Tuesday, December 11, 2007

Pay raises

In his presentation to parliament prior to the upcoming confidence vote, the PM, Nader Dahabi vowed to raise salaries of public sector workers and retirees. This is part of a compensation program in exchange for lifting subsidies on fuel derivatives, which is planned for the next fiscal year.

This pay raise is due to cost over 300 million dinars. Assuming that 300,000 military, security and civil employees and retirees benefit from it, then the average salary will go up by about 1000 dinars per year, or a little more than 80 dinars per month. Presumably, private sector employers will be asked (nicely) to raise their salaries by similar amounts.

This is a rather generous raise compared to previous salary adjustments. The government has taken to token raises of 5 and 10 dinars per month in the last few years, which did little to compensate for the effect of inflation on salaries. The last time fuel prices were raised, the government resorted to a cash payout gimmick, ostensibly to help out the poor. As might be expected, the mechanism was inefficient and demeaning, and did little to actually improve the well-being of the people it was supposed to help.

Obviously, some are concerned that increased liquidity will actually fuel inflation by increasing demand. While this is a concern, much of the inflation is not caused by local economic conditions, but driven by increased costs of imports.

On the other hand, a recent survey by the department of statistics shows that the average difference between income and spending for Jordanian families results in a deficit of about 1300 dinars per year. With the expected wave of inflation caused by lifting of subsidies, even this raise will do little to fill the existing gap. Until this gap is filled, it is doubtful that the increased liquidity will be a significant factor in driving inflation.

One also worries that the scale of this raise is a prelude to a massive increase in fuel prices, which may dwarf the effects to this pay raise. This is what remains to be seen.


At 4:54 AM, Blogger Abu Daoud said...

For what it's worth fuel prices are going up everywhere. So are food prices.

In reality it's just a a question of population growth:

Jordan has a population that is growing very quickly with the average couple having between three and five children. But it is also a desert country without petroleum resources. How could one expect for prices NOT to increase given the growing population and lack of natural resources?

At 6:04 AM, Blogger Khalaf said...

You are right. I was thinking this morning that the upside of these conditions is that people will need to have fewer children. I think that the average number of children is falling quickly, but families who already have many children will find it difficult to adjust.

At 8:08 AM, Blogger Masalha1 said...

Jordan has become one of the most expensive countries in the region as far as cost of living, an 80Jd a month is hardly any thing, unless we tie cost of living, inflation to salaries people will always be behind on making ends meet, I don't work so I can eat and feed my family, I work so I can own a home, a car and be capable of sending my kids to college, and be able to save some money for my retirment.
An average worker who makes 500Jd a month can't have any of the above if you are single, let alone have a wife, three or four kids, 50% of that goes to rent and the rest for food, but what about the rest of life's basic necessities? are we suppose to continue struggling for life? worried whether I'll be able to afford a hospital bill here or a college fees there or even a small family vacation to Aqaba? which is by the way is out of reach for so many Jordanian these days.
An economy that does not produce economic growth, new jobs, and higher income jobs, to me is a failing economy, and so far those geniuses of the neoliberal economists produced none of that, despite all the ivestments that was lured into the country and all the privatization of evry thing.
WE need a better, effective, smarter economic team that can turn this economy around.

At 9:14 AM, Blogger Tallouza said...

Do we know for sure what the true inflation rate is? The pay increase is a step in the right direction. However, the factors impacting the increase in the cost of living are scary. The national budget was prepared on the basis USD 60 for barrel of oil. I can't imagine what it would mean to have it realistically revised to reflect the true cost of oil alone. Leave aside the fluctuations of the exchange rates that we are so closely tied to. I think it is time we start thinking along the lines of "To whom much is given much is obliged". Empathy should be the guiding light for all of us today more than anytime that I can think of.

At 10:54 AM, Blogger Blogger said...

I have a feeling that the new government sole purpose or mission is to get us through the next 2 years of complete economical disasters and just see how it goes.

