I have long maintained that the biggest risk to Jamaica’s economic development is the unproductivity of our labour force, which was highlighted in an article I wrote in the Jamaica Observer titled ‘Transforming Jamaica’s Productivity’ (December 6, 2013).

Since then, efforts have been made to bring some greater skill sets to the labour force, but the truth is that there has not been much change in the composition of local skills and productivity. I think that The HEART Trust has been at the forefront of this attempt to improve our skills and productivity with initiatives such as the apprenticeship programme, and we have seen the development of institutions like the Caribbean Maritime Institute into a University.

Although these initiatives are welcome, my own view is that based on the rate at which international labour markets are progressing, this is far from sufficient to ensure that we have a labour force that will be internationally competitive. Why is this important? Unless labour becomes internationally competitive through increased productivity, then our production will remain uncompetitive, and real income levels will continue to remain low.

We will also notice a greater disparity between those at the higher income levels and those at the lower levels. I am sure that many of us would have heard this argument by some who argue for a reduction in that disparity, and justify it on the grounds that it is unfair for those in management to be earning so much more than a clerical worker, for example. They argue on the grounds of equity, and this is the underlying argument for political systems with socialist tendencies.

This need to reduce the disparity in income levels has led various countries to craft policies to try and close the gap between the “haves and the have-nots”. So, as mentioned above, this is the basis of socialism and communism, and also informs many government policy initiatives, which often result in taxes being imposed on higher income groups and capital, in order to subsidise a fair distribution of income to the lower income groups.

This is an attractive political argument, as it does sound good on the campaign trail, and it gives the perception that government is doing all it can to help “the small man”, and ensure that more money is distributed to those most in need.

Frankly, I agree that the wages of those at the lower income levels should be improved, and I understand that one of the primary roles of any government is to ensure that everyone is provided with the same opportunity to attain higher income levels. What I disagree with, however, is how it should be achieved and the manner in which some governments have attempted to achieve it.

The fact is that any fiscal policy which attempts redistribution of income has not worked in the long term. It has actually caused even greater disparity between income levels and has led to further decline in productivity levels. This has resulted in our labour force today being a big risk to our economic and social development plans. It has also resulted in our bureaucracy being the second most problematic factor to doing business in Jamaica. And more practically, it has seen our GDP per capita being significantly below that of our trading partners, with a large disparity between the income level groups.

We must understand that whatever distribution policy is put in place, income flow will always find a way to adjust to where labour is most productive. In other words, fiscal distribution policies are at best short-term, and only have the longer-term effect of creating inflation, lower productivity, and less efficient returns on capital. The result of all of this is low economic growth and numerous social challenges.

It is especially important for us to understand this as we grapple with public sector wage negotiations, and as I said in 2003 at the start of the first wage freeze, this would not be the solution to the wage challenges; without a fundamental shift in the approach to compensation, we would continue to face ongoing wage disagreements. Here we are again today, and the sad thing is that the public-sector workers are no better off than they were in 2003.

It is clear to me that what is needed now, and what was needed then, is still the same. We must reward labour based on performance and productivity, and this will result in higher levels of income which are sustainable. What it will do is allow people to “sink or swim”, but it will not have the effect of having everyone “sink” as we continue to see year after year.

This will also allow us to pinpoint those who are in difficulty and introduce measures to help them towards greater levels of productivity, and hence higher income levels.

It is clear to me that the policies of income redistribution, without productivity increases, have not worked for either the country or those in the labour force. We know that governments will always have the power to implement policies that redistribute income, such as through taxation, but what they will not have is the power to determine long-term productivity or income, as many previous communist regimes have found out.

The world is changing. We are seeing more and more manual (and even some intellectual) tasks being replaced by artificial intelligence and robots. So we cannot continue to build an economy on creating manual labour jobs or income redistribution policies. That will only make us become “relatively” poorer as a country, when compared to the rest of the world.

For Jamaica to become more competitive, and for income levels to rise significantly, we must create a more productive labour force. We must allow labour to reach its potential through performance, and not by way of fiscal policy. The fact, however, is that this can only happen through changes to our labour laws and our fiscal policy approach. We must encourage the productivity of capital and labour, and not policies that pit one against the other.

Dennis Chung is the author of Charting Jamaica’s Economic and Social Development AND Achieving Life’s Equilibrium. His blog is dcjottings.blogspot.com.

Email: drachung@gmail.com