Mon | Aug 21, 2017

Economic growth and social safety

Published:Sunday | October 11, 2015 | 10:00 AMChristopher Tufton, Contributor
Two women from Tredegar Park, St Catherine, walk with buckets of guineps for sale on July 29. While Jamaica's jobless rate is 13.2 per cent, youth unemployment is almost three times that figure.
Christopher Tufton
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Recently, the deputy managing director of the International Monetary Fund (IMF), Min Zhu, in a report on Jamaica's economic performance, admitted that while Jamaica was meeting its benchmark targets, economic growth was weak and job-creation efforts were less than adequate to address the challenges of unemployment and underemployment.

It is expected that there would be a lag between the reform programme and increased economic activity, but when the IMF speaks to the concern, then one can conclude that these concerns are an issue for them, maybe even a threat to the programme.

To the extent that poverty increases disaffection and supports social unrest, it also threatens any economic programme, even if those programmes are on the right path for success.

In an economy that is experiencing austerity as a consequence of reform, social intervention to support poverty alleviation is a critical imperative.

As a country, we have to protect the poor and dispossessed. The IMF may actually be telecasting to us that the structural adjustment programme can be unravelled by the actions of those Jamaicans who feel dispossessed.

STATIN gave 0.4% growth for the 2015 first quarter, with projections of 1.9% for the financial year 2015-16. Unemployment stands at 13.2%, but with youth unemployment of up to 38%, or three times that amount. Youth unemployment is a great source of despair and disillusionment. This could act as the catalyst for social unrest. Sadly, poverty affects approximately one million Jamaicans.

 

POVERTY AND GROWTH

There is a clear relationship between poverty and economic growth.

With an average 1% growth rate over the last 30 years, and our debt to GDP of more than 125%, it's understandable why so many Jamaicans are poor.

Our challenge is that as a country, we have borrowed to sustain ourselves, rather than grow our economy, and that borrowing has ultimately led to increased economic isolation for many.

Unless borrowing supports or enhances economic activity, there are greater risks that borrowing will further burden the economies that incur that debt.

At the same time, we must understand that those who are poor must be given an opportunity to survive and, where possible, be rehabilitated as productive citizens. Otherwise, we run the risk of lopsided economic recovery, characterised by income inequality and the challenges that brings, between the haves and the have-nots.

Poverty-alleviation programmes must, therefore, ideally be targeted and linked to training and retraining, and job creation.

 

SOCIAL SAFETY NET

Social safety nets are important to economies, particularly one pursuing an austerity programme. Ideally, Jamaica should be allocating at least 2% of GDP to social-assistance programmes, keeping with international norms. In 2006, this was approximately 0.8%.

Average spending on social safety nets across the world is approximately 1.9% of GDP. Average spending on social safety net programmes in developing countries is between 1%-2% of GDP. In Latin America and the Caribbean, average spending is approximately 1.5% of GDP.

The issue is, can we afford not to increase offering this level of protection? Additionally, how efficient are we in getting value for money in what we offer?

Jamaica's poverty-alleviation programme is administered primarily under PATH.

This programme is used to capture the critical target groups and be assessed, annually, based on special performance indicators, to ensure success.

What are these vulnerable groups and related programmes?

The School Feeding Programme; food stamps; old-age allowance; general poor relief (natural disasters, etc); disability transfers; conditional transfers - (pregnant and lactating mothers and children from birth to secondary schools); agricultural rehabilitation; and targeted unemployment allowance.

We must constantly assess these programmes to ensure efficient implementation, and adjust for efficiency where necessary. For example, the School Feeding Programme is better fully privatised. Government is spending billions through Nutrition Products Limited, but with less-than-satisfactory returns.

The auditor general's report over the years speaks to spoilage caused by unrefrigerated trucks, contracts given to board members, questions of quality standards for products, outdated equipment, just to name of few of the inefficiencies.

Similarly, on PATH, there is a need to link community support to student compliance and performance. We should be less rigid in penalising students for non-attendance before we attempt rehabilitation and hold parents responsible.

In the area of agriculture, rehabilitation after natural disasters should be linked to greater focus on sustainability, rather than simply giveaways. A more-equipped Rural Agricultural Development Authority extension services are required for this. It is necessary, also, for the Government to seriously consider introducing training and retraining allowance for the unemployed, particularly young people.

Pay young people to get a skill.

 

IMMEDIACY OF JOBS

We have to find a way to quickly increase job prospects for young people. Otherwise, we will undermine our reform programme. They will either migrate tempted to be deviants or just lose interests.

The good news is that it's possible. There are things we can do.

Opportunities in areas like business-process outsourcing carry significant potential with a relatively short build-out period. Jamaica has the market, near-shore, versus competing countries such as India and the Philippines. With proposed US$15 per hour minimum wage being proposed in states like New York, Jamaica is a competitive near-shore, low-cost provider. We have the labour force to create 50,000 jobs from the 18,000 we now provide. This is an area we could move quickly on.

- Chris Tufton is a former government minister and co-executive director of the Caribbean Policy Research Institute, a UWI, Mona, policy think tank. Email feedback to columns@gleanerjm.com and cctufton@gmail.com.