Sunday, August 26, 2012

Our bloated public sector

Why is there so much fuss about laying off government workers, and so little fuss about private-sector ones? The economic effect of laying off government workers is actually the lesser.

Every fired employee in Cayman gets whatever severance pay is due, plus accrued vacation pay and pensions entitlement. Everybody is added to the unemployment registers, and some become an additional burden on the Social Services budget.

But with government workers, there is no diminution of economic productivity, since governments produce nothing of economic value. Besides operating loss-making enterprises, most of what a government does is transfer money from some citizens to others.

Anyway, laying off government workers is only a sustainable saving in the context of a permanent reduction of the scope and reach of government. If a reduction is not intended to be permanent, it’s a waste of time. Closing down our Department of Tourism, for instance, or selling Cayman Airways to private investors, would be a futile gesture if the action were reversed as soon as the immediate fiscal crisis were over.

An across-the-board layoff of even a third of our government employees would save over $100 million – say 1500 workers at the average $40,000 annual salary, plus perks and overheads, plus office space. There would be a one-off charge against Public Expenditure for severance pay and the rest, but that would be largely offset by the removal of lifetime medical care for former Civil Servants and their extended families.

The Social Services Department would be hit for a few million dollars a year until the redundant workers found jobs somewhere in the private sector. If they could, of course. In an economic recession, there are few jobs available in the private sector, especially for government workers whose skills and work-ethic are not regarded at all highly by private employers. Hmmm. What to do?

In Cayman – no problem, man! Here, the natural thing to do would (will) be for government to force private employers to hire all the laid-off native Caymanians among them, regardless of quality. Bizarre though that will sound to non- residents reading this commentary, that is exactly what will happen, if our London masters insist on a reduction of Caymanians employed in the public sector.

After all, our Immigration Monster has no qualms at any time about forcing private companies to hire Caymanians they don’t want or need. Politically appointed commissars already monitor all private-sector hirings, promotions and firings, as part of the permanent affirmative-action program for native-Caymanians.

You’d think that Cayman’s rulers (at least the ones in London) would be keen to raise these Islands’ productivity and efficiency to competitive levels. I mean – do they (our rulers) want to break the current pattern of irresponsible governance, or don’t they care about the future?

A labour-market model adopted in Britain’s Caribbean colonies in the 1830s in the wake of the Emancipation of the Slaves is ridiculously inappropriate these 180 years later. It’s not just archaic and inefficient, in an economic recession it’s downright counter-intuitive.

Unless the FCO recognises the economic virtue of a free market for migrant workers, all the present quibbling about a sustainable Budget will go for naught. Imposing extra taxes on a private sector already struggling with excessive payrolls imposed by the commissars? London, what are you thinking?