The Employers' Consultative Association (ECA) yesterday warned that T&T is in a precarious situation which could get worse if wage increases are granted without carefully consideration of various economic factors.
In a detailed statement on current wage negotiations, as well as the increase recently granted to the Public Services Association (PSA), the group called for tripartite discussions between the three social partners–Government, labour and business.
"The energy sector, as major earners of foreign income, are faced with decreasing oil, gas and product prices. Our non-oil sector, on the other hand, is uncompetitive with competing imports. Furthermore, our exporters are already faced with an increasingly troubled external environment.
"This has to be balanced with the reality that the food price index is driving the retail price index and ultimately inflation; creating for many a valid argument for higher wages," the ECA said.
The statement continued: "An increase in wages without consideration of all economic factors including import/export, productivity and state sector reform will, therefore, as Ronald Ramkissoon (then senior economist at Republic Bank) warned in 2004, lead to '...strong and sustained price pressures which will make our products sold here more uncompetitive and further reduce our exports, since it will be much more difficult to compete in external markets.' These effects weaken our companies. This can in turn slow economic growth especially in our non-oil sector."
The ECA said strong and sustained price increases normally mean higher overall inflation which reduces real income or the purchasing power of money.
"Inflation affects different segments of the society differently. It is well known that those whose incomes are fixed and therefore cannot pass on higher costs, such as pensioners, suffer a loss in purchasing power. Consequently, rising prices affect individuals differently and redistribute income in a way that might not be intended."
The ECA congratulated the PSA and the Public Transport Service Corporation (PTSC) for the settling of their wage agreements at 14 per cent maintaining parity with the negotiated settlement for teachers late last year.
The group urged employers and representatives of employees to work assiduously to ensure all negotiations are concluded on time and questioned the relevance of the negotiation style used in collective bargaining.
"The bigger question is whether the way we conduct negotiations in state sectors and state enterprises is still relevant, since parity seems to be the major concern. This issue of parity is exacerbated by the creation of organizations like Natuc, Fitun and more recently JTUM.
"It is clear that the unions/associations that form their membership are aware of wages, and terms and conditions in the other companies within the body and are making attempts to level the playing field. This is a reversal of the approach to negotiations in the mid 1900's when the oil producers came together to conduct negotiations for prices in that sector.
"It is also no secret that the other sectors, principally manufacturing and agriculture, have to attract persons from the state sector as major employers and are therefore forced to set competitive salary scales to create movement of this labour force, if they are to survive. In the final analysis this has created a very inefficient system of national wage setting," the ECA said.