‘Robbing Peter to Pay Paul’: Effects of State Pay Hike on Inflation

Cat calls by backbenchers and obtaining the microphone for mudslinging purposes in the guise of making a Point of Order has become the order of the day 

Our legislature’s functioning is worse than that of the SLC. Dissolve Parliament and appoint an Interim Committee comprising non politicians. The disrespectful exchange and unseemly behaviour witnessed during the budget debate involving the President and Leader of the Opposition on Wednesday and Thursday, particularly their irresponsible conduct in the presence of school children, have tarnished the dignity and decorum of the August assembly.   

Cat calls by backbenchers and obtaining the microphone for mudslinging purposes in the guise of making a Point of Order has become the order of the day. The standing orders need a revision in the form of instituting penalties for irregularities in such behaviour. In the times of great leaders like the Senanayakes, Bandaranaikes, Drs. NM, Colvin, Wickremasinghe, Ponnambalam, Chelvanayagam, T. B. Jayah, and RazikFareed, there were no cameras focusing or live radio broadcasts; nor were there attempts to play to the galleries. Making derogatory remarks and subsequently requesting their removal from the Hansard seems contradictory and somewhat absurd, especially considering that these comments were made for the world to hear.   

The implementation of these precautionary measures seems impractical while the current occupants, or with another ignorant and indecent lot taking over at an election. Given the uncertainty of adherence to existing rules, the most feasible solution to this predicament is the prompt dissolution of Parliament and transferring legislative functions to an interim committee for a specified period. This committee, composed of esteemed intellectuals, including distinguished members of society and senior lawyers (with an exception for those defending narcotic robber barons), could effectively craft and implement new rules and standing orders to tackle the current issues.The grassroots membership of each political party should exert pressure on the leadership to align with their expectations.   

‘Robbing Peter to Pay Paul’: Effects of State Pay Hike on Inflation

The expression “Robbing Peter to Pay Paul” has a long history dating back to at least the 1300s, and it symbolizes the act of taking something from one person to give it to another, essentially solving one debt problem while creating another. This phrase highlights the notion of a short-term solution that may lead to more complications in the long term, emphasizing the challenges of balancing conflicting priorities or obligations.   

In the corporate sector, where the writer worked for four decades; it’s essential for the management to take into account the company’s financial capabilities, certainly they wouldn’t want to jeopardize the company’s financial stability by granting raises that it cannot afford. They assess the company’s current financial health, scrutinize its profit margins, and take into account any forthcoming projects that might necessitate additional funding. Additionally they compare the salaries against industry standards to ensure equitable compensation. Before deciding to grant a pay raise, they weigh the contributions by employees to the company. Assess their job performance, their dedication to their work, and any exceptional efforts they have invested above and beyond their regular duties.   

In the public sector, moreover, it’s crucial to recognize the broader economic effects of a salary increase. Such increases contribute to the expansion of the consumer money supply, enhancing their purchasing power and consequently, boosting the demand for goods. The heightened demand for goods leads to an increase in prices across the wider market.It’s worth noting that even in the corporate sector, elevating salaries can induce cost-push inflation, as businesses attempt to offset higher expenses by raising prices.   

Government trade unions, representing both working and non-working public servants, as well as employees in both profit-making and loss-making State-run enterprises, are rallying for a salary increase. However, it’s worth noting that the notion of “profit-making” can be somewhat misleading. A loss-making company might be well-managed but facing challenges in earning profits due to competition or other concealed issues. On the other hand, a so-called “profit-maker,” despite its financial success, may suffer from poor management, though, profits soar, especially if it enjoys an unprecedented monopoly in its field, [Example -Sri Lanka Telecom] implying that if managed meticulously, it can double the profits.   
Ultimately, the restructuring of state-owned enterprises is a crucial step toward promoting economic growth, ensuring fiscal responsibility, and fostering a competitive and resilient business environment.   

The government’s blanket ban on recruitments, even to fill vacancies, has significantly impacted the efficiency of universities. These institutions are currently grappling with a severe shortage of academic staff, as experienced educators are either leaving for better opportunities or retiring. This shortage has left universities functioning with only half of their required academic workforce, significantly impacting their ability to deliver quality education.   
A 10,000 rupee COL allowance increase for state employees has been proposed along with an increase in the Value Added Tax (VAT) from 15% to 18%. Such upward adjustments in indirect taxes invariably result in higher prices for goods and services, affecting all citizens. As a consequence, essential commodities like petroleum, electricity, gas, and sugar have experienced price hikes.   

The state employees succeeded in securing a raise, this could potentially place them in a more favourable position, while others will face a graver situation without any means of mitigating the impact of the impending VAT increase.   

It’s essential to recognize that the state sector is currently overstaffed and inefficient, employing over 1.4 million workers, figure that could be halved to meet the country’s needs. Over the past 40 years successive governments have erred by utilizing the state sector to provide employment to their supporters, leading to a more than doubling of public sector workers. This expansion has left the state grappling with the financial burden of sustaining excess employees. Unless steps are taken to reduce the number of state employees to a manageable level, the public will continue to bear the costs associated with this surplus workforce.   

Between 2010 and 2014, the Rajapaksas expanded the already bloated public sector by adding 500,000 employees. More recently, it was revealed during a COPE session that from 2015 to 2019, the Yahapalana‘s Minister of Housing, contributed to the expansion by hiring an additional 5,000 employees to the already overflowing National Housing Authority, with a significant portion of these hires — some 3,000 — coming from Hambantota. The electricity board, CPC and CWE have historically been vehicles for politicians of all governments to secure their return at the next election.   

The contentious trade unions should be mindful of their responsibilities and obligations when making various demands. They should make a commitment to enhance productivity by at least 30 to 40%, if their demands are to be met. It is crucial that both the government and protesting trade unions act responsibly and fairly, taking into account the interests of the public in their decisions and actions.   

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