Productivity or compensation, which comes first?
HAUGHTON... the country's productivitylevel is hampered by the absence oftechnology or a measure of technologyimplementation per annum, the lowlevel of human capital, and the level ofcorruption

In search of the answer to a question as divisive as the chicken versus the egg debate, stakeholders take the place of modern day philosophers regarding whether increases in employee compensation can lead to higher productivity within organisations — or vice versa.

Speaking at a Jamaica Observer Business Webinar recently, chief group HR officer at VM Group Dr Dayton Robinson contended that before discussing whether Jamaica's minimum wage of $7,000 per week is one that can citizens can live on, views should be aired about productivity.

The relation between wages and productivity is important because it is a key determinant of the standard of living of the employed population as well as of the distribution of income between labour and capital.

Senior lecturer in the Department of Economics at The University of the West Indies (The UWI), Mona, Dr Andre Haughton measures productivity by the amount of output per person and the value of that output.

“How much does this person produce in their job over a given period of time? If,for example, you're a farmer and you produce today three tomatoes, that value of those tomatoes is your productivity today. That is how productive you are. If you are a hairdresser and you do two hairs per day, that's your productivity. When you start doing three hairs per day, you have increased the level of productivity by 50 per cent,” he explained.

He pointed out that what is considered a livable wage is directly tied to productivity in the country, which is dependent on the level of human capital.

“Now, if we are going to discuss human capital and we're talking about Jamaica then we are talking about the education level of our population. If you look at the agricultural industry, the average output per person in the agricultural industry per annum, meaning their productivity, is less than $400,000 a year. Twenty per cent of our employment is in the wholesale and retail industries, with average output less than $400,000 a year,” he said, noting that the service industry – which includes finance and insurance and the utilities sector – earn the highest in Jamaica.

“These industries earn upwards of a million dollars per year. So the idea is, in order for people to be compensated properly then they must be producing enough to earn enough revenue to compensate themselves,” he reasoned.

According to Haughton, research conducted by his team revealed that productivity in Jamaica is driven by a host of variables, including but not limited to the inflation rate, trade openness, and human capital.

Concurrently, the country's productivity level is also hampered by the absence of technology or a measure of technology implementation per annum, the low level of human capital, and the level of corruption in the country.

“What happens is that because many people now can have, for example, a side job with their usual job they find out that because they now are earning more from that side job, more emphasis and focus goes towards it. If you want to get a licence or if you want to clear goods and the goods are for a million dollars, then the person clearing it gets $500,000,” Haughton said.

“So they focus more on serving these corrupt behaviours rather than focusing on the job they need to do. And you can't blame them because that is the structure of the economy. The economy is structured in such a way where the regular base salary that a lot of people receive is not sufficient or it's not livable. As a result, they have to embark on corrupt activities in order for them to properly satisfy their budget constraints,” he maintained.

Meanwhile, president of the Jamaica Confederation of Trade Unions Helene Davis-Whyte indicated that productivity does play a part in the wage negotiations.

“We have to look at the issue of productivity, and even within the country and industries, as productivity is what usually makes people or firms more competitive. A lot of employers love to speak about productivity [but are] not recognising the role that they have to play in the whole equation, because without the investment in the human capital and in the technology, the productivity will not come,” she argued.

She added, “In most companies and countries improvements in productivity have come about as a result of investment in technology, research and education – and if companies are not doing all of that then the workers becoming more productive is really just an elusive dream.”

In the meantime, Robinson agrees but contends that there needs to be a greater partnership between the providers of labour and organisations.

“I don't believe either came first, [productivity or compensation]. I believe it has to be a delicate balance between the two things. Employees and employee representatives will say, 'You know if you pay more, team members will be more engaged and be more productive, and from that productivity will come higher profitability.' On the other hand, the employer is saying 'OK, I need to be able to guarantee a higher level of productivity and a higher level of return on my bottom line before I can think of paying more' ”, he reasoned.

“How do you get this individual who enters your organisation, private or public, to deliver at that optimum level? A big part of it has to do with investment that you put in, the commitment, the transparency, the trust between worker and employer and how you reward for desired behaviours that you want. Your team members may have the willingness but may not have the ability and you have to invest in that in formal learning, experiential-based learning, and coaching and mentoring,” Robinson continued, noting that if employees are rewarded then organisations could see greater productivity levels.

Like the proverbial chicken versus eggdebate, stakeholders argue whetheremployee compensation or productivityshould come first.
BY ABBION ROBINSON Business reporter robinsona@jamaicaobserver.co

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