Salary raise? umm….

BBBB
Headline on Kuensel, 19 May 2018

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 increase in cost-push inflation of basic commodities in the market? I say we, although I am no more a civil servant now. But much of career spanning over 25 years has been in the government or in a government-owned corporation. I won’t be surprised if the talk of pay raise in the government has already prompted some unscrupolous owners to increase the rent from next month. Jaigaon merchants would have acted on it for sure.

I started my career in 1986 in the civil service 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 with allowances when I left the government in 2013 was Nu. 45,000. Honestly, let me say that I was relatively ‘poorer’ in 2013 than I used to be in 1986. Meaning, I had very little spare cash. I don’t deny that life now is more comfortable than it used to be in 1986. But the cost of living in Bhutan now is ridiculously high for the size of our economy that, at times, it can be very stressful for everyone. Hence, I am not sure if we are happier now.

Rich gets richer – and poor poorer

For some decades now, irrespective of the 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 are not. Instead, we unwittingly continue to fill the pockets of merchants and manufacturers from across the border – and the cash rooms of our banks. Offsetting the higher living cost through pay raise has, as a matter of fact, proven time and again, to be a complete failure.

Not only.

The gap between rich and poor is further widened with each raise. This is because of the flat-percentage pay raise, which sounds fair but is illusory. Phrases like across-the-board were used, which were a total eyewash. 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 flat-percentage model is, therefore, seriously flawed. 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 huge gap even further. Any surprises then that rich are getting richer and poor poorer? The grocery store, however, doesn’t discriminate between the ‘servant’ and the ‘master’.

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 additional liquidity triggers spending on imported goods and fuels massive foreign currency flights – especially on luxury items such as cars, iPhones, flatscreens and holidays and pilgrimage in foreign destinations. Ever heard of the Rupee crunch? Now you know one reason why it happened. 

Meanwhile land prices in the urban areas 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 off the coast of Fiji in South Pacific than a plot in Norzin Lam. It is impossible for our salaried working-class to buy a house in Thimphu, or in any major urban areas with their monthly income. Hence, the mass exodus of educated Bhutanese people to Australia – especially from the teaching cadre. 

One more point. 

If the flat-percentage model creates disparity, a flat-sum-for-all, say Nu. 10,000 for everyone irrespective of grade, is not the solution either. It narrows the gap, no doubt. And if I have to advise I would choose the flat-sum version. However, the cost-pull inflation will still be there, as traders and landlords will raise the prices anyway.

The solution

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 – especially house rents. Invest on a serious study to understand the root cause of high rents – and make adequate policies and enact stronger legislations. Start with a dialogue with the banks, building owners and builders. Experience from other countries have shown that if you control the housing rentals in an economy, everything will fall in place. I am not a banker or a real estate dealer. I am an engineer by background and dare I say that our construction techniques are outdated, out-of-place and inefficient and the industry is ridden with wastes, thefts, corruption and arrogance. All these have huge bearing on the final cost of the buildings. It is not only the interest rates on the loans.

Second, is to heavily subsidize some 10-12 essential items that people need to survive – fuel, electricity, rice, flour, milk, egg, oil, chilli, tea, soap, sugar etc. This way the basic needs for a decent life is secured for everyone – including the civil servants, and the benefits of the State resources are spread evenly across the whole nation – irrespective of whether you are a farmer, civil servant or a private sector employee. Once the prices of essential items are under control, cost of other goods are services will stabilise on their own.

More importantly, a cheap, clean 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 state subsidy, tax breaks 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 from the elected government will not necessarily translate into votes at the polling stations because it won’t be visible. Both the 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 I am hopeful that there would be leaders who will dare to embrace this inclusive concept without caring much about polls or promotions – or for the civil servants caucus that determine whether your party wins or loses the general elections.

In proposing this, I am neither a genius nor crazy. The above ideas are tried-and-tested formula in many countries. In the UK and France, milk is cheaper than bottled water. Farm produces are highly subsidized there. In Italy city bus and tram rides are almost free. In Macau every citizen receives an annual check from the government when there is surplus budget or a 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 by the Rental Act. Ever heard of the famous Ration Card? 

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 (DNP) would fix the rents of private houses after measuring the livable area. No houses could be rented out without their approval. For instance, in 1987, my rent for a two-room hut in Kala Bazar was fixed at Nu. 120, which was one eighth of my gross salary. Yes, I lived in Kala Bazar. Nowadays more than 60% of your salary goes into house rent. What a sin! Why was the DNP system discontinued? Was it because the decision-makers were also the house owners?  

