Thursday, January 23, 2020

Estudios Técnicos: Government Better Off Reducing Workweek

By on May 31, 2016

SAN JUAN – The government should reduce the work week instead of laying off workers because it would result in an $829.8 million loss for the gross national product (GNP) and negatively affect unemployment and public healthcare funds. Those were some of the conclusions of a study conducted by the Estudios Técnicos consulting firm, which analyzed the impact of a $525.7 million cut to government expenditures, of which $151.3 million could belong to the public payroll.

The study was presented during Senate Treasury Committee hearings analyzing the $9.1 billion government budget, which is around $700 million less than the current one.

Jose Joaquin Villamil, economist & chairman of Estudios Tecnicos Inc

José Joaquín Villamil, economist & chairman of Estudios Técnicos

Estudios Técnicos analyzed two scenarios, one in which the $525.7 million reduction was made by cutting the work week and another in which government laid off workers.

The government already cut its consumption expenditures in 2015 by 16%, and the percentage is expected to rise, which could have an impact on the economy as government purchases are 13.4% of the GNP.

If the government opts to cut the workweek without layoffs, the study estimates that some 1,714 indirect jobs would be affected, along with some 5,462 induced jobs, for a total of 7,175 jobs.

“Some $368 million in total salary will be affected, causing a loss to the general fund of $22.4 million in income taxes and $17.5 million in sales and use taxes. In total, the general fund will lose $39.9 million,” the study says.

Unemployment benefits would go up to $2.2 million a month, and nutritional assistance program expenditures would be $803,645 higher each month. Also, $829.8 million in GNP, or 1.2% in 2015, would be lost; personal consumption expenditures would see an impact of about $304.1 million; as would some $525 million in government consumption.

If the government opts to lay off workers, it would have to eliminate 3,469 workers, but would end up affecting 10,636 jobs. These jobs produce $368 million in salaries and are subject to $22.4 million in income tax.

As in the first scenario, there would also be a loss of $17.5 million in sales and use taxes lost,  along with $39.9 million lost for the general fund.

However, unemployment benefits would rise to $3.2 million a month and nutritional assistance program benefits, $1.2 million a month.

The impact to the GDP would be of $829.8 million, the study says.

Job cuts could also increase emigration because the private sector would not be able to absorb the losses, according to the study.

 

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