This headline might bring excitements in some people – and solace in others. A pay raise? Yes, of course, why not? It is about time. When was the last raise, anyway? With living standards increasing month by month – and not even by year-by-year, it is absolutely necessary. Right?
Well, think again.
Did the last pay revision leave us in a better position? I don’t think so. In fact, some of us might be in a worse situation than before. What guarantee is there then, that this time around, we would be able to solve our financial woes – once and for all? Are we not stuck in this vicious cycle of salary-increase-everything-increase zero sum game? Won’t it cause another spike in cost-push inflation of basic commodities in the market? I say we, although I am no more a civil servant but for much my working life, spanning close to 25 years, I have been in the government or in a government-owned corporation. I won’t be surprised if yesterday’s headline news has already prompted some house owners to increase the rent from next month. Jaigaon merchants would have acted on it for sure.
I started my career in 1986 with Nu. 875 as my take-home salary. And with that, not only did I have a comfortable life, I used to also send money to help my parents educate my two younger siblings and my cousins. My last salary when I left the government was Nu. 45,000. As a single-earner in the family, let me tell you that I was relatively ‘poorer’ than I used to be in 1986. Meaning, I had very little spare cash. Extrapolating my experience to the whole nation, it means that we have become poorer because the Ngultrum has lost in purchasing power. I don’t deny that 2018 is more convenient than 1986. But the cost of living in Bhutan is ridiculously high for the size of our economy that, at times, it can be very stressful for everyone.
Rich gets richer – and poor poorer
For some decades now, irrespective of pay revisions and so-called hydropower wealth, most of us are, in fact, stuck in the hand-to-mouth doldrums with no savings – and living under the illusion that we are better off than before, while in effect we continue to fill the pockets of merchants and manufacturers across the border. Offsetting the higher living cost through pay raise has as a matter of fact proven, time and again, to be a complete failure.
The gap between rich and poor is further widened with each raise. For example, 30% hike for a 5,000 basic salary is just 1,500. But 30% of Nu. 50,000 comes to a whopping 15,000. The same-percentage model is seriously flawed, as the new basic pay goes from 5,000 to 6,500 for a driver, and from 50,000 to 65,000 for a dasho, thereby increasing the already-huge gap even further. The grocery store, however, doesn’t discriminate between a driver and a dasho.
Furthermore, while the salary increase for many doesn’t even cover a week’s vegetable supply, for the high-income group it leaves a sizable disposable income. This liquidity triggers spending on imported goods and on foreign currency. Ever heard of the Rupee crunch? Now you know one reason why it happened. Meanwhile land price in core city area of Thimphu has shot up by 10,000 times between 1986 and 2018. A plot of land that I eyed in 1986 for Nu. 4,000 (which I didn’t have and so I did’t buy) is now valued at 40 million or 4 crore (US$ 600,000). It is cheaper to buy an island in Fiji than a plot in Norzin Lam. It is impossible for our middle-class to own a house in Thimphu, or in any major urban areas, with earnings from salary. Hence, the mass exodus of educated Bhutanese people to Australia and the others to New York.
One more point.
If the same-percentage model creates disparity, a flat-rate-for-all is not the solution either. It narrows the gap, no doubt, between the highest and the lowest earners, but the cost-pull inflation will still be there, as traders and house owners will raise the market price of goods and services.
The answer to the rising cost of living is not another pay raise for civil servants.
The way to go about is to control the inflation and house rents and also to subsidize some 10-12 essential items that people need to survive – cooking gas, fuel, electricity, rice, flour, milk, egg, oil, chilli, tea, etc. This way the basic needs and a decent life are secured for everyone – including the civil servants, and the benefits of State resources are spread evenly across the whole nation – irrespective of whether you are a farmer, civil servant or a private sector employee. More importantly a better, regular and reliable public transport system needs to be introduced so that people don’t have to own, or use, cars. Whether it is done in form of a heavy subsidy or through public-private partnerships, this ought to be done – lest the much-touted revenues from hydropower export are returned to the sender in entirety for the petroleum products that flow in from there.
Of course, such bold moves will not necessarily translate into votes at the polling stations because it won’t be visible. Voters and politicians seek instant gratifications nowadays. Visibility is what we all care for – in this era of selfies and social media. Nonetheless, I have faith in my compatriots and hopeful that there would be leaders who will dare to embrace this inclusive concept without caring much about polls or promotions.
