University of the West Indies (UWI) professor of Economics, Roger Hosein believes that once public servants’ wage increases are tied to greater efficiency and productivity, the domestic economy would benefit.
He told the Business Guardian that the 10 per cent wage increase to civil servants and others does not have to be seen merely as a heavy burden to the Treasury.
“If the 10 per cent adjustment is explicitly tied to a public service modernisation agenda, it can operate as a catalyst rather than a pure cost. Embedding the increase within a framework of performance contracts, digital workflows, Key Performance Indicators (KPI) driven evaluation and strengthened managerial autonomy can introduce an enhanced results-oriented culture that T&T’s bureaucracy has long struggled to establish,” he said.
The settlement for the 10 per cent wage increase is expected to cost Government $3.8 billion in backpay and $420 million annually in recurrent expenditure.
Public Services’ Association’s (PSA) president Felisha Thomas has said that public servants want their backpay in cash before the end of the year.
Two weeks ago, Minister in the Ministry of Public Utilities and former trade unionist Clyde Elder said it was unlikely the PSA’s successful wage negotiations will be replicated with other unions. He noted that unions that accepted the previous government’s offer of a four per cent increase would find it difficult to reopen negotiations with the CPO.
Referring to statistics from the Central Statistical Office (CSO), Hosein noted though that while employment in T&T contracted by six per cent between 2008 and 2024, jobs in the public service/statutory boards and in State-owned enterprises grew by more than three per cent over the same period, a striking divergence.
He added that while the wider economy shed nearly 34,000 jobs, the Government-centric sector absorbed an additional 4,500 workers, expanding its share of national employment even as the private sector weakened.
“The real Gross Domestic Product (GDP) generated per government employee has been broadly flat and even slightly declining since the 2015 peak, despite a rising public sector headcount. Specifically real GDP per government employee using total government workers (public service + statutory bodies + state entities), real output per employee declined about 4.5 per cent between 2015 and 2019.”
He said the pattern aligns with classic rentier state behaviour: as energy rents increased, the state expanded public sector employment as a primary channel for distributing those rents, effectively insulating the labour market from underlying weakness in the tradable economy.
“This pro-cyclical absorption of workers deepened fiscal dependence on recurrent spending at a time when labour force participation and non-energy output were already sliding. Instead of reallocating labour toward competitive, export-driven activities, the system became even more anchored in publicly funded, relatively low productivity jobs, hardwiring rentier rigidity into the labour market and shrinking the economy’s long run capacity to generate autonomous, non-energy growth.”
To push things, he said there needs to be a system of greater digitalisation (e-payments, e-building approvals, e-procurement, digital HR/payroll, integrated case management) which can help to increase total factor productivity by cutting processing times, lowering administrative overheads, and reducing human error costs, is now needed.
For T&T, where service delivery is slowed by paper systems and siloed databases, digital transformation can significantly raise public sector output without increasing headcount.
He also advocated for a programme of retraining (digital skills, regulatory analysis, project management), internal redeployment to high-demand units, and medium-term hiring discipline can help align labour input with actual service needs.
He highlighted public sector reforms worldwide and New Zealand’s experience, which he said show that performance improves only when governments replace rule-bound bureaucracies with a results driven managerial model.
He explained that New Zealand dismantled the old system that rewarded procedure over outcomes and built a structure where managers had real authority over budgets, staffing, and operations, but were held tightly accountable through performance contracts, measurable service targets, and transparent reporting. This shift he said aligned responsibility with control, encouraged innovation, and made efficiency and service quality the markers of success rather than compliance.
“T&T still operates in a setting characterised by rigid rules, weak managerial autonomy and limited accountability, which yields slow service delivery and a wage bill rising faster than output. With fiscal space exhausted, the country cannot afford wage increases unaccompanied by productivity gains.”
Hosein argued that in this regard, T&T may even more than ever need to consider moving to performance contracts, clear KPIs, and managerial accountability supported by reduced procedural bottlenecks offering the only credible way to modernise the state, lift productivity, and make wage adjustments consistent with long-run fiscal and economic sustainability.
