cost of living

Adjusting wages to inflation rate opposed by business group

A proposal to index and adjust the wages of salaried employees, pensioners, and retirees has been prelimarily approved by the legislature.

The Cámara de Comercio, Industrias y Agricultura de Panamá (Cciap) wants the Asamblea Nacional to consider alternatives.

David Mesa/LA PRENSA

Conflict of interests:The government is considering indexing wages according to the rate of inflation, but at least one business group sees that as risky economic planning and policy.1048671

The Cámara de Comercio, Industrias y Agricultura de Panamá (Cciap) rejected the Asamblea Nacional's preliminary decision to approve a wage index proposal, calling it “an act of politicking” that does not take into account the negative impact it will have on the country's economy.

The proposal calls for indexing and adjusting the wages of salaried employees, pensioners and retirees based on the increased rate of inflation in the cost of the basic food basket from last year to the present. "We hope that the legislators are able to reconsider the proposal, which is a matter of economic planning and policy,” said Juan Ramon Varela, president of Cciap.

Even though the Comisión de Trabajo received reports from the Ministerio de Economía y Finanzas (MEF) and specialists at the Caja de Seguro Social which did not entirely support wage indexing, "it prefers to superimpose individual interests on an issue of national interest," Varela pointed out.

The experience of Venezuela, where inflation now exceeds 20 percent annually, presents itself as a cautionary tale about the possible economic consequences of the indexing proposal.

Varela suggested a few alternatives to mitigate inflation, including temporarily eliminating the tax on fuel, which is 60 cents a gallon for gas and 25 cents a gallon for diesel; allowing an income tax deduction for private school expenses; reducing “unnecessary” public sector expenses and using the savings from “social welfare” programs to provide lunch to all school children; and making a tax benefit plan for employees earning less than $2,500 effective now, rather than in 2009.

In a Cciap report on Panama's current inflationary crisis and food problems the organization stated its opinion unequivocally: “The matter of inflation ought to be a matter of State.” The apparent implication is that controlling inflation and improving workers' wages in an inflationary cycle should not cost the business sector anything at all.

The Cciap wants companies to benefit from government programs that make businesses more efficient, agile, and productive but apparently sees no reason why they should in turn embrace measures to ensure that the workers who made them profitable are paid what is known as a living wage.