Productivity problems in JamaicaWednesday, May 16, 2018
BY DENNIS JONES
“Productivity is an economic measure of output per unit of input. Inputs include labour and capital, while output is typically measured in revenues and other gross domestic product (GDP) components such as business inventories.”
While we should be concerned about total productivity, we spend more time on trying to understand why the labour component performs how it does, because usually that is the part over which a government and individuals have greater control.
What two recent commentators have flagged is that without improving that, we are doomed to fail, and because governments have put raising productivity as a low concern, they have doomed Jamaica to decades of poverty or, being more generous, decades of being poorer than we should be. That can be seen more easily in a few statistics of trends over the past 40-50 years.
Jamaica Productivity Centre reported that since the early-1970s, Jamaican labour productivity has declined an average of nearly 1.5 per cent a year, meaning the average Jamaican worker has become progressively contributing less to national economic wealth over the past 40-plus years.
Unit labour cost grew by about 0.5 per cent a year over the period from the mid-1970s through the mid-2000s. This increase was, however, not caused by wage increases, since real wages declined on average by 1.25 per cent a year.
Still, the most damning statistic and, perhaps, one which sums up the whole issue of productivity in Jamaica is the one which shows that the combined productivity of Jamaica's resources (that is labour, capital, energy and other inputs) declined by an average annual rate of 1.75 per cent over the same period.
These developments do not have one simple cause. One could argue, plausibly, that Jamaica has never recovered from the loss of higher-quality labour of working age as a result of mass emigration — mainly to the UK, USA and Canada — from the late-1940s through to the early-1970s.
On top of that, it's known that Jamaica struggles to retain its best-trained people after they graduate from tertiary studies. A study conducted by the World Bank found that roughly 85 per cent of its tertiary-level graduates migrate to countries such as the US, UK, Canada, and other developed countries.
Finally, the supply of educated people is relatively poor, and the Ministry of Education has acknowledged the dearth of 'quality' secondary school places available, both in terms of actual spaces as well as quality of teaching.
The Global Youth Development Index (YDI), an initiative of the Commonwealth Secretariat, ranks 183 countries according to the prospects of young people in employment, education, health, civic, and political spheres.
Looking at 18 indicators, including literacy and mental disorder rates, financial inclusion and voter engagement, the index both showcases the best-performing countries and serves as a warning light for low-scoring countries.
The top-performing Caribbean countries are Barbados (28), Jamaica (46), The Bahamas (67), Antigua and Barbuda (72), and Grenada (73).
For context, the top 10 countries, with the exception of Australia and Japan, are from Europe. The 10 lowest-ranked countries are all from sub-Saharan Africa: The top 10 are: Germany (1), Denmark (2), Australia (3), Switzerland (4), United Kingdom (5), Netherlands (6), Austria (7), Luxembourg (8), Portugal (9), Japan (10).
The top 10 Commonwealth member countries are: Australia (3), United Kingdom (4), New Zealand (11), Canada (14), Malta (20), Barbados (28), Brunei (31), Sri Lanka (31), Malaysia (34), and Cyprus (38).
So, on various measures, Jamaica is way down the pack in terms of preparing its young people to compete on the world educational stage.
What these have resulted in is the fact that real GDP per capita in the mid-1970s was greater than it was in the late-2000s. At the same time, Jamaican workers have become poorer in real terms. So, the notion that many often observe that our parents seemed to have managed better on relatively “less money” than we earned appears true.
A recent World Bank overview http://www.worldbank.org/en/country/jamaica/overview noted Jamaica is “one of the slowest growing developing countries in the world”.
Put together, those numbers mean that the average worker is producing less each year and costing more in real terms to do that, so the only way that the average Jamaican will be better off is through a massive redistribution of income. We are not doing much to make the country wealthier.
Of course, there is no quick fix for this. While many Jamaicans lament the country for having poor productivity, I'm not sure if people understand what is wrong with how our country works and how things can change to give us higher productivity and faster growth.
The broad solutions requires creating a much better national workforce than exists at the moment.
Simply put, we need to invest in people — as the IDB has pointed out. If we don't do that, and we want to grow, then we must accept the need to import that better work force. This is what many dynamic economies have had to do.
A better-educated workforce is part of a long-term solution. We don't have enough people who are well-enough educated to more easily use the widening range of technology that can take any country higher up the growth ladder. Moreover, we have an economy with a poor mix of skills to give us faster growth.
Dennis Chung, then the CEO of the Private Sector Organisation of Jamaica, noted in the December 2017 'Fixing Jamaica's labour productivity problem' the need to train more technical people.
But, in the short term, we need to make the current work force do a much better set of jobs than they do now. What that means in many instances is that the interaction of workers and their production has to be much better — simply put, we need to get better performance from everybody every day.
For some, that could be as simple as understanding that time is money and eliminating all the time-wasting activities that go on daily.
The short-term fix also means employers and workers need to understand better how they can positively and negatively affect those who depend on their services. Let's call this better customer service.
We don't need to list all the complaints about poor customer service —they are legion and their recurrence tells us about poor management as well as about poor worker attitudes. If some of these attitudes are really about 'job preservation', they often turn out to be 'job destroying' tactics.
Poor customer service creates a drag on the performance of the enterprise directly and on the performance of the customer directly and indirectly. For instance, a customer spending time trying to resolve poor service is taken away from performing other tasks. As someone noted on Twitter this week, arguing with a rude Dominos pizza operative has many bad outcomes, not least a potential sale that was lost, but also a customer who may never return and discourage others from buying the product, affecting future revenue potential.
When we look at how poorly we 'serve', we should not let our eyes be shut to every aspect of that. I cite a current problem to highlight that point: the Jamaica Constabulary Force and their use of body cameras. This is what Commissioner Anderson said on the failure to use body cameras some two years after they were introduced:
“When you introduce new things and new capabilities, it's a process. You don't just buy something to stick them on. There's a training component, there's an equipment backup component, a logistics component, a command and control component to it. There's a whole thing that you used to deliver capabilities, but we haven't been that good at it.”
That sums up how in many areas we don't plan, which is the same as planning to fail. We fail to see the importance of things being done with great urgency — which is not the same as speed, because it goes to the matter of purposeful action. Part of that reflects a poor understanding of the true costs of delays, and how one affects so many.
When National Works Agency fails to advise in a timely fashion of road closures or expected delays, a large swathe of the national workforce then has to absorb the delays caused by that lack of information, and the costs and lost output is forcibly shared by all.
When a business advertises its hours as 9:00 to 5:00, but no one is present before 9:30 and gone by 4:30 the costs to customers is clear both in terms of wasted time expecting to be served and time available to be served.
When partygoers see no problem in parking on the Palisadoes Road blocking the only road to the airport.
When staff see no problem doing personal affairs during work time.
Not having consistency in work practices, so service quality is a function of personal interaction, reflects both poor management and oversight as well as poor training. Even in our justice system, where the justice minister has to implore the sector to render swifter justice.
Low productivity is deeply engrained into Jamaican life, but it does not have to stay that way.
Dennis G Jones is an economist.
Now you can read the Jamaica Observer ePaper anytime, anywhere. The Jamaica Observer ePaper is available to you at home or at work, and is the same edition as the printed copy available at https://bit.ly/epaper-login