EPOC Chairman Proposes Capping Public Public Sector Wage-to-GDP Ratio

Economic Programme Oversight Committee (EPOC) Chairman, Keith Duncan, is proposing that the Government reintroduce a fiscal rule that caps public sector wages as a percentage of Gross Domestic Product (GDP).

Speaking during the final EPOC quarterly press briefing at the Ministry of Finance and the Public Service on Friday (December 13), Mr. Duncan said this recommendation comes against the background of growing concerns over the increasing share of public sector salaries relative to the nation’s economic output.

He said projections indicate that public sector wages and salaries are expected to reach 12.8 per cent of GDP for fiscal year 2024/25.

“As GDP moderates and slows, wages and salaries… are consuming approximately 45 per cent of tax revenues and 40 per cent of total revenues,” the Chairman pointed out, noting that this raises alarm about Jamaica’s fiscal sustainability and economic health.

The Government previously instituted a fiscal rule that capped public sector wages at nine per cent of GDP, a measure that was removed in April 2023 following amendments to the Financial Administration Audit Act.

“We see this 12.8 per cent in 2024/25 moving up to 13.42 per cent of GDP by 2027/28,” Mr. Duncan said, noting challenges this could place on Jamaica’s financial resources.

Consequently, he urged policymakers to take decisive action, emphasising that, “it is important that growth in wages and salaries be kept lower or in line with GDP growth, to ensure that the wages to GDP ratio is stabilised and reduced over the medium term.”

The Chairman further underscored the need for strategic planning as Jamaica enters a new cycle of wage negotiations covering the period 2025 to 2028.

Mr. Duncan also expressed concern over protracted public sector wage negotiations which have encountered challenges, including recent industrial actions involving junior doctors.

“This is going to be challenging for the new Minister of Finance,” he contended, emphasising that effective management of wage growth is crucial for Jamaica’s economic stability.

Mr. Duncan maintained that as Jamaica prepares for these critical upcoming public sector salary negotiations, the call for capping the wage-to-GDP ratio serves as a pivotal recommendation aimed at ensuring sustainable fiscal practices and promoting long-term economic growth.