Editorial | Widen productivity debate

No one could fault Prime Minister Andrew Holness for harping – which he did again at last week’s Diaspora Conference – on the need for Jamaica to embrace a culture of productivity.

There might, however, be suggestions that Mr Holness broaden the discussion beyond a narrow focus on workers, to the full suite of factors required for the economy to produce more, and more efficiently.

Put another way, productivity should be talked about in the context of an industrial policy, tailored to address Jamaica’s needs in the 21st century. That should not be taken to mean a full-scale return to an import substitution model, or a wish to disengage from the global economy.

This requires strong government leadership, not only exhortations for employees to work harder.

In his address at the opening at the biennial conference of Jamaicans living abroad, Mr Holness noted last year’s reclassification of public jobs and salaries, which will cost taxpayers an additional $200 billion a year. He suggested that it was now up to the workers to enhance their productivity, but complained about the negative reactions when such issues are raised.

The prime minister said: “Whenever I use the word ‘productivity’, a large part of the country hears hard work or more work. They think, ‘They want us to work more and aren’t paying us more’.

“As prime minister, I have to be very careful how I deal with these delicate subjects because of our history. But it has to be addressed.”

This is a theme on which Mr Holness regularly dwells, such as in his speech at the opening of the Falmouth Artisan Village in April, when he warned that low productivity could undercut Jamaica’s economic growth and development.

“My great worry for us is that we are going to reach a level of economic performance within our current threshold of our productivity bar, and then we are going to struggle to convert that productivity into economic and social benefits,” he said.

LOW LABOUR PRODUCTIVITY

Jamaica does, indeed, have a problem of low labour productivity. In the five years between 2018 and 2022, output per worker declined at an annual average rate of 0.8 per cent.

In the previous 48 years, the slump was far steeper – an average of 12.76 per cent a year.

This, though, is not a statement about the inherent quality of individual Jamaican workers. Rather, it raises questions about the efficacy of policies that must come together to deliver a productive workforce, and for Jamaica to transition from what the social anthropologist and public commentator Professor Don Robotham described as an economy trapped in “low value-added, extractive raw materials and ‘raw services’ activities”, to one with enhanced productivity and high wages.

This will not happen by accident. Neither will it be achieved with an education system in which over 40 per cent of students complete primary school without meeting the proficiency standards for language arts and mathematics. Further, an economy in which two-thirds of the workers have little or no formal training for the jobs they do will also likely struggle for productivity. The island’s relatively low level of tertiary enrolment – 27 per cent of the age cohort – and low participation in STEM education will exacerbate the productivity problem.

But as Mr Holness is also aware, the productivity of an economy is not entirely dependent on the time and motion efforts of labour. Factors such as the macroeconomic environment, investment by firms in technology, the cost of domestic energy, the country’s level of innovation, the quality of the national infrastructure and social conditions, including the state of crime, also play a role. The Government’s guidance and support, once that does not amount to an attempt to eliminate the hand of the market for that of the State, is appropriate.

PARTNERSHIP

In other words, there is a place for a national economic strategy that is the outcome of a partnership between the government, the private sector, labour and specialised institutions. Stated differently, the suggestion is to shift the discussion from its narrow concentration on the per capita output of labour to include total factor productivity and a modified industrial policy.

The administration will, rightly, say that it is already implementing, or has on its agenda, many of the issues highlighted as important to creating a productive economy. What has not happened sufficiently is addressing the issues in a structured, coordinated fashion to produce cohesive policy outcomes.

Jamaica need not fear being branded with the tag of industrial policy, which is regaining cache, having for a time fallen out of favour. America’s CHIPS and Science Act and its Inflation Reduction Act are means to the same end.