Friday, May 7, 2021

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.


You must be logged in to post a comment Login