Economist sees benefit in increasing remuneration amid layoffs
Amidst layoffs in both the public and private sector, an economist is suggesting that companies should consider pay hikes.
Jeremy Stephen said today that was the route some businesses might need to go, once the conditions were right to do so, if they wanted to increase productivity.
Stephen, who is head of the Barbados Economics Society (BES), told Barbados TODAY that he believed companies that were in a position to increase wages should do so as a way of encouraging workers to increase their outputs.
“A wage increase at this time could help in terms of the motivational aspect –– motivating employees in a down time to work a bit harder because the wage increase should come with more expectations towards output and profitability of the firm,” he said during an interview on the sidelines of the Productivity Analysis For Accountants Seminar at the Accra Beach Hotel.
“So I believe in it. I actually think that when you pay people a bit more, counter-cyclically it can drive productivity, but the problem is that classically, productivity is viewed as a post-cyclical thing, meaning that people would tend to drive productivity more in a growing economy rather than in a languishing on. But counter-cyclically it actually works especially if a company has the capacity and the willingness and risk tolerance to do it . . . . There are a lot of market factors in there that still have a big role to play in a company’s decision to raise its workers’ pay in this tough time,” explained Stephen.
To support his point, he drew reference to how the Ford Motor Company was one of the few companies to survive the Great Depression because it raised salaries and that resulted in increased productivity.
Stephen quickly pointed out, however, companies would have to determine how long they would be able to sustain paying higher wages.
“It really comes down to how much the companies have budgeted for certain expenses and whether they realize that this could be a labour-driven growth expansion plan, or maybe it will have to be a technology expansion plan, or maybe they have decided strategically that it might be better to hold back for a bit and then catch the market on its way up. So it can’t be a one size fits all solution,” he said.
Stephen said a pay hike decision in the current economic climate would also have to take into consideration the company’s tolerance for risk, its growth plans, and whether the growth plans were for the short, medium or long term.
He acknowledged, however, that it might be difficult for companies to increase pay at this time because they are playing a “wait-and-see game” with Government.
“They are waiting to see what policies can actually be implemented in a relative time and how a turnaround would come about as Government is not able to drive the economy much longer because of the fiscal deficit,” Stephen added.
Addressing the recent 54th annual general meeting of the Barbados Employers’ Confederation (BEC) last month, economist Dr Clyde Mascoll also expressed similar views, as he told private sector players to pay their staff more.
He said at the time: “I am not asking you to simply go and increase salaries, but I am asking you to put some incentives in place, either through productivity gains or whatever, to boost the spending power of the workers of Barbados. That is the only way that your business can succeed and thrive.”