Editorial | Building productivity

That the Government is developing a policy to address Jamaica’s long-standing crisis of low productivity is, on its face, good news.

But the administration is reminded this problem won’t be solved solely by, or an excessive focus on, the sociological factors that impact people’s relationships to their jobs. That issue demands attention to all factors that affect the overall efficiency of the economy, and will likely require new thinking on, if not an entire overhaul of, prevailing orthodoxies in the organisation of the economy.

In other words, in the prevailing environment, various factors that influence productivity ought not to be addressed as discrete elements, but part of a strategic and cohesive whole, aimed at achieving expected national outcomes. Put another way, whatever label may be applied to it, the circumstances and the times call for a national industrial policy that integrates education, skills training, research and development (R&D), innovation and targeted investment – by that and the private sector. By now, it is absolutely clear that while important, macroeconomic stability is not, by itself, sufficient to generate robust growth.

Indeed, over the past 13 years, Jamaica has dramatically reduced the national debt as a proportion of GDP (from over 140 per cent to below 70 per cent) and most of its other macroindicators are in relatively good balance. Yet, while unemployment – hovering at four per cent or below in recent years – is at historic lows, economic growth, even discounting the impact of natural or other disasters, has been anaemic – generally at under three per cent. In fact, annual average growth over the period of around one per cent is in line with the average performance for the better part of half a century.

At the same time, labour productivity has been declining by around one per cent a year, while gains in the broader total factor productivity have been minimal. So, even though unemployment has fallen and more people are in jobs, the average output of those in the workforce has declined.

LESS THAN A FIFTH

As Prime Minister Dr Andrew Holness told Parliament last week during his contribution to the Budget Debate, Jamaican workers, on average, contribute US$8.81 to GDP per hour work, measured by purchasing power parity (PPP). With an average eight-hour workday, that translates to under US$26,000 a year, or less than a fifth of what prevails in the United States.

But it is not only behind the United States that Jamaica lags in labour productivity. It also trails its Latin American and Caribbean peers, as was highlighted by Dr Holness.

Indeed, output per worker in Jamaica was less than half the average of its Caribbean peers (US$20.5) and of the Latin American and Caribbean region (US$21.1) as a whole. Further, on average, a worker in Panama, measured by contribution to GDP, is approximately five times more productive than their Jamaican counterpart. Compared to The Bahamas, the gap is four times, while the Jamaican worker produces only 28 per cent as one in Trinidad and Tobago.

In this hemisphere, Jamaica betters only Haiti where workers’ average hourly output as a ratio of GDP is, Dr Holness pointed out, US$3.3.

“... This is not a judgement on Jamaican workers,” the prime minister said. “It is a diagnosis of our economic structure.”

Fundamentally, he is right. Especially when the issue is taken in its broadest context.

For instance, by most measures, nearly seven in 10 of workers are not trained for the jobs they do, and fewer than three in 10 are enrolled in universities or other forms of tertiary education or training.

The cause for this is obvious. Each year, over a third of students who complete their primary education remain either illiterate or can barely read or comprehend English. In the regional Caribbean Secondary Education Certificate (CSEC) exams, fewer than a fifth of Jamaican students pass five or more subjects, inclusive of maths and English, in a single sitting – a basic requirement for matriculation to tertiary education. Further, students struggle with STEM-related subjects, which are critical to the development, and function, in modern, digital economies.

LAGS BEHIND REGIONAL PEERS

Additionally, Jamaica also lags behind regional peers in spending on the things in the economy that help it to produce in the future – gross fixed capital formation (GFCF), and, in too many instances, in this newspaper’s view, misaligns expenditure to what is required to drive production, growth and development.

Since the 2010s Jamaica’s GFCF has ranged between 16 per cent and 18 per cent of GDP, with a significant portion of that going to real estate development. Comparatively, Dominican Republic’s and Costa Rica’s have been consistently above 20 per cent and, with respect to the latter, closer to 25 per cent.

At the same time, the island, like most of its Caribbean neighbours, invests too little in R&D – less than 0.1 per of GDP. That is below the level of 0.6-0.8 per cent for Latin American and the Caribbean, which itself is low by developed countries’ standards.

The point is that a sustainable fix to Jamaica’s low productivity should take all these factors into account, matching education and training, research and development and innovation with critical areas of investment. Twenty-first century farmers can’t be globally competitive using forks, hoes and machetes.

Further, if China, Singapore and South Korea are guides, industrial policy can no longer be grouped with four-letter words. Even the United States with its CHIPS and Science Act (2022) and the Infrastructure Investment and Jobs Act (2021) appreciates this.

In Jamaica’s case, the process of building productivity requires serious conversations, robust analyses, and genuine partnerships between stakeholders.