Many have large family and have very limited income. Now we have to keep in mind that in 4 years time, people will get very angry (possibly some riots will break out every now and then just like last year, but maybe on a larger scale). People are already angered by the new traffic laws. I mean 4 years are sure enough for the Islamists to make a very strong come back because people are fed up!
Lets hope other things like crime rates, prostitution and organized crime would not surface.

At 12:28 PM, Blogger Masalha1 said...

Budget deficit and national debt are the biggest enemies of any economy, no one is expecting the government to bear all the surcharges of the oil prices and every thing that is associated with it, its true we have no natural resources, and most of the government income is tax based revenues, however most of the investments were none jobs generating investments, mainly ( realstate ) and the rest had so many tax exemptions that the country did not benefit much from them ( Q I Z ).
The funds that were generated from the privatization did not contribute any thing in lowering the national debt.
So we continue to run the economy with these conditions and it looks like unless we have a miracle nothing will change, our deficit will continue to grow so will our national debt.
Prostitution is already a big business in Jordan, the crime rate is going up, although its still not an organized crime yet.

At 6:49 PM, Anonymous Anonymous said...

real estate is a major business and an economy driver, as many things went worse, some other businesses are being up and running, creating many jobs, not enough but yet creating. We have lame infrastructure, and some investments are getting there which is the foundation of any economy. Energy and Water will start having impact or difference in around 10 years, which will be the main reason for quick development. No government will be able to turn us to a scandanvian state, measures taken for the last 10 years are amendments to the past when all the country was run wrongfully on an economic level. what used to be the case neither growth or even sustainability. As harsh that may be, but the situation in late 90 is not that of now, the country was forced due to international factors.

At 7:26 AM, Blogger Masalha1 said...

Speaking of pay raises our newly elected parliament members already talking about pressuring the government or ( blackmailing )if you want to call it, to provide them same fringe benefits as those given to ministers.
بدأ نواب جدد مشاورات جانبية فيما بينهم وبشكل غير رسمي للتقدم بمطالب للحكومة تتعلق بضرورة حصولهم على امتيازات مشابهة لامتيازات الوزراء الخاصة بالسيارات والسائقين لهم.


At 7:44 AM, Blogger Masalha1 said...

Real estate has a limited capacity of generating jobs, although money generated from sales of properties (if invested properly) can stimulate the economy to a certain degree, however what we need is to direct foreign investments in job producing sectors such as IT or industrial, transportation, water energy, or even agriculture, Jordan has decent infrastructure that we can build on, and all these Hotels and high rises buildings are part of that infrastructure, but if you don't have plans to supply them with water and energy at reasonable prices with well trained and educated work force investors will flee in a heartbeat.

At 2:06 AM, Anonymous Anonymous said...

Water is interesting for investments when you have a rich country, so investors will be selling the government or neighboring countries if you have that much. Energy if you can produce it locally, or a mega energy company (i.e. shell, BP) would come and develop a new idea for clean energy for free just for publicity.
You are right, employment is the key to wellfare. but why would an investor come to Jordan for IT or meduim and heavy industries at this time. we are an expensive country being small and lacking leading sectors, so our government runs a tax scheme. though salaries are crappy, we are more expensive than africans, indians, asians, even egyptians, syrians and Moroco. We are just starting with logistics and we have a sole easily conjucted seaport and a semi functional airport, no railways and roads are not maintained. We are sucked in politics loops due to lovely middle east for 60 years and still counting, we have a rapidly evolving laws and regulations frame and a very unfortunate demography. Least to be said about our harsh economic reality.
In my own opinion, the followed pattern is a part of adjusting our reality enabling future opportunities by realizing economies of scale for potential investments in infrastructure by increasing urban developments which will be served by communications, electricity, water, sewage, roads. enabling those investors to realize their targeted profits by number of subscribers rather than high rates. window opened opportunities need to be capatilized on to improve local communities such as Maan aimed station for transit and transportation, tourism remains a main window for now, the gega projects of the Nuclear reactor and the red-dead seas canal just wonderful for water and energy. We need to focus more on our regulations and law frames, information, accountability as part of our infrastructure.

