Exploring the COVID-19 — Part 4

Exploring the COVID-19 — Part 4

... and behind the poverty reduction numbers

Canute
Thompson

Tuesday, June 30, 2020

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In my last instalment in this series, published on June 2, 2020, I looked at the educational planning and the proposed 'new normal' for the sector. Attention is now turned in the Jamaican Economy in a COVID-19 era.

There have been any number of sure, as well as wild, bets about what the global and local economy will look like in a COVID-19 era. The safest bet is that we are not sure, but some taking account of Jamaica's vulnerable situation as revealed when we look behind the poverty reduction numbers, some clear issues which required attention before COVID-19 will greater attention now. These include:

Agro-processing

On the issue of inflation, which is the measure of the relationship between supply and demand, where demand is driven by purchasing power, citizens who spend most of their income on food, who account for 70 per cent of the workforce, are at great risk. In crises like epidemics, as we have seen with COVID-19, prices of key commodities rise based on increased demand, and those who have little or no margin in their disposable income bear the brunt of price increases. To mitigate these probabilities the Government must ensure that steps are taken to work with the productive sector to ensure an adequate inventory of critical supplies to prevent price gouging.

In this regard agro-processing plants which allow for storage of bulk supplies are vital. But, in addition to storage, the processing makes it possible to maintain price stability for both farmers and householders.

Alternative energy

Another area which requires urgent attention is energy. This is a national security issue as well as a health and safety issue. Jamaica imported some US$1.6 billion worth of fuel in 2019, representing 25 per cent of the country's total imports. Whereas COVID-19 resulted in the cost of fuel falling, the next pandemic or global shock could see the price of fuel skyrocketing. The cure for this probability is not a hedge, but alternative sources of energy. Thus, Government must fast-track the process of incentivising households and businesses which are utilising clean and sustainable energy sources.

Water supply

The conduct of successive political administrations in relation to water gives the clear impression that water is seen as a good political commodity. It is a means of corruption at several levels, including who get black tanks and who do not, who gets contracts to supply and/or distribute those tanks and who do not, who gets water and who do not, and who gets the contract to truck the water and who do not.

It is a complete shame the way this commodity is handled. A whole article is needed on the issue of water alone.

Despite repeated promises by successive administrations, yearly lock-offs occur, and so often we behave as if a drought is a surprise event. We have droughts every year and we go through the same ritual. The time is going to come, I am predicting, when the games we play with water will backfire big time, and the toll will be seen in the economy and human lives.

It is full time that a coordinated water management strategy rooted in a health and safety and national security imperative be developed and systematically implemented, free from political consideration. At the heart of this strategy should be the provision of support to households to harvest and treat their water.

Tourism

Back in the 1980s we used to say if America sneezes, the Caribbean catches a cold. We are living that reality today. COVID-19 closed the hotel sector and another pandemic can do the same. We simply must wean our economy on the high level of dependence on tourism. What also bothers me about tourism is that there is so much corruption in how resources are spent, and this did not begin with $46 million to do a little cleaning in Ocho Rios. Before that we had the tree-planting along the elegant corridor and countless consultants flying all over the world, yet the vulnerable young men and women of the sector earn the crumbs which fall from the table.

BEHIND THE POVERTY REDUCTION NUMBERS

Minister of Finance Dr Nigel Clarke reported to the House of Representatives on June 23, 2020 that: “In 2018, the poverty rate was 12.6 per cent — a decline of 6.7 percentage points relative to 2017… This is the lowest rate of poverty since 2008.” The reality of less poverty is good news, but the bigger question, in my view, is whether this reduction signifies a sustainable improvement in the economy and the quality of life for the working poor.

The minister further stated that the “decline may be attributed to an increase in real gross domestic product (GDP), an increase in employment, an increase in the proportion of households in the lower quintiles that received remittances, as well as a slowing in the rate of inflation”.

The inarguable fact is that the factors which have led to the decline are not sustainable. A single precipitous movement in the value of the Jamaican dollar to the US dollar could reverse poverty numbers.

Let us examine each of these in reverse order.

Inflation

The rate of inflation has been low for some time. The data show that inflation for the period 2015 to 2018 was:

2018 – 3.73 per cent

2017 – 4.39 per cent

2016 – 2.35 per cent

2015 – 3.68 per cent

With 2015 and 2016 showing rates lower than 2018 it is evident on the face of it that low inflation does not necessarily mean lower poverty given the poverty rate was higher in 2015 and 2016 than in 2018, but both years had lower inflation than 2018.

Remittances

I think everyone would agree that the level of remittances is not a function of any economic magic which a Government works. Remittances reflect the work and generosity of people who are outside the country. Thus, a reduction in poverty which is attributable to remittances is really a depressing development, for it simply shows the dependence of our citizens on others.

Increased employment/under-unemployment

Increased employment as a driver of poverty reduction is the best-case scenario. But when one hears about poverty reduction one hopes that the reduction is sustainable; that is, that people have acquired skills and are in jobs for the long term. In addition, increased employment is expected to result in increased economic output / growth. So, with the rate of unemployment falling from 11.66 per cent in 2017 to 9.45 per cent in 2018, we must look to 2019 to see whether those numbers had an impact on economic growth. The data show that while the economy grew by 1.8 per cent in 2018, compared to one per cent in 2017, in 2019 the economy was in constant decline from a rate of growth of 1.7 per cent in the first quarter to 1.3 per cent in the second, to 0.6 per cent in the third to virtually zero per cent in the fourth, a mere 0.1 per cent.

So, whatever changes in unemployment were registered in 2018 could likely be reversed in 2019 given the shrinking of the economy, and certainly in 2020 with COVID-19.

With lower unemployment and a lower rate of poverty in 2018 there was no positive impact on the economy in the subsequent year. This fact invites us to look at the type of jobs which were created.

A Jamaica Information Service (JIS) report of April 17, 2019 recounts a presentation by the Statistical Institute of Jamaica (STATIN) Director General Carol Coy, who was giving an update on increased employment in Jamaica: The JIS report quotes the director general thus:

“The occupations with the largest increases were clerks, professionals, senior officials, and technicians and elementary occupations. The increased employment in the occupation group 'clerks' was mainly females, aged 20 to 24 years and 25 to 34 years. This group includes occupations such as customer service clerks working as hotel receptionists, survey and market research interviewers, telephone and switchboard operators, contact centre information clerks, bank tellers and travel consultants.”

The report then elaborates in the category “elementary occupations” as follows: “The group 'elementary occupations' includes car washers, street vendors and housekeepers in hotels.”

For us to be reporting on the number of people engaged in car washing — and I was told windscreen wiping — and street vending as employment is somewhat embarrassing. What does it say about our society and economy that the Government seemingly takes pride in those categories of employment and reports on them at a major press conference?

What is glaringly missing from these categories are jobs which relate to innovation, information and communications technology (ICT), the creative industries, new areas exports in nutraceuticals, etc. Unless we are producing innovators and entrepreneurs from our education system who are creating value-added products, and where new jobs are low-end repetitive activities, then reductions in poverty do not reflect real improvements in the economy.

It is perhaps a curious parallel that, while there is increased employment in 2018, remittance flows reached an all-time high of US$2.4 billion in 2019, after averaging $1.9 billion since 2001. Sustained reduction in poverty is the goal, and education is the solution.

Dr Canute Thompson is chair of the People's National Party's Policy Commission, as well as a senior lecturer in educational policy, planning, and leadership at The University of the West Indies, Mona. He is also author of six books and several articles on leadership. Send comments to the Observer or canutethompson1@gmail.com.


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