IT'S NOT JUST PRICES - IT'S INCOMES
HOW CAN WE HELP PEOPLE EARN MORE?
by Hon. Prof. Biman Prasad, NFP Leader
An opinion piece published in the Fiji Times on:
Saturday 12th March 2022
This week brought the news that flour prices have increased 21%.
Logically, it will not be long before this price rise flows through to other essentials of daily life such as bread.
This is just the beginning of an increased period of economic hardship for our poorest and low-income people and families. They will face their toughest economic times ahead as prices rise.
People complain about rising prices – and that is understandable. All Aiyaz Sayed-Khaiyum, the Economy Minister, can say is that the Government is looking at ways to keep prices down. But (as usual) he does not understand the problem.
The problem is not just rising prices. Prices will always rise, especially as other countries’ incomes rise.
The problem is that the incomes of our people have not risen.
Global economic changes will soon raise the prices for many other essential consumer goods. Yes, there is a war in Ukraine that affects the price of wheat. But there have also been sharp increases in shipping costs.
And price inflation, which the world’s major economies have kept under control for a generation, is now returning. This will obviously impact Fiji.
Aiyaz Sayed-Khaiyum is desperately running around the country now, talking about raising the minimum wage. He is doing this for the first time in four years. His concern for our poorest workers seems only to emerge when elections are near.
Nothing for the poor
The Government has never had a strategy to increase incomes for our poorest people. And this is the difference between a government that wants to help people and a government that wants to show off to capture votes.
The Fiji First government has been focused on one statistic – GDP growth. It boasts about the “Bainimarama Boom” and “unprecedented growth”.
But that is far from the truth. The “reality of the matter” is that Fiji’s average economic growth rates in the last 10 years, which are about 3% per year, are pathetic.
And the Government’s boasting means nothing to poor people who cannot feed their families.
The problem is that real economic growth must come from private sector investment. This, in turn, must come from confidence in Fiji’s ability to deliver economic returns.
So when private sector investment falls short, what has the Government done? Pushed money into the economy through Government spending.
But to do that, the Government has had to borrow. And borrow and borrow and borrow.
The problem with reckless and indiscriminate spending – after all, the Government spending is for politics, not economics – is that you don’t know where the money is going to go.
For example, if you do big roading projects, the money goes to foreign contractors. Some of the contractors employ Fiji citizens and pay them wages. Others bring in foreign workers who take even the wages.
The rest of the money leaves Fiji in import payments and profits.
Even when the Government benefits from spending on big contracts, it is the rich who pocket the biggest portion. Wealthy people do not buy goods from market vendors in the market or from small shopkeepers. They buy cars, luxury goods and other imported items.
Another failed strategy
The Government’s other failed strategy is price control for political purposes.
Price control is a necessary regulatory measure. It is important for essential items, particularly in rural areas where, unlike urban centres, there is not enough price competition between supermarkets and other stores.
But price control is an economic measure, not a political one. Even when sellers’ costs are increasing, the Government uses price control to hold down prices for as long as it can, instead of allowing prices to rise gradually and for people to adjust to them.
All this does is to create uncertainty for businesses. Businesses lack confidence in the regulatory process to do long-term planning. When price control becomes too ridiculous, they will even stop putting essential items, like medicines, on their shelves. Why sell at a loss?
Then, when the gap becomes too big, the Government – through the price controller, the Fiji Competition and Consumer Commission (FCCC) – finally responds and there is a big price hike and a sudden shock.
Rising prices will always be with us. The Government cannot change this. Prices rise because of things out of our control – wars, fuel prices, freight costs and the like. These factors affect our imports.
But so do other things. When wages rise in other countries things become more expensive in Fiji. Wages rise in those countries because their economic performance is better than Fiji’s and, as their economies strengthen, they can pay their workers more.
In the meantime, Fiji and its government are boasting about the “Bainimarama Boom” – but nothing is happening to people’s incomes.
15 years of failure
These outcomes reflect 15 years of long-term failure and lost opportunities under Frank Bainimarama and Aiyaz Sayed-Khaiyum.
The first issue, particularly with wages, is productivity. And productivity, in the twenty-first century, is a function of education, training, health and personal security.
The Government’s leaders like to give speeches at openings of school buildings about how much they are investing in education. But the truth is that they have utterly failed to invest in the most important part of education – teaching and the curriculum.
We have a non-communicable diseases (NCDs) epidemic. We are world leaders in per capita rates for diabetes. We are in the top tier of countries with high rates of heart conditions and high blood pressure.
In this month of International Women’s Day, we are reminded of Fiji’s high rates of domestic violence.
Education, health and domestic violence are all critical elements of employee productivity. The average productivity of a Fiji worker, compared to other workers in the world, has not improved for 20 years.
This is because Fiji workers are not getting the education and training they need to become internationally competitive. Health and domestic violence affect their attendance at work and their efficiency when they are at work.
If Fiji workers have not become more efficient, how can they be paid more?
And let us not forget – while productivity in Fiji is stagnating, in more successful countries around the world, employee productivity is rising. And because those employees are more productive they are getting higher wages.
And because they are getting higher wages, the prices for their goods are going up. These are the goods Fiji workers have to buy – even though their wages are not going up.
Meanwhile, the Government’s minimum wage policy, like its price control policy, is not about economics. It is not about the people. It is about politics.
For four years, the Government has done nothing. In an election year, it wakes up.
What should we do?
We need a strategy that is directed to increasing the incomes of our lowest-paid people.
What this means is that we must all work together to achieve it.
Instead of doing nothing and then suddenly try to push up wages abruptly, the Government, unions and civil society need to be communicating with each other about rises in the minimum wage.
When I say “communicating” I mean all the time, all year round – not running around the country lecturing people two weeks before the mini-Budget.
The Government needs to be listening to the employers about how it can help in the areas of education and health to improve worker productivity.
One of the reasons employers can only pay low wages is because they are selling lower-cost goods in international markets. This means they are competing with businesses who can make goods made more cheaply in bigger countries closer to international markets and with lower wages. So Fiji workers’ wages have to be held down to stay competitive.
The Government should be helping exporters look for ways to move their products up the value chain where price competition is less important.
This is just the beginning of what we should be doing.
And, if you are paying attention to the National Federation Party’s policy suggestions, what is the common factor?
Dialogue, consultation, co-operation. Working together. Looking for the best ideas. Because we are not afraid of people who know more than we do.
This is not rocket science. This is harnessing the skills, resources and experience of our own people, including many people who have succeeded in business despite the ridiculous economic policies of our government.
There is so much to do – and we have lost so much time with an insecure, hyper-politicised government that is too afraid to ask its own people for ideas and help.
The coming elections will give us the opportunity to change that. And we should not miss that opportunity.