KINGSTON, Jamaica—In the hopes of increasing national income and economic growth, which have remained perpetually anaemic in Jamaica, the need to enhance productivity has become a common refrain over the last 50 years, with the most popular estimates suggesting a progressive decline in both labour productivity and total factor productivity (TFP) of at least one per cent per year during the period.

The result has been a widening of the gap in incomes per capita between Jamaica and its peers. The fact that this has been spoken about for two generations ought to signal a much deeper and systemic problem than the mere attribution to individual worker laziness.

At just over US$7,000 per capita, Jamaica is a low-income country, despite classifications to the contrary for the evaluation and provision of development assistance by multilateral agencies.

When our Gross Domestic Product (GDP) at over $3.5 trillion is divided by only the 1.4 million Jamaicans in the employed labour force instead of the entire population, the average productivity of each worker in the country is almost US$14,000 per person or double our per capita GDP.

This can be ascertained intuitively, since the employed labour force is half the total population. While an inexact measure of productivity, this serves as a useful proxy for the average salary/wage of all individuals working in Jamaica as roughly $2 million per year.

Of course, as an average, this conceals several wide variations, which means many people are also likely to be earning far below this, with others receiving multiples of this amount.

Prior to the onset of Hurricane Melissa, Statin (Statistical Institute of Jamaica) data made far even more interesting reading and analysis. When disaggregated by industry, the sectors with the highest average productivity (that is, when assessed as total economic output divided by the number of workers in the sector) are electricity and water, mining, and finance, with the average productivity per worker exceeding $6 million per person for each.

The first two industries warrant special mention, as they are largely capital-intensive, and both sectors employ the two smallest numbers of workers, at fewer than 10,000 each.

Somewhat predictably, the sectors which fall below the average productivity per person of $2 million are construction; accommodation; and food, agriculture and wholesale and retail. For the latter two industries, the low productivity per person is influenced considerably by the number of participants in the industry, as they are the two largest employers among all sectors, exceeding 200,000 workers each.

The industries of ICT (Information and Communications Technology); manufacturing; transport; real estate; education and health; and public administration and defence all had above-average productivity per person.

The latter two industries, undoubtedly, reflect the recent upward adjustment in public sector wages and salaries, helping to raise the average incomes of teachers, nurses, doctors, police, soldiers and other public servants who would be captured in these categories.

For all the known inefficiencies of public bureaucracy to which the average citizen can attest in their interactions with some government agencies, and for all efforts at public sector transformation over the years, productivity in the public sector is above average when measured by its outsized contribution to tax revenue.

Government workers represent approximately 10 per cent of the employed labour force but contribute more than three times that proportion in PAYE taxes, which means the private sector’s contribution is relatively undersized, with the other 90 per cent of workers accounting for the remaining two-thirds of personal income tax intake.

The reason for this—and the crux of the productivity puzzle—becomes clearer when one considers the findings of the recent World Bank Country Programme Evaluation for Jamaica for the fiscal years 2014-2025. It noted that Jamaica has a dual labour market structure, comprising a larger low-productivity segment (over 50 per cent of firms in Jamaica have less than 20 workers) and a smaller segment with a higher productivity than in peer countries.

Large firms in Jamaica have, on average, higher wages and productivity and more skilled jobs, but these firms are few. This leaves a significant share of Jamaican workers in low-skill (and middle-skill), low-productivity, and low-wage jobs.

Much of this we have heard before, but the report goes on to note, critically, that “MSMEs (micro, small and medium-sized enterprises) provide more than two-thirds of jobs and are mostly engaged in wholesale, accommodation and food services, and agriculture.”

This forcefully corroborates the data on average industry earnings. It also confirms that Jamaica’s long-standing productivity issues are, unsurprisingly, to be found in the private (i.e. productive) sector, specifically, the smallest and most informal businesses and enterprises. The policy direction should, therefore, be obvious — a renewed thrust and more meaningful focus on small business development through greater government-assisted capacity building and in collaboration with the larger, more productive and established players.

There is a tendency to believe that the private sector consists of only large financial conglomerates. The “private sector”, more broadly defined, simply comprises everyone who works outside the government, which includes many small restaurateurs, transport operators, farmers, fishermen, vendors, barbers and hairdressers, tradesmen, mechanics, salon operators, and anyone who provides a service that you will need at some point and who often employ exclusively cash-based payment systems.

Ultimately, what matters most for productivity is its conversion to increased revenues; otherwise, there would be no need for this decades-long conversation. For these and other categories of entrepreneurs and small businesses, merely processing additional customers, however, will not augment national income significantly.

Unlike higher-income jurisdictions (like the US, France and Germany), where the overwhelming majority of GDP growth is concentrated in consumption, consumer spending is not robust enough to drive GDP in the long run in Jamaica, where incomes are generally low — a situation exacerbated by having a small population.

Consumer spending may only do so episodically and temporarily, such as during the immediate aftermath of economic crises, which has resulted in more rapid recoveries from shocks than in the past but an equally quick normalisation to our anaemic one-to-two-per-cent growth rate trend.

National productivity demands structural, catalytic increases in the other components of GDP growth, namely government spending, private investment (both domestic and FDI, the latter of which has historically lagged, bar tourism), and eventually export-oriented production to radically alter Jamaica’s long-term growth prospects and lift average incomes.

● Keenan Falconer is an economist with experience across Jamaica’s public and private sectors and the multilateral financing space. Send feedback to keenanjfalconer20@gmail.com.