Until the 1980s, our own FCB – Food Corporation of Bhutan, had below-the-MRP food and home items sold and advertised (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. FCB was established to redistribute food and sell at subsidized rates – and not to compete with grocery stores or make profits. It is supposed to stock up food while buying surplus productions to stabilize the market prices – and release them during poor harvest or in case of natural or man-made calamities. I ran into the current CEO of FCB some time back and he did mention about reinstating 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 of the hydro-power export. Firstly, isn’t the country’s wealth supposed to be distributed equitably as per the Constitution? How sustainable is it to spend 60% of our annual budget on 4% of our population? Is that not happening at the expense other sectors such as culture or manufacturing? It is not enough for the government to fall back on free health and education while dishing out endless perks and privileges to a small section of the population, at the expense of the State funds. Little wonder then that there is a growing resentment against the system among the private sector. The scarier thing is that values such as sense of belonging to the nation, patriotism, ownership or social responsibility will decline once people don’t have physical place to call home. For Bhutanese, who are descendants of highlanders and forest dwellers, identity is a place. Distancing and alienation are already happening as more and more children of the Bhutanese diaspora make Australia and US their home.

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. We are then dismayed that the private sector is never taking off.

The thing to note is that human history has not been kind to large social inequalities, and glaring divisions between 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. So Japan will never face a social upheaval like in the UK with this Brexit thing – or like in the US with ongoing White Nationalism. Discontent will manifest in strange ways, mind you.

In Bhutan the salary ratio between the highest and the lowest salary used to be around 8 times in 1986 but has drastically gone up to 30 times with the last two salary hikes. 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 there is some much resentment in the US against the traditional political class. The glaring social gap that I saw there (when I was a visiting scholar in UC Berkeley in 2014) was the reason why I predicted that Donald Trump would win when he announced his nomination. Every polls and pundits were for Hillary Clinton.

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.

**********

NB:

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. It started from Tunisia and not from Egypt.

 

FCB2
FCB price list. They did their job back then. Where did they lose the plot? (Photo : Kuensel page, 1987)

27 thoughts on “Salary raise? umm….

  1. Jamyang Choden

    Highly agreed with you la. U have somehow raised the voice of some non civil servants like us. Sir, I just wish and hope that the nation builders will consider some of these factors one day. Thank you for writing and sharing ur valuable views la.

    Like

  2. I have the same thought as shared by you la. Especially I am concerned about the raise and drastic increase of house rent as soon as the pay raise come into effect. In fact there is tenant act and rules and regulations in place, but there is no intervention from any of the Ministry and concern authority. We are left with no option but to go on paying the rent as deemed and fixed by the building owners. Culturally we are believed to be compassionate and pious in our manners as reflected to the world, but the voice of the poor civil servants is always neglected and turned deaf and blind.
    It may be advantageous to few countable individuals but it will certainly impose traumatic scenario to majority of the lower rung civil servants.

    Like

  3. Shirley T

    Hi , I chanced upon this article and I think is well written , very clear and done with quite an extensive research. I am a foreigner and thought it well describes what is and what will happen. Agree the cost of living is too high for your country given the earning power of the people.

    Like

  4. As you mention on the head line. Now house owner have raised the house rent. Beside increasing the salary. Why not government make a flate policy of rent as carpet systems even for private house owner.

    Like

  5. Sangay

    This is a master piece!
    All the factors are well take care with evidences and logical reasoning. I like your thoughts and expressions!

    Like

  6. I was having the same conversation with a friend after I read the news. Country’s development is based on its people and all should be treated equally irrespective of which sector one is employed or unemployed. Why are civil servants’ pay only raised? What about those people who are not employed as civil servants? Why are civil servants always targeted by politicians? Are civil servants assumed to be easily manipulated, and driven by financial motives?
    Anyways, I appreciate how you have treated the repercussion of this decision on ‘have and have nots, driver and Dasho’. Kudos la. For once, Policy makers should at least be objective and not be guided by manipulative political spins and do what is good for the country at large to retain good faith of people on politics and piliticians.

    Well written piece la. 👍

    Like

    1. Thank you, Sanggay. We are in a democracy and it seems we are not setting the right trends in many areas – elections, governance, civic education, etc. Hope things mould as we move on

      Like

  7. Kuenlay

    Sure of what you write up . It’s just yetetday that’s i spoke to one of the pan shop owner renting a room size of just 4 ft x 5 ft area in the main town who shared her sorrows of monthly rent revision by the owner from 12,000 to 14000. . Also pressed by the owner fir deposit of 6 months rent which amounts to whooping sum of nu. 84,000 for a small pan shop like her. I couldn’t believe till she shoes me her papers signdef by the owner . To be appeared a day light robbery by certain land lords which really needs a govt s attention .

