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Saturday, October 18, 2014

What are we doing in The Caribbean? Productivity vs. Busyness.

Government workers are lousy, lazy and dreadfully incompetent. They come to work late, don't produce results of what you asked or paid them for in a timely manner, plus they take 3 hour lunch breaks and then leave work more than a half an hour before their scheduled knock off time.

Employees in the private sector want more money for doing nothing at all. I mean, where do they think this is? Don't they see that I'm the boss and I know it all? What work do you do around here?! How dare you ask for more than $200 dollars a week? For what you do? Are you kidding me? You want us to raise the minimum wage to what?!?

This is what you hear across the board when we talk about labour, work and employment for The Bahamas. You hear the same cries even in America and Canada. No doubt the calls are all the same across the Caribbean and Latin America too. But, for the Caribbean's sake, is it all true? Or, is it just misguided anger?

The most recent strike actions in early September from the Trade Union Congress (TUC) and their related sub-unions has garnered some attention from the local and international media. The courts granted an injunction to the government to put a halt to this action that the government felt was illegal, however the discontent was already in the air and certain concerns were placed before the Bahamian people with regard to these labour matters. Matters that will most likely be addressed, but at a later date.

This strike action prompted this author to review an IMF Working Paper read a few months ago. Published on July 1, 2014, the paper analysed labour market issues in The Caribbean.

I must say from the rip that I'm not in favour of labour unions striking on a whim. I'm not appreciative of their particular matters being rejected totally out of hand either. I'm also not particularly agreeing wholeheartedly with the IMF's Paper, even though the work produced gives impetus to framing a separate debate and from that debate begging particular questions to be asked and other matters to be raised.

My position on this entire affair, leaning from the work produced by the IMF, is done strictly to bring to the attention of the public a parallax position that may be seen as distorted or an aberration of the original issue. But, a part of the issue it is, even though one may feel it too distant or unrelated.

For instance, we're all not lazy loafs, unskilled and unprofessional and choose to spend our time drinking rum, smoking marijuana and taking days off because we can. And, on the other side, we are not mean, maniacal and spiteful policy makers that want to hog up all of the money for ourselves and leave the workers to eat cake like we do! This type of language and sentiment is unhelpful.

In this spirit moving forward, the IMF paper went into great detail to collect, collate and analyse data on labour market trends in the region. Some data was more readily available, and others sparse or simply unavailable. In either extreme case, the data was enough to extract a rich amount of inferences from the data set and the subsequent correlations it brought to the fore.

One theme that's prominent throughout the paper is: Employment output-elasticity. Or, in other terms, the extent to which employed persons' (hired workers or labourers) output (the amount, rate and level they are productive based on how and what they produce) is elastic/inelastic (negatively or positively responsive to external and or internal determinants and/or shocks) to the extent to which it impacts, or is impacted by, GDP and/or GDP growth determinants in the macro-economic sense, or in the micro-economic sense, basic company performance indicators: The bottom line and the inputs or variables that affect the bottom line.

One thing that jumps out is the correlation of employment elasticity of The Bahamas, being the lowest correlated point observed in the data set with Jamaica being the highest. Directly speaking, with any change in real growth through cyclical periods, Bahamian employment is least likely to be impacted in any significant way.

This is a very interesting outcome from this study and says a great deal about the Bahamian economy. For starters, it lends to the idea that we are over-saturated with entrenched workers in many areas of our economy, particularly the services and governmental sectors. A lack of employment-skills dynamism and services diversification is and was always a factor in Bahamian labour and employment dynamics.

This also gives the perception that it doesn't matter that if 1 person is employed on a particular task, or 10: The same level of output will be evidenced in our GDP estimates and other output and growth indicators. Essentially, we are doing the very little we are expected to do with an over-saturation of workers in those areas.

In Jamaica's case, it's the exact opposite. Which leads to another interesting piece of information brought out by the Working Paper: The distribution of elasticity of employment over time.

Without being too technical, the second method used is a regression model over time to pin-point the rate at which growth and employment were evidenced over time.

The policies that spurred these dynamics could not be explained in the paper, but highlighting the lowest correlated over time in Jamaica and the highest correlated over time in Trinidad and Tobago, the authors did make mention of the Trinidadian government implementing employment growth initiatives that were independent of regular cyclical periods.

Further to all of this, Caribbean countries that utilized their natural resources, like Trinidad and Tobago, were seen as countries that were able to control the dynamics of employment and employment output outside of the regular business cycles and other related cyclical periods.

To further solidify this observation was that over the last decade, real growth has been historically low, generating low employment growth. During 2002–2012, average real growth ranges from 0.62 percent in the Bahamas to 4.7 percent in Trinidad and Tobago.

The Bahamas has not utilized a great deal of its natural resources in a nationalistic sense, while Trinidad and Tobago has. Neither has Barbados (due to a lack of natural resources to exploit) to any large extent but Jamaica to a larger degree, both countries being on the sub-side of opposite ends of the spectrum.

While it has been reported that over the medium term real GDP growth is projected over the entire country set, one must ask the question based on this analysis is: Where will this growth be seen? Which sectors will be at the lead of this growth? Also, based on the sectors identified for growth, will this truly impact the labour market in a substantial way?

Knowing what we know now, removing constraints to innovation and investment is also a policy recommendation for the region. This is key to being able to open the doors of opportunity for development led employment growth, but also keeping our citizenry employed with worthwhile endeavours and in a sense, not going on labour strikes and other forms of disruptive behaviour.

Whatever happens as a result of these factors, natural resources are critical to impacting employment growth and managing employment elasticity. In fact, this was the key inference suggested from the paper.

Labour unions in services dominated countries must be cognizant, particularly in non-resource rich and natural resource producing countries, that labour input at the widest margins does not significantly impact real GDP growth. And from this author's estimation, an over-saturation of employees may harm growth if this study is launched into another study that pinpoints the effects of labour and employment saturation.

I must also caution that, over time, if counter-cyclical measures aren't put in place to satisfy labour and employment demands, regardless of the benefits negotiated through the various labour unions in conjunction with the government, strikes and other work-related disruptions will become more severe and protracted as the years progress.
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