Youth unemployment rapidly on the rise

Published: Sunday | May 24, 2009


Dennis Morrison, Contributor


Morrison

No one should be surprised that the results of Jamaica's first-quarter economic performance have confirmed that local production is declining at an accelerated pace. The lag period between the onset of recession in the United States economy and when its effects were felt here is now clearly ended. While we have not been hit by financial sector crises and housing foreclosures, we will, like the USA, suffer job losses as the local economy contracts; and this has begun.

As the full impact of the closure of the larger part of the bauxite industry is now being felt and the tourist industry slows down, we can expect that this quarter and the next will show steeper declines in production. The fall in remittances, which is already depressing demand for goods and services, will also serve to worsen the downturn in output in several sectors. For most people, what matters most about the deterioration in the economy is its effect on the availability of jobs.

Young people, in particular, who have borne the brunt of the country's weak performance in job creation over the past 30 years, are likely to be disproportionately affected. This is in the context where the youth ( 14-24 years ) unemployment rate in 2008 of 25.9 per cent was more than twice the overall rate of 10.6 per cent, with the rate for young females being worse, at three times. The vulnerability of the youth can be seen in the fact that while the overall unemployment rate went up by less than a percentage point to 10.6 per cent last year, their rate moved up by 2.2 points, to 25.9 per cent.

Self-employment

The plight of young people was further exposed by the warnings coming last week from the business sector that summer jobs are going to be scarcer this year. Responding to concerns about the difficulty faced by high-school graduates, Prime Minister Bruce Golding recently announced a new programme to help "school-leavers to become self-employed". This initiative, to be called Young Entrepreneurs Programme (YEP), will, important, provide training to students in the basic elements of running businesses.

It would send a powerful signal of their commitment to long-term development if stronger private-sector entities participated actively in YEP through contributions to the training programme, mentoring and financing of start-ups. They should at least be able to match the $250 million to be allocated by the Government for small-scale loans to participants who show potential.

So much has been said by the sector about the link between crime and the lack of economic opportunity and how the high crime rate is hurting investment, that there should be strong support for this kind of initiative. Our failure to establish and sustain networks that promote micro-, small- and medium-size enterprises (MSMEs), and the lack of a policy framework for the sector, has retarded the growth of our economy.

Specifically, the absence of an organised MSME sector means Jamaica has been operating without being able to draw fully upon the creativity of the most dynamic employment-generating part of the economy. This weakness partly explains why we were not able to gain greater spill-over effects on local production and employment from the strong bout of investment experienced since the late 1990s. And it is manifested in the data which show that GDP growth and employment generation flowing from each investment dollar were lower in Jamaica than in other high-performing mobilisers of foreign direct investment in the region. Thus, the question has been raised as to whether Jamaica has utilised investment less efficiently.

Inefficient investment

In reality, a substantial part of the investment flows since 1999 went into critical infrastructure, such as highways, airports, seaports, water and sewerage systems and state-of-the-art telecoms, which have created a platform for supporting major expansion of production. If this platform is not used to bring about an expanded economy, the infrastructure will not fulfil its purpose and the investment will appear inefficient. In short, expansion of production will require private-sector investments in the industries and activities for which the infrastructure has been provided.

These include the full range of ICT-based activities (data processing, back-office out-sourcing, etc) at which some local entrepreneurs have been successful. With this sector's growth now being constrained by shortage of office space, there are opportunities for local investors to supply additional office facilities. Production of agricultural and agro-processing products and manufactured goods for the tourist industry is another area that is beckoning local investors to step forward.

That is not a job for the state, though it can promote and facilitate private investment as it has done in tourism; and it, from time to time, will be called upon to help seed riskier projects. For now, the priority of the State has got to be placed on the MSME sector, and especially in agriculture, where it costs less to create each job, and bearing in mind the urgency of rebuilding the capacity of domestic food production. With export sectors suffering large declines, a food-import bill running over US$800 million per year will be a heavy burden on our foreign-exchange resources. Isn't this a great opportunity for modernising the agricultural sector and organising it around the MSME sector?

In previous crises, people who lost jobs turned to informal commercial trading of imported goods as a lifeline, but as the economy deteriorates, this outlet will be under pressure. Surely, this crisis requires that we find more sustainable solutions.

Dennis E. Morrison is an economist. Feedback may be sent to columns@gleanerjm.com.