(qCOSTARICA) It would take between 15 and 18 years, maybe even 20, to feel the impact of any reforms in public salaries, says President Luis Guillermo Solis in addressing the current issue of “gross” salaries paid to employees at many of the state institutions like ICE, RECOPE and the UCR (University of Costa Rica).
“These issues of wages have no immediate impact on the current fiscal situation, but a subsequent impact, say between 15 and 18 years, and even talk of 20 (…),” Solis said to the press.
The president admitted that the Executive Branch (government) has withdrawn from the legislative agenda session that starts August 1, discussion of legislators on state wage reforms.
Solis said that short-term projects that generate income to meet growing expenses, combatting tax fraud and smuggling, reducing exorbitant pensions and the Value Added Tax (VAT) and income tax, are all pending issues.
The issue of the “gross” wages that have been in the limelight the past several weeks is not new, reflected in the 2014 national budget, a public debt representing 40% of the gross domestic product and worsening. The Ministry of Finance (Ministerio de Hacienda) is projecting the debt could reach 67% of production by 2019.
Figures show that public sector salaries and bonuses came to ¢3.7 billion colones in 2014, more than 55% of the national budget. In fact, bonuses outweight basic salaries. Numbers also show that 99% of public sector employees are paid a bonus for good performance.
The contradiction. While President Solis says there is “an urgent need” to submit the issue of wages to a public debate, his Ministro de Hacienda, Helio Fallas, and Ministro de la Presidencia (Chief of Staff), Sergio Alfaro, both consider this is not the time to enter the debate.
Legislator Otto Guevara, who of late made a public spectacle of the gross salaries, that led to a public demonstration on Monday by public sector workers, says President Solis proves not to be a statesman, thinking only in the short-term and not the long-term benefit.
Solis, meanwhile, believes, “we must find the right time, it is not a simple discussion, it not only requires law, but negotiations with the social sectors and clarification of acquired labour rights, which cannot be undermined”.
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Are you kidding me? One simple way to IMMEDIATELY reduce the deficit and control spending is to eliminate the payment of “bonuses” to someone for doing the job they were hired to do.
I was a public employee in the U.S. and there was no such thing as a “bonus”. That is considered to be a gift of public money and is illegal. They should be happy to have a job which apparently pays way better than a private sector job and probably has a certain amount of built in job security and other perks, BUT “bonuses” should NOT be allowed and need to be eliminated.
Why does it take 15-20 years to make the tough decisions to reduce government spending and to reduce the deficit/debt which are going to be the Achilles heel for Costa Rica? HELL, IF they were serious about addressing the problem, they could have a plan and implement it within a few years (even at the Pura Vida pace).
Greece made the necessary economic changes in a much shorter period of time, after “the gun was put to their head”, by other EU countries.
So, what you are saying is that CR is going to have to have a gun pointed at their head before they are forced to address the issue? Unfortunately, I believe that you are probably correct, for it seems as if this is the way of the world. There are no great leaders or politicians with any integrity to explain to their people the need for sacrificing in the short term for long term benefit. Sure, there will be suffering, although, if implemented properly with precise and even consequences, and with thoughtful and prudent planning for the future, everyone will be better in the long run as there will not be a need for having a gun pointed at your head.
It’s when you are forced to make difficult decisions, that usually have outcomes which are not favorable to the debtor nation, which force you into a corner from which there is no escape. The key is to resist the easy temptation to borrow money with no real plans on how it is going to be paid back.
Sure some government debt is necessary as governments need to build and maintain roads, bridges, etc., to accommodate and sustain commerce and allow for the natural growth of people and the nation, but ALL too often that debt is used as a means to appease a select few at the expense of the entire nation. As an example, why are public employees being given bonuses? They are paid to do a job, same as everyone else who is paid to do a job. Why do they receive a bonus? A bonus is supposed to be for doing something extraordinary or something which is beyond what is normally expected. BUT, if over 95% of the employees are receiving a bonus maybe, just maybe, they need to be expecting a LOT more from the employees? If you are receiving a bonus just because you show up for work so that you can earn a living, you are part of the problem. There should be no bonuses for public employees, period! Do the job you were hired for and receive your salary just like everyone else. Be grateful that you have a job, earn a living, and be a productive member of society.
It’s time the politicians make the tough decisions and stop the runaway borrowing and debt spending before the entire country is destroyed. Just because something has been happening for a period of time, does not mean that it has to continue forever. Times change and people need to change to adapt to those changes. Make the tough decisions!
YOU are so correct. Also: Government Employees that CANT BE FIRED. They sit at home and get Paid. What idiot passed that law here in C.R. I wonder if there is any Intelligence in C.R.????
Clearly, Solis is POOR leadership. He has no vision as a leader. He, seemingly, has no agenda. He truly has no power as a leader (examplem: his own staff contradict his decree). A very sad time for the country I love.
Costa Rica will be bankrupt well before the 18 years that Solis proposes it will take to implement Public Sector wage and bonus reductions. Greece, which faces similar Public Sector economic problems, has been forced to implement such changes in a much shorter time period, albeit, with some hardship suffered by those directly affected by the wage and bonus reductions. The fact is, these people should not have been living so “high on the hog” in the first place.
That’s right. But as long as the IMF continues to back rotating loans and the foolish international investment community is willing to buy the bonds, the government can kick this “can” down the road. Costa Rica will NEVER be able to confront this issue politically.
Good article in which the president makes an important and underappreciated point.
As crucial as it is to reduce the outlays for overpaid public employees and retirees, accomplishing that is only a longterm fiscal reform strategy. In the short term, public employees and retirees could sue and probably prevail. Moreover, if the legislature passed new labor laws that allowed for public employee pay and pension cuts, it’s unlikely that the courts would allow these new laws to be enforced retroactively. Costa Rica is a constitutional republic, after all, and laws can’t violate constitutional rights.
The issue of bonuses is fishy. I too would think these could be reduced. However, who knows, maybe a government employee accustomed to receiving bonuses could sue for not receiving one, or not receiving one as large despite a good annual performance review.
Meanwhile, there is probably the issue of getting government employees subjectively on board. Angry workers can sabotage public programs quite easily. Good management requires keeping employees happy.
I’m no lawyer, but I would think that the only immediate ways to reduce the expenses of public employees would be very crude. Entire agencies might be closed, or arbitrary reductions in the workforce mandated. Unfortunately, the canned public employees would still be entitled to severence pay and pensions, while those eliminated in meat cleaver cuts would probably be the most recently hired and lowest paid. Left would be the overpaid senior deadwood.
There is not a good way to do this quickly.