a manifesto. I would like to see them in writing,” Jayaratne said.