THE Government has ruled out reinstating the nine per cent wage-to-GDP cap abolished in 2023, Finance Minister Fayval Williams confirmed to Parliament’s Standing Finance Committee on Thursday during its review of Jamaica’s $1.26-trillion FY2025/26 budget. The decision comes amid warnings from fiscal monitors that public sector wages — projected at 13.3 per cent of GDP next fiscal year — risk destabilising Jamaica’s debt trajectory and crowding out critical investments.

Julian Robinson, Opposition spokesman on finance, raised the issue seeking clarity on the Government’s thinking about the public sector wage cap.

“Is the Government contemplating reimposing a cap in terms of the wage-to-GDP?” Robinson asked, referencing the nine per cent ceiling implemented under 2013 International Monetary Fund (IMF) reforms to tame debt then peaking at 147 per cent of GDP.

“Member, to answer your question specifically, it is not contemplated at this time,” Williams responded.

The decision defies calls from fiscal watchdogs to reinstate austerity-era limits amid concerns over debt sustainability ahead of public sector salary talks set to begin soon. The talks are to hammer out a compensation package for the three years from 2025 to 2028.

“We really do believe that Jamaica should consider the reintroduction of the wages and salaries fiscal rule to cap wages and salaries as a percentage of GDP,” Keith Duncan, chairman of the Fiscal Advisory Commission, said in December as he pointed to the fact that public sector wages have grown to being the biggest expenditure item for the Government, even outstripping debt payments. Duncan did not identify what level the cap should be but has been adamant that one should be in place.

On Thursday he told the Jamaica Observer he has not changed that stance.

“In order to continue on the path of fiscal sustainability, we should consider the re-introduction of the fiscal target of a fixed percentage of wage-to-GDP, or possibly index growth in wages and salaries to inflation in order to prevent an uncontrollable rise in wages as a proportion of our economic output. At the end of the day, the public sector should be increasing productivity through the use of technology, more efficient processes, shared services and performance management to name a few areas,” Duncan said in written responses.

He acknowledged that the cap may not necessarily be fixed at the previous indicative target of nine per cent, “although this is the rough median for all countries in the world (9.21 per cent), those in the Latin America and Caribbean region (9.33 per cent) and for countries with a similar income level as Jamaica (9.42 per cent). This also does not mean that we should contemplate freezing wages, or any retrenchment of public sector workers as happened in the past to cut the wage bill”.

In the upcoming fiscal year, the Government is projecting to spend $463 billion on salaries and wages for public sector workers — equivalent to the 13.3 per cent wage-to-GDP ratio — but that figure rises to $496 billion when total compensation in the public sector is considered. That total is equal to 14.2 per cent of Jamaica’s projected $3.5 trillion economy and nearly 40 per cent of the budget. By comparison, debt repayments of $340 billion take up 9.7 per cent of GDP and 27 per cent of the budget.

Jamaica implemented the nine per cent wage-to-GDP ceiling in 2013 under IMF guidance to stabilise public finances after debt peaked at 147 per cent of GDP. While initially effective — reducing the wage bill to 9.2 per cent of GDP by 2019 — the cap faced criticism for stifling public sector reforms and contributing to attrition in critical services like healthcare and education.

The Holness Administration abolished the rule in 2022 during a sweeping compensation review, raising wages to address retention issues and historical underpayment. By FY2023/24, wages reached 12.6 per cent of GDP, with further increases projected to 14.2 per cent from FY2025/26 to FY2028/29. The wage surge coincides with progress on debt reduction, projected at 63.7 per cent of GDP by March 2026 and may give public sector unions some hope as they negotiate salary increases for their members.

With wage negotiations for 2025–2028 set to begin soon, Opposition member Morais Guy pressed Williams on undisclosed contingency allocations set aside to pay increases in public sector salaries.

“What provisions have been made for the imminent salary negotiations with the public sector, especially teachers? We have heard that there have been complaints that they have not started the negotiations,” Guy asked.

Williams said the unions have been asked to send in their claims and some have been received so far, with meetings already started to clarify some issues.

Pressed again about how much money has been set aside for salary increases, Williams pointed out that the sum is contained in the $496-billion that has been allocated for compensating public sector workers, but declined to say what that figure is.

“So the Government’s position is reflected in the budget. At this point in time, it’s not advisable to say [what the figure is]. We are only just beginning that process [the negotiations]. We speak to the various unions in terms of what it is that the Government can afford. We listen to the unions in terms of their expectations, and we try to come to a meeting point with the various entities,” Williams added.

After a back-and-forth with Guy a few more times about what was the actual level of contingency to pay public sector salary increases, Williams would only reiterate: “In the current budget as presented in the Parliament today, there are contingencies — amounts in the budget to reflect what the Government’s position is. Again, the actual [figure] will depend on the negotiations between the Government and the various unions.”

She added that the provisions include sums for “any one-time or retro payment” and are consistent with what the Government is expecting unions to agree on at the end of negotiations.

Still, the Fiscal Policy Paper FY2025/26 outlines a $33-billion figure for contingencies that will be allocated through a supplementary budget for public sector workers “once definitive calculations” are completed.

Williams added that, at this time, “as far as I’m being advised, there are no outstanding increments” owing to public sector workers, in response to questions raised about teachers indicating they are yet to be paid sums owed.