PRESIDENT of the Jamaica Manufacturers and Exporters Association (JMEA) John Mahfood says he's expecting employees to start pushing for higher wages as inflationary pressures takes it toll, but he questions whether all employers would be able to acquiesce to the demand.
Inflation has been running above the Bank of Jamaica's target range of 4 per cent to 6 per cent since August last year. It peaked in April at 11.8 per cent but has declined steadily since, though it remained at an uncomfortably high 9.3 per cent.
Trade unions negotiating new wages and salaries on behalf of workers usually present the inflation rate as the bottom line of their expectations of increases during wage negotiations. Even among non-unionised workers, the practice is for employees to keep abreast with inflation.
But the highest inflation in Jamaica in just over a decade has employers in a bind, especially since it has come with overlapping crises which have stretched even the best run companies.
"My own thoughts are that the situation is very difficult and complicated. In one respect, employees are suffering badly with the increase in costs due to inflation and so they would be expecting, wanting and needing an increase," Mahfood told the Jamaica Observer in an interview earlier this week.
"If you are a factory worker earning around $13,000 per week, you would expect employers would give the increase relating to inflation of 10 per cent. But, the question is, how many companies can afford 10 per cent? Companies, especially manufacturing entities, have been hit with increased costs of everything," he continued.
Mahfood opined: "The profits and margins on everything in 2022 have been squeezed and are not at 2021 levels. It is going to be hard. For them to give 10 per cent increases would be hard, but that is what I would expect [employers] to do."
Financing the increase, meanwhile, could be challenging. Mahfood notes that companies, especially manufacturing companies, have been "hit hard in 2022 with increased costs of raw material shipping".
Another issue affecting employers is the dwindling supply of workers, which is also putting added pressure on wages.
"There is a serious shortage of people available for work. You see recently where the unemployment rate has gone down to 6.6 per cent, meaning that just about 80,0000 people are now available for work."
"Companies are finding it difficult, also trying to win staff over from other companies by offering higher salaries. We see that happening in the manufacturing sector. These companies are challenged both by the inability to hire staff and inability to keep staff."
Mahfood expounded: "There is pressure which is being created, number one, because of shortage of staff and, number two, because staff need an increase to compensate for inflation, but at the same time companies are not having the financial ability."
So far, some salary increases have been granted by the state, for example, the national minimum wage has gone up by nearly 30 per cent to $9,000 per 40 hour work week, while the court has inadvertently awarded increases in other cases.
On September 23, 2022, the Revenue Court ruled that security guards engaged by Marksman Limited are employees and not contract workers and that the firm should immediately start paying its portion of National Housing Trust (NHT) contributions.
It was noted industry wide that the ruling will affect employer costs. Security companies will be expected to pay out more per employee, including benefits which were previously excluded.
Security companies had only been paying the two per cent NHT deduction for security guards while saying they are contract workers and, essentially, self-employed.
Most employers, however, will be battling with employee expectations. Mahfood stated, "Companies will be forced to give increases bigger than in the past when inflation rates were four, five and six per cent. Companies will have to be looking at seven, eight and nine per cent increases just to hold their staff.
Some companies have already responded swiftly. William Mahfood, chairman of Wisynco Group, told the Business Observer, " Our annual cost of living increases are usually done mid-year at the beginning of the financial year. [However] due to the high level of inflation, we took the decision this year based on advice from our board and executives to effect the increase in April, three months early. The increase was in line with inflation."