‘Reverse the trend’ - Increasing productivity must be a strategic priority in 2015 and beyond
Most Jamaicans tend to usher in each New Year with a sense of renewed hope and positive expectations.
It is, therefore, not surprising that despite the bloody start, many of us are anticipating a 2015 with lower crime rates, increased employment opportunities, and significant improvement in the country's macroeconomic conditions.
There is, therefore, no better time than now, when we are filled with optimism, to remind ourselves that productivity improvement will be a critical pre-condition if we are going to enjoy a higher standard of living from 2015 onwards.
With this in mind, it is important that, at the beginning of 2015, Jamaicans from all socio-economic strata maintain a laser-like focus on productivity growth as a holistic strategy that can deliver several much-needed but elusive development goals simultaneously.
It is important that we embrace a philosophy where both our employed labour force and our labour productivity are increasing. This is critical because increasing the workforce without improving productivity will lead to reduced real wages and profits and, ultimately, lower standard of living.
It is a fact that the richest countries in the world are also the most productive. A comparison of Jamaica and its main trading partners (such as the United Kingdom, Canada, United States, Brazil and Colombia and several Small Island Developing States such as Barbados, St Lucia, and Trinidad and Tobago) reveals that during the period 1990 to 2013, Jamaica recorded the lowest labour productivity levels and growth rates.
We must all work to reverse this trend if we are to reap the benefits of productivity growth. We must consistently strive to extract the maximum output of goods or services from each unit of productive resources we employ, be it land, labour, capital, energy or raw materials.
It must be understood that it is only when we eliminate waste from our daily activities and enterprises that we can claim to be productive.
The negative growth of capital intensity over the period 2001 to 2013 (-0.2 per cent) - a measure of the amount of capital stock (machinery, equipment, etc.) each worker has to perform his job, has constrained labour productivity growth in Jamaica.
For 2015 and beyond, employers must seek to enhance the productive level of their workers by providing the requisite capital stock to perform tasks. Policymakers and bankers should assist this retooling exercise by improving the environment for lending and borrowing.
A decline in total factor productivity (TFP), over the same period, at an average annual rate of 0.3 per cent suggests that the work environment must be improved to facilitate productivity enhancement. TFP is a measurement of all the factors that augment or impede labour and capital in the production process. It encapsulates many factors, but chief among them are business processes, management, job skills, and human-resource practices.
In 2015, employers should invest in 'up-skilling' staff in an effort to get each worker to perform at a higher level of efficiency.
Job training or enrichment programmes should aim to increase transferable skills so that each worker is able to perform multiple tasks within an organisation. This will prevent a reduction in production within firms or industries when workers are temporarily ill or absent. Up-skilling staff also serves as a motivator; employees usually work more efficiently when they are motivated.
Early in 2015, employers should spend time reviewing and increasing the efficiency of their business processes. In this regard, commendation is extended to the Government for attempting to reduce the time it takes to register a business by eliminating the need for prospective investors to visit multiple agencies.
Employers should invest in developing leadership within their organisation and improving management-employee relations as lack of appropriate leadership is known to affect employee outcomes and, hence, the productivity level of the organisation.
While there are many other factors that affect the efficiency of labour, another component of TFP that employers should give some attention to in 2015 is performance-based compensation systems.
Companies should begin to seriously explore paying wages or even bonuses that are commensurate with productivity improvement. This will also motivate workers to perform optimally as well as improve the state of the country's macro economy.
Ultimately, productivity improvement is undisputedly the most important determinant of sustained growth in standard of living. If we want to enjoy higher and sustained standards of living, the price we must pay is 'AN INCREASE IN PRODUCTIVTY'.
- Latoya Miles is the senior productivity specialist in the Research and Measurement Unit of the Jamaica Productivity Centre. The centre is mandated to serve as a catalyst for promoting and facilitating productivity improvement at the national sectoral and enterprise levels in Jamaica.