Will the nice bonuses for government employees help the local economy?
What will be the impact on the local economy of the $475 million that will be distributed as a bonus to public servants, as envisaged in the government’s debt adjustment plan (PAD)?
Experts consulted by Primera Hora agree that the final impact will depend on the consumption behavior of the 107,722 government employees who will receive the stimulus on December 1. It is important to clarify that this money differs from the Christmas bonus – which totaled $128.3 million – that was given to government employees last week.
Gov. Pedro Pierluisi explained that 98,270 government employees from various agencies will receive a $2,954 bonus, while 9,452 employees represented by the Service Employees United Union (SPU) will receive $11,360 because they supported the amendment plan. These payments provided for in the PAD are the result of the fact that the government has exceeded collection expectations, so it can pay its creditors extra money.
Although within the government, the President of the Economic Development Bank of Puerto Rico (BDE), Luis Alemani González, has publicly stated that the early disbursement of the Christmas bonus to employees of the central government, public corporations, municipalities, retirees and eligible retired beneficiaries can be used “in whole” or in large part for the consumption of goods and services, and the truth is that it is not yet clear how the consumer will act from this week when “Black Friday” or “early sale” occurs, as well as the following days and close to the Christmas celebrations.
Economist José Caraballo Cueto explained that the consensus is that if recipients use the reward on imported products or on purchases from multinational corporations—nearly all of them online—the impact on the local economy will be minimal since the money leaves Puerto Rico almost immediately. Ricoh, except for collections made through IVU (sales and use tax).
“But if those 100,000 employees spend the money on, say, remodeling their homes or in local products or stores, the money will continue to circulate in the Puerto Rican economy and generate what we call the multiplier effect. But to see what impact those $475 million will have, we will have to To see consumer behavior.
He added that those who use the reward to improve their situation, such as debt reduction, will also have a positive impact.
And he stressed that “saving part of the money is also positive for the local economy,” noting that unlike what happened with the “936 generation” when there was an economic boom on the island and people spent what they earned now. They see different behaviour.
“In the last decade, we’ve seen that people save a little bit and that’s beneficial. Whether they save or pay off debt, it’s positive. What needs to be assessed is who really gets this bonus, especially the one close to $12,000, because there are people in the government who earn very poorly.” And they need this money to cover or update current expenses that have increased dramatically with inflation. While there are others who are earning a good alimony and may be able to save them.”
He also stressed that the impact of the bonds will be greater in the cities of the metropolitan area, where most of the government agencies that will receive the largest amount of incentives are concentrated. “It is unlikely, for example, that the merchants of Cabo Rojo, Rincon and Yabucoa will receive or feel the effect of this bonus,” he said, stressing that he has recommended over the past seven years
Low expectations among small and medium traders.
For her part, the President of the United Retail Center (CUD), Lourdes Aponte, stressed that although the “early bird sales” and Christmas represent a kind of richness for merchants, the expectations this year, at least, are to offset the losses. or investments incurred by emergencies caused by hurricanes, epidemics, and inflationary effects.
“It’s not that we’re unenthusiastic, but we’re waiting to see if we can balance out a little bit all the economic disadvantages and expenses that we’ve incurred because of past situations,” he said.
He explained that the analysis they made at CUD, taking into account consumer behavior, is that earnings will remain “more or less the same” as last year.
“Our call to consumers is to support local commerce. Small and medium-sized merchants have Orange Wednesday, with deals that will run from this week through December. Remember, the pesos you invest in small and medium businesses is the income that stays in Puerto Rico. Plus, we’re the largest employer.” On the island, we are the engine of what is development and growth,” Aponte urged, realizing that this year the consumer is more careful when buying, due to the high prices of products, food and utility
On the other hand, Evan Baez, press spokesperson for multinational companies Sams and Wal-Mart, highlighted customer consumption patterns as “positive”.
In fact, expect year-end sales to be 1% higher than last year.
In regards to Weekin’s “Black Friday” deals, Baez said that unlike the dynamics that occurred in the pandemic — when special merchandise could be segregated online — this year the shopping experience will return to being one physically in stores.
However, he doesn’t expect crowds or chaos last year, as shows started on the last few days and will vary over the weekend.
“I think electronics will still be king. I can’t say how the consumer will behave, but I’m sure electronics will attract attention, ”he predicted.
“Frankly, between the Christmas bonus that the government gave last week and the PAD bonus that will be given out on December 1st, we expect a good sales season because there will be ‘cash flow,'” Bayes decreed.