In proposing this, I am neither a genius nor crazy. It is tried-and-tested formula in many countries. In UK or France milk is cheaper than bottled water. Farm produces are highly subsidized there. In Italy bus and train rides are almost free. In Macau every citizen receives an annual check from the government when there is surplus budget or high inflation. Kuwait gives 75 liters of free petrol per month to every citizen. Even in India, from where we get all our inspirations, the Food Corporation of India takes the role of providing essential food items at subsidized rates, while house rents there are strictly regulated.
Market controls won’t be a novelty in Bhutan either. Some of these were in place in the 1980s. Those days the Department of National Properties would fix the rents of private houses after measuring the livable area. For instance, my rent for a two-room was fixed at Nu. 150, which was one eighth of my gross salary. Now more than 50% of your pay goes into rent. What a sin! Why was the DNP system discontinued?
Our own FCB – Food Corporation of Bhutan, had below-the-MRP food and home items sold and advertised back then (see picture below). But again, I guess, somewhere along, someone must have come up with a brilliant idea that FCB should sustain on its own because it is a “corporation”. In Bhutan, there is no such thing as institutional memory. It is shame that Dantak Canteen is cheaper than our own FCB. I ran into the current CEO of FCB some time back and he did mention about re-initiating those food schemes. Perhaps again, he must have lost out to the many cannot-do people that flood our government and bureaucracy.
Inequalities and consequences
The salary raise for 27,000 civil servants is funded mainly from the revenues from the hydro-power export. Firstly, isn’t the country’s wealth supposed to be distributed more equitably as per the Constitution? Or does it say anywhere else that it can go to a select few? Do we continue to spend 60% of our annual budget on 4% of our population? And we have the audacity to criticize our youth, and Bhutanese people, for jumping into ‘white-collar’ jobs in the civil service only. It is not enough for the government fall back on free health and education while dishing favours and gifts to a small section of the population, which is so apparent.
Secondly, our market is largely state-driven and hence the civil service, and whatever happens around it or in it, has huge bearing on the economy. This aspect is often underestimated, sidelined or not understood at all.
The thing to note is that history has not tolerated existence of large social gaps, and glaring haves-and-have-nots. This can be really dangerous for a nation. More so now when information and fake news travel from finger to finger without passing through the brain. That’s why in Japan, the ratio between the highest and the lowest salary is maintained at less than four. And that’s the reason you don’t hear about “poor Japanese person”. They don’t exist in a country of 130 million. In Bhutan it used to be around 8 times in 1986 but has drastically gone up to 30 times with the last salary hike. As a consolation we are, of course, much better than the Americans whose top CEOs earn as high as 400 times compared to their lowest-earning employees. This is one single big reason why Trumpism has stormed over the US. The glaring social gap that I saw there was the reason why I predicted that Donald Trump would win when he announced his nomination.
In conclusion, if we still decide to go ahead with the pay raise for civil servants, please do not forget to re-read this post after a decade (with few more raises by then) and ask yourself, if you are better off. I can bet anything that you won’t be – and lesser still will be those who are not in this rarefied and privileged world of civil service.
Conversely, how about that we all benefit equally? Maybe some of us will get lesser than anticipated but we can all be better. And above all, above all, the most important thing is that, we don’t have to take anybody’s drin (favour) as a nation.
1. I have not mentioned the negative impact on the growth of the private sector by civil service pay rise each time. It might sound more as a sour grape but the fact is, the salary increase in the civil service has clipped the wings of the private sector. Ask anyone from BCCI.
2. Not to boast but when I handled the pay raise for BBS in the early 2000s (we had to do our own because we were SOE), we went for a flat rate and not on flat percentage. Low ranking staff in BBS, especially, still remember me for that even to this day. TA/DA for drivers were raised to the level of junior officers on the argument that drivers have the same human body and physiological needs.
3. Look for the genesis of Arab Spring – as your homework. It was not for political change, as Western media put it. It was social inequality
4. In Japan, once you reach retirement age, if you have contributed to Pension System, you get retirement pensions. If you have not, you still get a small Social Pension.