Editorial | Achieving equity with fiscal discipline

This week’s report by the Economic Programme Oversight Committee (EPOC) on Jamaica’s recently concluded standby arrangement with the International Monetary Fund reconfirmed what was already well known: that the Government had met, and, in several instances, exceeded the programme’s fiscal targets. The only deficit was in economic growth, which has lagged behind projections. The economy is expected to expand by less than one per cent this fiscal year.

However, EPOC is confident that the country’s macroeconomic policies remain “on a sustainable path”, which should see growth in the region of two per cent by the 2021-2022 fiscal year. While disappointed with the continued anaemic growth over the nearly eight years since Jamaica embarked on its economic reform project, this newspaper continues to stand firmly behind, and in support of, the broad parameters of the policies but believe that it is time for a conversation on how to expand national output and deliver what EPOC terms “inclusive growth”. This, to be clear, ought not to translate to an abandonment of fiscal discipline.

This issue of ‘inclusive growth’ is given added currency by this week’s release by the United Nations Development Programme (UNDP) of its 2018 Human Development Report in which Jamaica is doing well on its human development index. With a composite score of 0.726, Jamaica is ranked at 96 out of 189 countries, a position it shares with Venezuela. Our score increased by 13.2 per cent between 1990 and 2018, and the current value places Jamaica in the category with “high” human development.

During that period, a number of indicators of the country’s welfare improved. Life expectancy is up by 1.2 years; the mean average number of years a person spends in school jumped by 3.9 years; expected number of years of schooling increased by 1.9 years; and, though less impressive, gross national income, on a per-capita basis, increased by 20.2 per cent.

However, Jamaica ought not be self-satisfied with those indicators. For, when the score of 0.726 is ‘discounted’ for inequalities, the value slips by 16.7 per cent to 0.604. What the UNDP calls ‘human inequality coefficient’, on the basis of three broad areas of inequality – life expectancy, education and income – is 15.9 per cent. The highest level of measured inequality across the population was in income, averaging 32 per cent, against 10 per cent for inequality of life expectancy at birth and 5.6 per cent for inequality in schooling.

Contributors to poverty

Further, weighting the indicators of health, education, and standard of living to chart an index of multidimensional poverty, the human development report, using 2014 data, concluded that 4.7 per cent of the population was multidimensionally poor, with a deprivation score of 38.7 per cent, where a value of at least 33.3 per cent is required to be placed in that category. Another 6.4 per cent were deemed vulnerable to multidimensional poverty and 0.8 per cent in extreme poverty. Standard of health (42.1 per cent) and standard of living (40.4 per cent) were the major contributors to the results on poverty.

The inequalities in Jamaica are particularly stark when quantified by gender. While females live 3.2 more years (to age 76) than men and spend, on average, 0.5 more years in school than males, they are more likely to have secondary education (69 per cent) than men (62.4 per cent). However, males, proportionately (73.9 per cent), have a greater participation in the labour force than women (60.4 per cent), and, with per capita gross national income of US$9,559, have a greater share of national income than women (US$6,326).

Faster economic growth won’t, of itself, resolve these inequities, either across social groups or between the genders. In some respects, growth, without equity, might worsen them. As the UNDP said in the introduction to its Jamaica briefing on the report, “policies matter for inequalities”. We should begin to seriously discuss these policies in the context of the economic reform programme.