    Like

  8. Tshering

    Hats off to you sir.you are right sir. Corporations and governments themselves compete with public and private sectors in areas of good returns.Even FCB thought a social mandate, wants to make profit and bonuses.
    House rent will definitely rise and most of the house owners are government officials.
    Is it possible to sign the agreement with house owners about rent at the time when the construction approval is given. Otherwise house owners are difficult to meet especially in four thromdes.

    Like

  9. Bhai

    Bhutanese society has the system of serving the tea in a different cups in a family or any gatherings as per the grade. Different cups are some low priced and some high cost mugs/cups. Is that law here in the country. Mr. Dasho gets the golden printed cup and the middle officer gets good one and the lowest official gets the cracked cup.
    What a non sense I feel and a Japanese/foreigner fellow observes if the liquids inside the cup is different but it will be all same tea.
    That simple our society is differnciated among grades drastically.
    First of all start providing the same cups/mugs in a meeting or workshops/public gatherings.
    So stop low and high class people or rich and poor.
    Let me see if the Dasho and his messenger eats the lunch in a same kind of place in any gatherings.
    There is vast difference in our system.
    I am worried how this DNT will bring down the ratio.

    I have full support to the author
    Let’s hope for better this time.

    Like

  10. Rinzin

    One brillent report Disclouse in the house was the population birth rate analysis in 2047 and will continue to fall.
    Belief this we cannot do any thing without population. So government should at least encourage or make it compulsory to have a two or three babies in every married couple.
    Country will die with no population some day.
    Neighboring crocodiles are aware on this population status of the peaceful nation.
    We can make the smooth flow of GNH by ourself in the country. It’s all possible if we act wisely for the nation building. Yes author is absolutely true when salary raise news flash in social media for people’s eye wash and consequences on our Bhutanese social economy.

    Like

  11. Pema khandu

    For politician, to declare pay raise is the easiest way to owe the voters and beyond that is hurt for them. Pay raise will no doubt widen the disparity between rich and poor.

    Like

  12. Namgay Wangmo

    I have always thought and wished if government could solve this rental problems at the earlest as possible….no wonder peolpe are having mental problems.Am with it and have my full support for this one la.

    Like

  13. Dr. Ritulal Sharma

    There is a lot of sense in this article. I would like to salute the author for a lot of reading and thought has gone into this article. Politicians need to read a lot and encourage scholars to conduct several appropriate researches in order to make fact based (data based) decisions which benefit the Nation as a whole.

    I would like the Author of this article (who seems to be my contemporary but do not actually know him personally) also to remember that there were the following rules in the 80s & 90s which contributed to widen the gap between the haves & have-nots:

    1. The spouses of the Civil Servants were not allowed to do any Businesses. This meant paralyzing the other half of productive citizens of the Nation from doing anything to improve their economic status or contributing to Nation Building.

    2. All businesses including a small Paan Shop had to pay significant amount of their earnings as taxes to the Government. This is okay as citizens need to pay taxes to run the Government.

    Paradoxically during 80s & 90s many high ranking civil servants and rich businessmen were renting out several of their buildings and were hiring their landcruisers, mini-busses and hiluxes to tourists. These activities were not considered as businesses and were not taxed. I dared to quiz one of the then Ministers but didn’t get a satisfactory answer as he was one of those beneficiaries of the upper echelon.

    I hope and pray things will improve.

    Like

  14. Drungpa

    No doubt there’s increasing trend of smuggling, burglaries, theft, suicide, sex trades, mental problems, and you name it. This country is literally paralyzed.

    Like

  15. Choki

    It is a fact that the house owners are charging echorbitant rents and take away more than 60% of their tenants’ salaries each month.
    It seems that they also do not have much choices (new owners or residential buildings) since they build their houses on a loan taken from the banks and the interest rates are quite high. The rents are already calculated before building to raise just about enough money for the emi on the loans.
    The owners of older buildings and the buildings in town area leasing to commercial businesses on the other hand are just taking advantage of the fact that there are many who are willing to pay higher rent who can afford and have the mindset of ‘take it or leave it’
    Now, all these things come down to the banks who seem to be happy charging high interest rates which comes down to the tenants eventually. Every year we hear that the banks are making hundreds of millions of Ngultrums net profit and the employees of the banks are getting 6 months to a year worth of salary as bonuses while the rest of the population suffers. I think the RMA seriously needs to look into this matter and decrease the rates on housing loans so that the Govt. can also actually implement the Tenancy Act.

    Like

Leave a Reply to Dhan Dhb Gurung Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s