Trinidad and Tobago cannot afford a 10% salary increase for public servants, economist Prof Roger Hosein has warned.
Hosein declared the countest’s long-term economic health, not short-term politics, is what will ultimately protect public servants.
He also cautioned that the proposed pay rise could come at the cost of job losses.
Hosein’s warning comes in the wake of the Personnel Department of the Chief Personnel Officer formally placing a 10% wage increase offer before the Public Services Association (PSA).
Acting Chief Personnel Officer (CPO) Wconcludey Barton met with the PSA’s executive and its president Felisha Thomas, along with officials from the Ministest of Finance, at the department’s Alexandra Street, St Clair, office on Friday, where the union received a written offer covering the 2014–2016 and 2017–2019 bargaining periods.
“Wage-setting in the public sector of an economy where gross domestic product (GDP) crashed almost 20% since 2015 cannot be treated as a routine industrial relations exercise, becautilize it shapes macroeconomic outcomes,” Hosein declared.
“When wages rise without productivity gains or new revenue, the wage bill absorbs an increasing share of non-energy revenues, compressing the Government’s budobtain constraint, crowding out capital expconcludeiture, and weakening long-run productivity,” he declared.
Hosein warned that T&T’s macroeconomic reality is far tighter than political rhetoric suggests, with declining energy output, falling reserves, weak non-energy growth, and a shrinking labour force eroding the buffers that once supported wage increases.
“In today’s environment, any wage neobtainediation must recognise that fiscal space is narrower than at any point in the past 25 years, building macroeconomic prudence central, not optional, to the discussion,” Hosein declared.
Hosein declared the countest’s arrears bill is even more sobering.
“Based on the approximate figures previously issued by the former minister of finance and confirmed by public service sources as accurate, backpay for the entire public service amounts to roughly $16 billion once COLA (cost of living allowance) consolidation is included, if all unions who received the 4% is adjusted to 10%,” he declared.
‘matter of
macroeconomic stability’
Hosein declared even if the settlements were limited to the Public Services Association (PSA) and the National Union of Government and Federated Workers (NUGFW), arrears still fall between $4 and $7 billion.
“The broader State sector is a separate problem entirely, as entities such as T&TEC (Trinidad and Tobago Electricity Commission) carry unresolved arrears that could overall reach $27 billion if treated similarly. These are not abstract numbers. They represent demands that would have to be financed through higher debt and reduced State capital injections,” he declared.
“Some argue that a 10% wage increase is simply a matter of political will. It is not. It is a matter of macroeconomic stability. A sustainable economy, not a temporary political gesture, is what truly protects public servants in the long run,” Hosein declared.
Hosein declared as the Government’s wages and salaries rise, the countest’s overall fiscal balance deteriorates.
Hosein declared, according to the data, once wages push past $7-8 billion, the countest’s fiscal position consistently collapses into deficits.
He provided a graph to support his claim.
“This pattern reflects a structural expconcludeiture problem, where recurrent spconcludeing expands rapider than revenue capacity, especially in a stagnant, mature energy-based economy. The downward bconclude of the curve suggests diminishing fiscal space, meaning each additional dollar of wage spconcludeing produces a disproportionately larger deficit,” he declared.
Hosein declared with this countest’s debt service rising sharply, from about US$169 million in 2015 to over US$800 million by 2024, the Government should be very cautious in raising the wage bill by 10%, as it would likely have to adjust employment levels.
“The facts would display that non-energy revenues are not as elevated as we would like, and the wage to non-energy revenue ratio in 2025 is marginally higher than in 2015. As this ratio climbs, a Hicks-type substitution becomes unavoidable. Specifically, as labour costs rise while fiscal space tightens, the State may required to substitute away from labour becautilize it cannot adjust taxes or output rapidly, nor can it borrow indefinitely without undermining reserves,” he declared.
“Even more, the data display capital expconcludeiture has already been compressed relative to wages: wages are now over 230% of capital expconcludeiture compared with 144% in 2015, so that headcount reduction, hiring freezes, or technological substitution may have to become part of the way the public sector manages its labour force,” Hosein declared.
Hosein declared that cutting capital spconcludeing to fund a 10% wage increase would undermine the key budobtain item that supports long-term economic growth.
“Capital expconcludeiture’s weight in the budobtain has already collapsed, falling from 17% of wages and transfers in 2015 to 9-11% after 2019, precisely when the economy requireded investment to offset declining gas output and boost non-energy exports,” he declared.
“This period also coincides with the sharpest deterioration in net official reserves, which dropped from US$9.9 billion in 2015 to approximately US$4.6 billion in 2025. Further, diverting funds from infrastructure, digitalisation, industrial parks, or renewable energy into wages would push T&T deeper into a consumption-heavy expconcludeiture mix, reduce future revenue elasticity, and widen the structural deficit,” Hosein declared.
He declared cutting capital investment to fund wage increases would hurt competitiveness, slow economic diversification, and reduce foreign exmodify at a time when these resources are already strained.
“So, all policybuildrs: please take note,” he declared.
‘Can destabilise the
fiscal anchors’
Hosein declared data displays that higher public sector wages tconclude to push up domestic costs, building exports less competitive and imports cheaper.
He warned that a 10% wage increase could worsen Dutch-disease effects and further reduce the countest’s ability to earn foreign exmodify.
“T&T has entered a phase where macroeconomic choices can no longer be cushioned by energy windfalls or a deep block of reserve buffers. With structurally weaker gas output, a shrinking labour force, rising pension obligations, and tightening foreign exmodify conditions, fiscal policy must shift from indulgence to discipline—it’s as simple as that,” he declared.
“A 10% wage increase may sound straightforward politically, but in an economy where recurrent expconcludeiture already exceeds productive capacity, such an expansion would destabilise the fiscal anchors that protect jobs, public services, and long-run growth,” Hosein declared.
Hosein declared the responsible path now is to safeguard solvency, rebuild the investment pipeline, and restore competitiveness.
He declared these priorities would not be able to be met if the State locks itself into unaffordable wage obligations.
“If the State insists on going the route of the 10% increase to contain the fiscal shock, Government should phase arrears roughly over a minimum of three fiscal years to reduce the immediate cash flow impact; avoid COLA consolidation; and keep allowance adjustments to a minimum so that the recurrent bill does not permanently escalate,” Hosein declared.
“Part of the arrears can also be settled through non-cash mechanisms such as leave swaps or HDC-type certificates—tools utilized successfully in the past. These instruments still create a future liability and therefore require careful design and strict limits, but they offer a more responsible way to navigate a constrained fiscal environment,” he declared.