At 8:52 AM, Blogger Masalha1 said...

I have to admit you make a good argument, but IMAGIN just Imagin if the Agriculture sector brings in 9 billion dollars a year in revenues what would that do to our economy? THIS is exactly what the agriculture sector's contribution to the Israelis GNP, the difference is they have all the necessary infrastruture needed for that to happen, top that with the marketing skills needed also.
Jordan valley is a gold mine if our beloved government gives it more attention and point out its potentials to investors.

At 4:22 PM, Anonymous Anonymous said...

Much of what has been said here is true, but also, Jordanians must start helping themselves. Khalaf says families are getting smaller, but not fast enough. Many of the thirty five plus still seem to have had several children and the idea of the one or two child family with two working parents, (as are usually to be found in Northern European countries with thriving democracies, a higher standard of living and functioning welfare states) is still a pipe dream, As a society we seemed to have absorbed many of the standards and aspirations of the west, without taking on board other, more modest aspects of their lifestyle. By this I also mean smaller weddings, less food on the table when guests come over, etc. Less need to save face or else it is 'aib'. Aib is a word I have come to hate. I know of far too many families where the man has married again for no good reason except probably to satisfy his personal needs, and his older sons are having to help support their usually retired father's new family, and so diverting their proably modest salary from their own families. This practice should be illegal in law, as it is in religion, if only the religion were properly understood and applied. Aib, surely this sort of behaviour is really aib, not putting one or two well cooked dishes on the table instead of a feast when guests come over ?

At 12:50 PM, Anonymous Anonymous said...

I second you fully regarding the Jordan valley especially that a quarter of Jordanians are considered as peasant societies living on the west border from Irbid to Gregara and Finan through Jerash, Ajloun, Dier Alla, Al-Shouna where fertile lands are. Water remains a bottle neck for us. Israel sucked Jordan River, Tibris Lake, and the water reserves of the west bank for that reason. Syria is not helpful yet regarding Al-Yarmouk. I believe that the canal and the reactor will have alot to do for that areas.

Totally agree, our cultural mind sets are not economic or resourceful consuming. The energy commission headed by HH Prince Hamza will do alot to develop these patterns especially that the agenda is pledged for now on the national and macro levels.

At 7:03 PM, Anonymous Anonymous said...

My husband is known for helping people who are financially in need. Today he came home with three requests for assitance. Number 1, works as a gardner at a foreign embassy earning JD 410 a month. Unfortunately, he has eleven children, ranging from 20 years to 2. His elder two daughters are married ( and very likely reproducing as well). His eldest son is in a private university ( having obtained 64% in his Tawjihi) and now he cannot manage the fees. With the best will in the world, who today can afford eleven children, whatever their salary !? The other two men also earn regularly, although less money. They are also in a mess due to having large families and also children at private universities (both of whom got less than 65% in their Tawjihi.) These people will never pull themselves out of poverty unless they get a grip on their lives, whatever any government does or or does not do. They could earn a thousand dinars enough but even so, with eleven children, it would be difficult.

At 9:55 PM, Blogger Abu Daoud said...

I think we all agree that Jordan needs to take some actions to teach people about having manageable family sizes. I'm thinking one to three kids each.

But have any of you EVER heard a government official mention the topic?

At 5:56 PM, Anonymous Anonymous said...

I have, but then I am an oldie in my sixties. I remember way back in the late seventies or early eighties, I think it was, when Prince Hassan was working on the first development plans, he said something about family planning, which ran on the first news broadcast of the evening, and we all noticed that the phrase was then cut out of the reportage in the following later broadcasts that night. Also, he brought a sort of clock which might have been a gimmick, but it showed the increase in population size in the course of an evening for that country. ( It must have been on some sort of average but it was quite scary). I don't know how it worked, but it was being used in various countries at the time, but again, it was pulled here after a few days.

At 2:47 PM, Blogger Unknown said...

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