“Let us be clear though, the retail price index increased by roughly 17 per cent during the negotiation period so that a proposed 10 per cent wage increase is not economically unreasonable from a worker’s perspective, as the purchasing power of public servants would still be about 7 per cent lower than before, given this 10 per cent increase in salary. Workers accepting 10 per cent are effectively settling for a partial correction rather than a real wage gain.”
He concluded by saying that the PSA’s 10 per cent has been confirmed but what remains is the important work of raising productivity to match it.
“If we policy makers fail in putting in place the necessary steps that would ensure earnings is paired with efficiency, the medium-term horizon will feel less like open water and more like a gathering storm.”
Private sector negotiations
In response to questions from the Business Guardian, the Employers Consultative Association (ECA), the country’s main employer body noted that companies that negotiate in the private sector operate under different circumstances from those in the state sector.
“First, most private employers are not negotiating for past bargaining periods. Moreover, unlike the State, private employers cannot rely on deficit financing or a reallocation of budgetary provisions to meet or sustain higher wage bills. As we have previously indicated, some firms may certainly have the capacity to match or exceed these types of settlements. But from an economic perspective, we believe that most private sector employers would find it difficult, if not impossible, to absorb such wage increases. Notwithstanding, this is a reality that can only be addressed at the firm level.”
The statement informed that the ECA carried out a membership survey that they conducted just prior to the last national minimum wage increase, which revealed that the lowest wage paid by 90 per cent of survey respondents were already above the then national minimum rate.
“This demonstrates that in the main, employers are committed to fair and equitable compensation, and are not averse to progressive compensation measures, once their business can support these commitments. But this is not only a question of resources. Sustainable wage growth is directly linked to competitiveness, productivity, investment, and economic confidence, so it is also about creating a stable, conducive environment for businesses to grow, thrive and enhance compensation over time.”
The ECA also addressed the issue of “fairness” in collective bargaining.
“Fairness is ultimately a function of the negotiation process, which should not only be evidence-based, but also financially sustainable, reflective of the economic realities facing each enterprise, and conducted in good faith. We cannot detach wage settlements or other terms and conditions of employment from individual business realities so it would be impossible to determine any ‘fair’ figure.”
However, the ECA also explained that collective bargaining exercises are not limited to wage increases only.
“The exercise is usually one that considers both cost and non-cost items and even where wage increases are not feasible, other aspects of total compensation or other benefits may remain viable options that can add meaningful value for workers while protecting business continuity.”
The ECA gave examples of non-cash benefits in negotiations.
“Certainly, performance-based incentives tend to have a mutually beneficial effect; as businesses do well, so do their employees. In addition, other benefits may be considered such as flexible work arrangements where practical, enhanced leave provisions, training incentives, one-off allowances, among many other types of alternative benefits.”
The ECA also commented on other unions that are clamouring for wage increases following the PSA settlement.
“While parties are expected to consider the unique conditions of each bargaining unit and engage in its own evidence-based negotiations, history tells us that within the public sector, the recent PSA settlement is likely to become a reference point, if not a benchmark, for other negotiations.”
The ECA added that ultimately, the outcome of public sector negotiations depends heavily on the state’s fiscal position and projections, as the single largest employer, and their ability to not only fund negotiated increases and arrears in the short term, but to sustain the new wage bill in a responsible manner.
The ECA further stated that it supports fair and responsible bargaining, but the question of affordability and sustainability is one that only a government can answer, as it must not only manage what is before it today, but also ensure that today’s commitments can be honoured in future years without compromising national competitiveness or the broader economic environment in which enterprises must operate.
“In the private sector, employers generally negotiate based on what is sustainable for their specific business realities, driven by factors such as profitability and cash flow, productivity, sectoral performance or projections, and competitiveness pressures. Wage expectations may certainly arise, and while it is entirely feasible for some firms to afford higher settlements, it is neither economically feasible nor appropriate to expect public-sector outcomes to be replicated across the board in the private sector.”
