The content originally appeared on: News Americas Now

The content originally appeared on: The Anguillian Newspaper

During the 2023 Budget Presentation by the Honourable Premier, Dr Ellis L Webster, on December 16, 2022, mention was made that the Government is looking favourably at giving a well-deserved pay increase to public servants. Commendable, one could say.

There is probably wide support for such a pay increase, as public servants have not had one in a number of years. In fact, some years ago, civil servants were asked to make sacrifices with regard to their salaries. Consequently, they experienced a reduction in salary.

Premier Webster noted during discussion of the Supplementary Appropriation Budget at the November 29 sitting of the House of Assembly, that the government was ensuring that the debt owed to public servants for over ten years would be paid off in full. This government’s commitment recently to remedy that predicament by repaying public servants’ lost wages, was much appreciated, I am sure.

But, to recommend pay increments for public servants during a time of economic challenge on the island might be a two-edged sword. It may seem reasonable, on the surface, but the undertow may be too rough.

Those of us who have been around for a while are aware of the impact that a pay increase to public servants has had on the economy in Anguilla. We would recall that whenever Government has given public servants a pay increase, it has been inflationary. Why? When people have more disposable monies, they tend to spend more and spend more for higher quality items. This is a basic principle of economics. Spending more is, in and of itself, inflationary.

When Government speaks of increasing the wages of public servants, persons wonder where the money will come from to fund the increase. Most persons in Anguilla have concluded that this increase will most likely come from revenue generated through taxation – the Goods and Services Tax (GST), among others.

Keep in mind that the cost of living in Anguilla has also gone up substantially over the last 12 months, in part, due to factors outside of Anguilla – global economic pressures, but also due to the 13% GST and other fees for essential services across the island. We all know what we have been experiencing since the introduction of GST just over six months ago.

Many persons in Anguilla view a government pay increase to public servants as another strike against the private sector and the least fortunate among our people. Many see this as placing an additional financial burden on the rest of the populace. It seems grossly unfair that persons whose salaries will not be changed and who will not get an increase, might have to endure the hardship of being taxed so that government is in a position to increase the wages for their workers in the public service.

Recently, there has been much talk of establishing a minimum wage, especially for workers in the private sector. Perhaps that is a good thing, but we have yet to see what those talks will yield. However, we must bear in mind that if a minimum wage introduced in Anguilla puts additional financial burden on employers at this time of unprecedented economic challenge around the world, and certainly in Anguilla, then a major fall-out from the impact is likely.

A number of employers may have no choice but to cut back on employment – they may cut back on new hiring, reduce the number of current employees or cut back on the number of hours their employees come to work. That will contribute to longer production time and lower quality of service. There are a number of hospitality workers who are struggling to survive day-to-day, but their employers will tell you that if they had to increase the room rates for occupancy at their properties to accommodate increased operations cost, many of their guests would likely choose another destination.

So, to talk of increasing the wages for public servants, one has to look at the multiplier effect of doing so, in addition to the overall impact it will have on the economy and the cost of living for all.

When the cost-of-living goes up, it will also go up for Government. What that means is that the government will then be forced to raise more taxes. When you trigger an event that leads to higher inflation, you, as a consumer of goods and services, will also have budgetary shortfalls. And when you do, you will need to fill the revenue gap. Historically, Anguilla’s government has gone the route of increased taxation rather than finding creative ways to cut costs.

So, here comes the introduction of another tax or an increased adjustment to existing taxes. That would bring in the additional revenue needed to accommodate wage increases, but all to the detriment of the consuming public.

The argument here is not whether a pay increase is warranted for public servants, or a minimum wage is needed for private sector employees. The issue is where will the source of money come from to cover the increase in wages? And if the funding source is taxation, then isn’t that source which, today, is responsible for choking off the local economy?

The full scope of wage adjustment has many challenging issues that should first be systematically worked through with sensitivity and empathy for all stakeholders involved before its implementation comes into effect.