WITH Jamaica consistently losing workers to foreign countries, we ask the question this week: For those employers who earn hard currency or have markets abroad, what might be the return on investment if they offer wages that are competitive with those paid in the Cayman, the US and Canada?

One example is the hotel sector and some business conglomerates which routinely lose their most talented staff to these countries and others. We spoke to a company CEO and an economist about the issue.

First at the crease is John Mahfood, CEO of Jamaican Teas and president at the Jamaica Manufacturers and Exporters Association (JMEA). Mahfood shared with the Jamaica Observer that while there are sectors and companies which earn income in US dollars and other “hard” currencies, the larger picture of a nation’s wealth and its competitive advantage must be looked at.

Companies which increase employment, even at lower pay rates, are contributing to an increase in a country’s wealth which later will lead to higher wages, the manufacturer and business leader proposes.

Meanwhile, economist Dr Adrian Stokes told the Business Observer “some of the services that we export are fairly price sensitive. For example, tourism and some aspects of the BPO sector. This means that the local suppliers of these services are very sensitive to wage pressure.”

Stokes stated, “material changes in wages that aren’t based on productivity factors would make these local suppliers uncompetitive and the demand would move to other suppliers globally.

“This is one of the major factors that drive wages in the tourism and segments of the BPO sector. The need to be globally competitive against other markets that have relatively attractive labour costs.”

Exports do not equate wealth

John Mahfood added: “Exporting does not by itself make a company or a country rich. The largest exporting country is China and they have a GDP of US$23.5 trillion which is similar to the US, but their population is 1.2 billion compared to the USA of 330 million people.

“The per capita GDP in China is US$17,000 compared to the US of US$65,000. China is successful in exporting because their products are the cheapest in the world which comes because their labour rates are low. Their labour rates will only increase when the wealth of the country increases.”

Comparing Jamaica and a few Caribbean countries, Mahfood noted that Jamaica’s GDP was US$13.64 billion with a population of three million and GDP per capita of US$4,600; Trinidad and Tobago had GDP of US$38.10 billion, population of 1.4 million and GDP per capita of US$27,000; Barbados with GDP of US$4.70 billion, population of 290,000 and GDP per capita of US$16,300; and finally, Cayman with GDP of US$5.6 billion, population of 70,000 and per capita GDP of US$78,000.

The JMEA head, expanding on his theme, said, “Trinidad has oil and a lot more wealth than Jamaica but their population is half of ours. Cayman’s wealth comes from international banking and tourism and has a small population but a very high per capita income.

“The products that Jamaica exports are low value such as bauxite and sugar and our tourism is still quite small, only contributing US$3.5 billion per year.”

Mahfood stated, “Our food exports are also small and they are sold at a discount compared to others. For instance, Grace hot pepper sauce is sold in the US for US$0.79 vs the brand leader Tobasco for $2.79.”

The manufacture said, “Our population is fairly large [by Caribbean standards] and poor and the country is poor, so the purchasing power of Jamaicans are low. A trained nurse in Jamaica may make $1.8 million per year, while if they went to the US they would make $11 million. So a trained nurse in Jamaica will struggle to buy a house and car but they can achieve this in the US.

“If we tried to come close to matching the salary of what they could earn in the US, the question would be how would the people of Jamaica afford this?

“Who in Jamaica could afford to go to a doctor or lawyer that charges the same rate as a professional in the US? Our problem is that we are poor and have a large pool of people who are not well-educated.”

Turning to the issue of growth, the JMEA head said, “We have to build up the wealth of the country through increased economic activity including BPO, manufacturing and tourism. Right now, BPO operations are growing and so is tourism and they are employing more staff.

“BPOs are here because our labour rate is lower than India and other countries with large BPO operations. The good thing is that the BPO operators pay more than traditional manufacturing and retail operations and as they employ more and more persons [they now employ 60,000 persons], it will pull people away from jobs that pay less and will also employ high school graduates. So, employers in other industries will have to pay more to either keep their staff or attract new staff.”

Global labour market

Stokes told the Business Observer, “For certain services or skills, the global market pays a higher compensation relative to Jamaica. Nursing is a prime example of this where many developed countries face significant shortages and are willing to pay premium compensation to attract talent.”

The economist stated that overtime retention of local talent will be driven by, “making living conditions more hospitable by lowering levels of crime and violence as an example. Affordable housing is another driver of talent retention.”

Stokes also called for policies that incentivise higher value jobs, “especially services that are fairly price inelastic; and improving our human capital through better education and training.”

John Mahfood shared, “The more people that are employed, the more the wealth of the country will grow and the more people will have to spend. This will allow companies to grow and increase employment and increase wages.

“Jamaican companies that sell only in Jamaica are limited in their growth prospects as well as their profit potential. They must increase exports so that they can increase sales and profits.”

Mahfood noted that companies that are large and export a lot such as Red Stripe and Wray & Nephew can afford to pay their staff better than a company that sells only in Jamaica but unfortunately, there are very few companies of this size in Jamaica.”

He concluded, “Until Jamaican companies can become large and profitable enough, they must still do the best for their staff including providing health insurance, pension plans and other benefits that will make life a little more comfortable for their staff.”