In the aftermath of the COVID-19 pandemic, Jamaica has witnessed a record decline in its unemployment rate from 9.7 per cent in 2013 to 4.5 per cent in 2023, the lowest in the country's history.
The increase in employment is boosted by a booming tourism industry along with increased business process outsourcing (BPO), real estate, commercial construction and other sectors. Rationally, one would expect that as more people get jobs they would earn enough to support their expenditures and to keep themselves and their families above the poverty line. However, recent data from the Planning Institute of Jamaica (PIOJ) shows that during the period of rising employment, more Jamaicans fell below the poverty line. Poverty increased by 5.7 percentage points from 11 per cent in 2017 to 16.7 per cent in 2021.
Indeed, the COVID-19 pandemic played a role in pushing these poverty numbers up, but the decline began three years prior to COVID-19, which sheds light on how poorly the economy is being managed.
The misalignment between employment and poverty also insinuate the more fundamental issues of the quality of employment and income distribution on the island. In a normal functioning economy, like that of developed nations in Europe and North America or even in Asia and the Middle East, when unemployment is low, the businesses cycle is on a positive trajectory and this has a positive bearing on people's well-being, like increased standard of living, etc, and poverty rates fall.
It is important to note that the unemployment rate alone might not be sufficient to reflect the overall economic well-being of a population. Other factors such as under-employment, wage levels, and the distribution of income play crucial roles in determining poverty rates. Some of these issues are present in Jamaica's style of economic management. From a total population of 2.74 million people in Jamaica, less than 50 per cent of them — 1.37 million people — are in the labour force (those working and actively seeking employment). Of this, 1.31 million or 48 per cent of the population are employed. Of the employed, 298,100 or 11 per cent of the total population are professionals, senior officials and technicians. These are who would normally comprise the middle class in a normal functioning country.
If Jamaica intends to arrive at developmental status, it has to expand its middle class to at least 50 per cent of the population. In America, for example, the middle class represent about 50 per cent of their economy, coming down from more than 62 per cent in the 1990s. These middle class earn an income anywhere between US$50,000 and US$150,000 per annum.
In Jamaica, the bulk of the population, 1.07 million people (38 per cent of the total population) are employed as clerks, agriculture workers, craft and related, assemblers and elementary occupation, most of whom tend to be part-time or informal jobs paying a menial income that is often insufficient to lift them and their families over the poverty line. This scenario is the phenomenon of "working poverty" as described by Hussain, M, & Haque, M (2017).
Inflation is also another factor to consider. Inflation has been higher than normal in recent times across the world and in Jamaica. High inflation in the developing world depletes real wages, changes the cost of living and influence poverty rates. Even if employment increases, the disproportionate increase in the cost of basic necessities reduces the real purchasing power of individuals, contributing to an increase in poverty; see Ravallion, M (2016) in the The Economics of Poverty: History, Measurement, and Policy. Kabeer, N (2005) noted that the relationship between employment and poverty is multifaceted and influenced by various economic, social, and policy factors. Therefore, government and policymakers should take a comprehensive approach that not only focuses on reducing unemployment but also addresses the quality of jobs, income distribution, and access to essential services.
The recent improvement in Jamaica's credit rating to B+ by Fitch gives the country added leverage to solicit foreign investment to expand and diversify the industries in Jamaica. However, as countries across the world quest to repatriate production and industries to create opportunities to create wealth for their citizens, Jamaica has maintained the same old approach of soliciting foreign direct investment (FDI) on the basis of country's ability to provide cheaper labour relatively to the global job market, which has been damaging to people's well-being. In the new technological boom including the advent of digital currency and artificial intelligence a new mindset is imminent. A mindset that thinks about how to generate wealth to reduce the level of poverty and to empower the nations citizens. Jamaica has to tap into higher paying industries that produce goods of high value added.
What are the Solutions
The situation where the unemployment rate is falling but the poverty rate is increasing is puzzling. To address this problem, a multifaceted approach is needed to ensure that the working population experiences genuine improvements in their living standards. Below are some strategies that Jamaica can look into:
Fix the electricity, water and Internet poverty across the island: Jamaica falls in the top five countries in the world with high electricity costs. An old-fashion inefficient oil refinery at Petrojam also contributes to the country's high energy cost, these issues must be addressed asap.
