Rise in cost-of-living allowance will likely worsen inflation — experts

(File photo: Jordan News)
AMMAN — A recent report issued by Jordan Labor Watch stated that despite inflation, the cost-of-living allowance, which is given to public sector’s employees, has not been increased in the last 10 years. اضافة اعلان

The report was received with disapproval by economic experts who said that an increase in allowance would bring up the rate of inflation in the Kingdom.

Economist Husam Ayesh told Jordan News that “in order to combat inflation, the government should not increase salaries or the cost of living allowance”.

He said, however, that the government has other tools to use to combat inflation, particularly price controls, tax cuts, and a more flexible fuel tax.

According to Ayesh, the government can resort to such tools, and that would help the economy grow.

“The solution should be through supporting the supply side in order to keep the demand going,” he pointed out.

Public sector salaries consume the bulk (65 percent, according to economists) of current expenditure in the country’s state budget.

Former minister of state for economic affairs, Yusuf Mansur, told Jordan News that since 2016, the economy “has not seen high rates of inflation”.

“(This) is the only year in which the inflation rate rose. This is why we cannot say that we have high rates of inflation that make it necessary to increase the cost-of-living allowance,” he said, suggesting that the government should “decrease fuel prices, which are considered the main cause of inflation”.

Mansur added that increasing wages without studying all aspects of the issue would have serious consequences, indicating that “a cash infusion without a production increase would cause another inflationary wave”.

He noted that the key solution here “is to revitalize the economy and encourage work in the private sector”.

However, an expert in labor affairs and head of the Workers' House, Hamada Abu Nijmeh, told Jordan News that the minimum wage, in both the public and private sectors, “is lower than the poverty line”.

“This makes any increase in wages, which are already below the poverty line, of little help in increasing the purchasing power,” he added.

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