Fri | Sep 4, 2015

United States less favourable for unskilled migrants

Published:Sunday | October 10, 2010
Dennis Morrison,

Dennis Morrison, Contributor

Jamaicans who have for long eyed the United States (US) as a frontier for economic advancement would be concerned about immediate job prospects for those planning to migrate based on recent reports showing a weakening of the recovery.

Specifically, the job report confirmed that the US economy con-tinues to shed jobs while employers are exercising unusual caution about hiring. With unemployment remaining stubbornly high at 9.6 per cent and the number of long-term unemployed at record levels, the US is now a less favourable outlet for people from our unskilled, semi-skilled, and professional ranks.

Just how important the US has been as a labour market for us is reflected in the fact that since the mid-1940s, officially nearly one million of us have settled there. This figure dwarfs the estimated 250,000 who went to the United Kingdom and 200,000 to Canada. In times of economic distress or political uncertainty here or boom there, our people have gone to America in search of opportunities. Those opportunities are likely to shrink as the forecasts indicate that jobs are going to be scarce in America in the next five years or so partly because employers are seizing the opportunity of a weak labour market to produce more output using less people.

The related benefit of migration, remittances, now the largest source of income to the Jamaican economy, will be affected as the US accounts for over 60 per cent of such inflows. But beyond migration and remittance flows, the US has been the major external force in our economy for decades. Even before the British left Jamaica, the US had become our major trading partner and source of investment tied to major developments in the bauxite and tourist industries starting in the 1950s.

Policymaking politicised

Realistic assessments of Jamaica's economic recovery are, therefore, inextricably linked to the outlook for US economic growth. Local observers would have noted, however, that policymaking has become extraordinarily politicised these days as conservatives have taken up rigid ideological positions. Facing the worst recession in over 70 years and a collapse in consumer demand, there is strong resistance to fiscal stimulatory measures and calls for spending cuts that would only aggravate the weakness of the recovery. In recent months, it has become obvious that without further stimulus, the American economy will limp along, but politics might well trump economics.

Given the damage caused by the financial meltdown on the housing and transportation sectors, which have been drivers of the US economy in recent years, measures to spur growth will eventually have to come from other areas. One proposal that has been gaining credibility is that of an infrastructure bank to spearhead a massive programme to modernise America's crumbling brides, its roads, runways, air traffic control system, and electricity grid.

Advocates of this proposal argue that injection of public-private investment in these areas would reinvigorate the construction sector, which has been dragged down by the collapse in the housing market.

An infrastructure programme estimated by the US Society of Civil Engineers at US$2 trillion would be a new driver of economic activity, breathing life into the labour market. If it is postponed, America's decaying infrastructure will cause it to lose competitiveness at a time when China and other leading economies are investing heavily in laying down state-of-the art transportation and other systems.

Cheap money

What is more, this is a propitious time for such a proposal with the cost of building materials down by double digits and contractors anxious to slash their margins in order to pick up jobs. As a consequence, investment dollars will do more.

Perhaps the most compelling factor of all is the cheap cost of borrowing money. Currently, long-term interest rates are at their lowest in nearly 60 years as central banks in developed countries have printed money to refloat the world economy. Not since President Eisenhower was in the White House has the cost of borrowing been cheaper. Jamaica has benefited from this low interest rate environment by way of the loans from the International Monetary Fund and other multilateral institutions for balance of payments and budgetary support. There is not likely to be a better time for raising low-cost money for investment in infrastructure, including upgrading of electricity systems to supply an existing market.

Notwithstanding the attractiveness of the infrastructure proposal, the outlook for the US economy is not encouraging. The risk is that there will be a political stalemate in Washington after the November mid-term elections which would create more uncertainty and hold back policies to boost the recovery. In this case, Jamaica's recovery path could be more difficult given our heavy reliance on the US economy.

The question is whether we can locate and engage the growth industries of the US and other markets - health, information and communication technology, education, cultural industries, and others. This will require rethinking of growth strategies and export and other policies to meet the changing economic landscape.

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