Blessed with natural sunshine, north-west trade winds and abundance of water, Jamaica should be able to explore alternative energy sources to reduce the cost of electricity per kilowatt hour. Jamaica is the land of wood and water, Jamaica should be able to tap into wells or build dams and establish a robust network of pipes to harvest, store, and distribute water consistently across the island.
The Internet of things is becoming more and more import and provide a platform for people to earn more income. However, more than 40 per cent of people/areas do not have access to the Internet. Until we are able to do these basic things, we can kiss our chances of being considered a developed nation good bye. The Afrexim Bank has US$1.5 billion reserved for Jamaica to access developmental capital upon signing of an agreement. Barbados and other Caribbean countries have recently signed, while Jamaica continues to lag behind.
Invest in Infrastructure: Develop and upgrade infrastructure, including transportation, energy, and digital connectivity. Modern infrastructure attracts foreign investment and supports business growth. Agriculture and other economic activity have been negatively affected by drought conditions as well as insufficient water distribution. Jamaica must invest in the right infrastructure to correct this.
Diversification and Innovation of Economic output: Jamaica has to encourage more innovation and diversification of industries like tourism and BPO and also support innovations that can facilitate growth of other sectors like finance, economics, legal services, agriculture, manufacturing, health care, alternative medicine and technology to create more diverse income streams. Jamaica has to foster a culture of innovation and invest more in research and development (R&D). This can lead to the creation of new products, services, and industries. Innovation and diversification can lead to a broader range of job opportunities, including those that require different skill sets and offer better pay.
Skills Development and Training: While more people are working, focusing on skills development and training programmes can help workers access higher-paying jobs. This can involve partnerships between the government, educational institutions, and private sector to offer training in industries with higher earning potential. Some of this is currently being done by HEART but is not extensive enough the move the needle forward.
Education and Early Childhood Development: Investing in education and early childhood development can break the cycle of poverty by equipping individuals with the skills and knowledge needed for higher-paying jobs.
Social Safety Nets: Strengthen social safety net programmes, such as cash transfers, food assistance, and subsidised healthcare, to provide immediate relief for those living in poverty while they work towards better opportunities.
Affordable Housing: The increasing poverty rate might be linked to rising housing costs. Initiatives that promote affordable housing options can help alleviate financial burdens on low-income families. This is essential to attract and keep our young talent who normally migrate in search of a better life. We have to be serious about retaining our talent.
Addressing Informal Sector Challenges: The informal sector in Jamaica is very large. In many cases, the informal sector does not provide stable incomes or benefits. Finding ways to formalise parts of the informal economy can lead to better job quality and social protections.
Data-Driven Policymaking: Utilise accurate and comprehensive data to understand the specific challenges that contribute to the increasing poverty rate. Tailor policies and interventions accordingly.
Collaboration with Private Sector: Engage the private sector in poverty reduction efforts through initiatives such as job training partnerships, responsible business practices, and support for community development projects.
Promoting Financial Literacy: Equipping individuals with financial literacy skills can help them make informed decisions about their income, savings, and investments, thereby reducing vulnerability to poverty.
Promoting Decent Work and a liveable wage: The topic of liveable wage is now on the table again. Is US$100 per week enough to keep a family above the poverty line in Jamaica. This must be properly researched. There is also the need to advocate for safer working conditions, and employee benefits to ensure that employed individuals are earning enough to lift themselves and their families out of poverty or can take care of themselves when they retire.
The middle class is the backbone of any economy, Jamaica being no exception. More effort has to be made to create a larger middle class for the country. Plagued by rising crime and violence, poor and depreciating infrastructure especially in the healthcare sector, Jamaica has to do better. Weak government policy and public relations politics have created a smoke screen to disguise the true potential of the country. As developed countries build new train lines and experiment with modern means of road infrastructure to move goods cheaper and more quickly, the Jamaica Government is issuing donkeys to farmers to assist them to carry goods and traverse bad hilly terrains — a 2000-year-old practice that has been outdated since Mary rode on a donkey from Jerusalem to Bethlehem to give birth to Jesus. The country has gone forward into the past and ignoring the need to create a more peaceful brighter future for everyone. This mentality has to change now. Jamaica has enough thinkers and engineers to transform this country into a modern global mecca. We have to do better.
Dr Andre Haughton is a senior lecturer in the Department of Economics, University of the West Indies, Mona. He is also the People's National Party's shadow Cabinet minister for commerce, innovation and technology and the MP candidate for the St James West Central constituency.