Urges that higher pay be aligned to greater productivity

Durrant Pate/Contributor

Bank of Jamaica Governor (BOJ), Richard Byles is cautioning the private sector about adverse effects of large wage increases on the economy and the threat such a situation poses on its inflation target.

Addressing the BOJ’s quarterly news briefing today, Byles made a wake-up call to the private sector about large wage increases on the economy and eroding the economic gains made in recent years. The call comes in light of recent data from the Statistical Institute of Jamaica (STATIN) on the country’s unemployment rate, supported by anecdotal information about wage adjustments in selected private sector industries, indicating that the domestic labour market is very tight.

Byles is fearing that Jamaica’s tight labour market and the labour shortages therein could translate into large wage increases and higher prices, further driving up inflation out of the BOJ’s target of 4-6% this fiscal year. 

Impending bus and taxi fare hike

Our Today asked the Governor about the impending increase in bus and taxi fares and the impact this could have on inflation and whether the Central Bank has been asked to undertake a model to see the likely impact on inflation.

Byles responded that in cases of bus and taxi fare increases, the BOJ is usually asked to assess the likely impact pointing out that it is his expectation that such a request would be made at the appropriate time given that the government has been mooting an increase in the past months.

He hinted that the BOJ will be closely monitoring wage pressure as one of the factors going into its decision on the bank’s benchmark interest rate. According to Byles, “among other factors, the BOJ’s future monetary policy decisions will pay careful attention to the incoming data relating to the headwinds noted above, such as wage pressures and second round effects of agricultural price inflation.”

Turning to the unemployment rate for Jamaica, where STATIN reports that as at April 2023, the rate was 4.5 per cent, the lowest on record. “This is indeed a momentous achievement for the Jamaican economy, Governor Byles remarked.

For Byles, “inflation is on its way down and our expectation is that it will continue to decline, except for some months when the general level of price increases could be adversely affected by exceptional circumstances. The BOJ remains committed to achieving its primary mandate of preserving price stability.”

He added that the bank will continue to closely monitor the global and domestic environments for potential threats to Jamaica’s inflation target and act accordingly.