Introduction
Over the past two weeks I have been displaying a Table that I had specifically constructed for this series indicating: 1) the annual public sector nominal minimum wage increases announced by government for the years 2006 to 2013.When these are adjusted for annual price increases (inflation) it is revealed these increases had only grown annually by about one percent on average. And, 2) in the meantime the rate of growth of real GDP over the same period had averaged 4.6 percent annually.
If it is assumed (as I had earlier argued and for the reasons given then) the trend rate of increases in the public sector minimum wage 
broadly reflected the trend rate of expansion of labour income received by Guyana’s workforce as a whole (or it was not far above or below it) then the Table also indicated a declining share of national output going to labour and a rising share going to the other productive factors. Such growth and its distribution would tend to promote surging inequality given the substantial difference in favour of the real growth rate (less than one percent for the former compared to 4.6 percent for the latter).
Growth and poverty
Thus far the focus has been on growth and inequality; but what can be said of growth and poverty, bearing in mind that the two are not the same, contrary to popular belief? Some analysts specify a definite relation (mathematical) between growth and poverty.
While this cannot be dealt with fully in these columns it should be noted that this relation states that increases in real GDP per person (or the more familiar per capita income) result in measurable decreases in the poverty rate, thereby giving rise to what is termed in economics the “total growth elasticity of poverty”. Simply put this expression indicates by what percentage the poverty rate decreases for each one percent increase in the growth rate.
There are many restrictions to the straightforward applicability of this relation in Guyana. First, it is normal to assume the relation holds constant for the entire period of the calculation. Second, it is also assumed that growth itself would not affect income distribution, which readers have been shown in these columns does not apply to Guyana. Third, the relation is affected by the policies and patterns of sectoral growth and development. While there are other limitations hopefully enough has been indicated to suggest the requirement for careful usage of this relation in the Guyana context.
Guyana’s economic dataset does not contain a regular up-to-date series on poverty. Indeed the last national survey was conducted as far back as 2006. The Poverty Reduction Strategy Paper (PRSP) 2011 – 2015 has provided an estimate of the rate of real economic growth rate during 2011 to 2015 that is required to reduce poverty in Guyana sufficiently in order for the country to meet the Millennium Development Goals (MDG) 2015 target of halving the moderate and extreme poverty rates obtaining in the World Bank’s 1992 study of poverty in Guyana.
These data have already been the subject of recent columns on poverty and inequality in Guyana. Let me therefore simply indicate here that the PRSP has stated a growth rate of real GDP of 4.3 percent over the period 2011 to 2015 should reduce moderate poverty to 21.6 percent (half of the 1992 estimate of 43.2 percent). The 2006 moderate poverty estimate was 36.1 percent. Similarly the extreme poverty should fall to 14 percent (half of the 1992 level of 28.7 percent). The 2006 estimate for this was 18.6 percent. This implies from my calculations a growth elasticity of approximately 0.9.
Growth and joblessness
As regards growth and employment, the IDB (2014) has recently found that their regional economic data show the Region (including Guyana) appears to have entered a period of “jobless growth after the late 1990s”. Based on this the IDB has further projected that in order: “to reduce unemployment to zero the region would have to grow by 12.3 percent annually for the next 5 years”
More on the minimum wage
First and foremost at this juncture I should perhaps expand on the importance of improvements in the minimum wage for the national fight against surging inequality and poverty in Guyana. To recall the public sector minimum wage as of July 2013 by Public Order now applies to the entire workforce and no longer only public employees.
As previously indicated the present minimum wage is about US$8.00 per day or about 0.8 of the per capita GDP per day, which is the theoretical maximum it can reach.
The big challenge therefore facing the unions is the national application and enforcement of the minimum wage brought about by a substantial expansion in their active and engaged membership.
Second, there is controversy among economists as to whether improvements in the minimum wage lead to unemployment and macroeconomic instability.
Personally, I do not believe this to be the case.
More importantly I have never come across evidence in support of this for modest improvements in the minimum wage. Despite this disagreement there is a wide consensus among economists that a rise in the minimum wage usually reduces the number of persons living in poverty. This is where the elasticity measures are widely applied.
Thus Professor Duke (Amherst University) has found after surveying 16 different statistical studies that a modest rise in the minimum wage yielded decreases ranging from 0.12 to 0.37 in the number of persons living in poverty.
Third, worldwide studies also reveal, as carried in the Guardian earlier this year (April 24, 2014), there is “a correlation between falling union membership and rising inequality across the entire OECD” (Organisation for Economic Cooperation and Development).
Falling trade union membership in Guyana has been a hallmark of the workers movement in recent years, if not decades. The challenge is clear however even though the environment is not supportive of thriving trade unionism.
Next week I shall continue to pursue some of the themes raised in this and recent columns.
