A Salary Increase is Necessary for Economic Growth and Productivity

Asokore Beckles Chairman
Salaries & Wages Negotiations Committee
The consensus among many labour and employers ‟ organizations across the Caribbean region is that a wage led growth strategy is the way forward. The Barbados economy needs to re-focus on this as the solution to improving our economic status. Any growth strategy which is to be sustained must include a pro-labour wage policy. We cannot continue to keep measures in place that stifle demand and productivity. The last nine years have proven that the alternative profit-led strategy is wrong.

There has also been much debate over the need for increased productivity. Evidence suggests that more emphasis has to be placed on the effects of increased wages on productivity improvement. With the lack of a wage increase, and the increasing burden o f overwhelming debt and inflation, it cannot be expected that there will be optimal productivity or a fostering of good work relationships.

Therefore, increases in wages will not only improve consumption and demand but this in turn will increase productivity and stimulate investment.

The Case for a Wage Led Economic Growth Strategy

It is clear that since the recession of 2008, many things have changed. These changes have put the workers at a severe disadvantage. Both income and wage inequalities have increased. The minimum wage, which was once used as a benchmark wage that we must not go below is one now viewed as one not to go above. As a result, workers are now increasingly relying on credit to meet their demand for goods and services required to maintain their standard of living.

The burden on the workers has been compounded by an overwhelming focus on macroeconomic policies including increased taxes, benefits reduction, freezing of wages, privatization, and deregulation. These policies have not only failed to stimulate the economy as promised, but have in fact become  increasingly destructive. The destruction is evident in the job losses, closure of small and large businesses and an overall feeling of frustration, while not solving the intended macroeconomic problems of the country.

In the face of it all, there is a compelling case to be made for a wage-led economic growth strategy that was highly successful in the past. This would be consistent with any growth strategy chosen by the government, whether it is outward looking and increasingly concentrated on tourism or inward looking with the focus on import substitution. The goal is to earn foreign exchange from a growth strategy.

Traditional vs. Modern Thinking

There is a view by some economists that policies, which promote moderation of wages and hence view wages as a cost rather than a way to generate demand, are the key to creating a competitive economy. This is the concept behind the profit-led growth strategy and in most economies, actually results in the worsening of economic conditions and contributes to more strain on the economy and income inequality.

During the world financial crisis of 2007, worldwide wage moderation led to a reduction in c o n s u m p t i o n . N a t u r a l l y , production fell. In the face of fiscal deterioration, governments resorted to borrowing, which increased their national debt. This was accompanied by rising household debt, which put further burdens on the economy.

The expectation was for workers to hold strain. It was hoped that this would attract more investment, resulting in the creation of jobs and more p r o d u c t i o n . H o w e v e r , consumption drives production and workers‟ incomes demand the former.

Analysis has shown that very few economies can sustain a profitled growth strategy. It is agreed that the neo-liberal policies associated with this strategy are largely out-dated, unsuccessful and contribute to an overall decline in the welfare of workers and their dependents


It is now accepted that the vast majority of economies need a more sustainable wage-led growth strategy. This is because the increase in the labour share of output/income would promote an increase in demand and consumption. This in turn leads to more production and by extension, economic growth over the shortterm. This inspires a marked accumulation of capital over the long-term. In looking ahead, strategic interventions by workers‟ unions in conjunction with policymakers can result in an economy of high employment, which addresses the vexing issue of income inequality in the pursuit of e c o n o m i c g r o w t h a n d development and social justice. Asokore Beckles Chairman Salaries & Wages Negotiations Committee

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