Low productivity, Jamaica's bugbear

By Dashan Hendricks

With statistics showing real gross domestic product (GDP) over the period 1973 to 2007 averaging 0.5%, it is clear that if Jamaica is to improve the standard of living of its people, then faster growth has to take place.

But getting faster growth goes beyond just investing to employ more people. It goes to the heart of the productivity of these people. That is why the current trend in Jamaica's labour productivity disturbs me.

These are the trends, as presented by the Jamaica Productivity Centre.

1. Labour productivity, or output per worker, has declined at an average annual rate of 1.3% over the period 1973-2007.

2. Unit labour cost grew by 0.4% over the period 1973-2007. This increase was however not caused by wage increases, since real wages declined on average by 1.2% per annum.

Still, the most damning statistic and perhaps one which sums up the whole issue of productivity in Jamaica is the one which shows that the combined productivity of Jamaica's resources (that is labour, capital, energy and other inputs) declined by an average annual rate of 1.74% over the same period.

What these have resulted in is the fact that real GDP per capita in 1972 was greater than it was in 2007. At the same time, Jamaican workers have become poorer in real terms. In keeping with that reality, members of my generation often observe that our parents seemed to have managed better on relatively "less money" than we earned. This low growth/low productivity scenario has contributed to a worsening of the standard of living of ordinary Jamaicans.

Caribbean comparisons

The decline in productivity in the country becomes even more stark when Jamaica's output per worker is measured against that of our Caribbean neighbours. Take for example, Trinidad and Tobago. An average worker in the twin-island republic produces three times the output of the average Jamaican worker on any given day. At the same time, while the Jamaican worker was more productive than his St Lucian counterpart in 1997, by 2007 the average St Lucian worker was 1.16 times more productive than a Jamaican worker.

With productivity falling that much, and given that it continues to decline (The Bank of Jamaica's 2014 Annual Report show productivity declined by 1.3% last year), urgent action should be taken to reverse the trend. No country hoping to record growth and improve the standard of living of its people can afford to have declines in the productivity of its workforce.

Solutions

First, with declines in productivity this country will never see the full potential of investments. Growth will continue to underperform its potential. Real wages will continue to contract. The Jamaican worker will continue to get poorer each year. The easy policy prescription is to talk about improving educational outcomes to ensure labour is more productive. But improving productivity goes beyond just education. It also includes the health of that worker and the type of capital the worker is asked to use to produce. A man with a machete and hoe doing farming cannot be as productive as a man with mechanical plougher or harvester. A factory worker with a refurbished but highly inefficient piece of machinery bought second hand from a factory in China, that is, re-tooling, cannot compete with his Chinese counterpart who just got the latest equipment. A culture of wanting to read every story in the newspaper before work begins takes time away from the working hours.

What needs to be done, more than anything else, though, is for the country to tackle this scourge of low and declining productivity sector by sector, industry by industry. It means drilling down to the micro level in terms of solutions. If needs be, improving productivity may require individual targeting of businesses and farms or as a sector on a whole. We need to find out in each area, the reason for the productivity trend and take steps to reverse it. This may not take one or two years, but five to ten years.

Let us not fool ourselves. That productivity has declined across generations suggests that the problem of low and declining productivity has become a cultural norm. Those graduating to the workforce will be taught (and have been taught) techniques of low productivity by those who mentor them in the workplace. It's the culture of "Jamaica, No Problem". The problem is, I do not know anyone who has no problem with not being able to afford even the basics of life. Since the lowering of our living standards is directly linked to low and declining productivity, we need to start improving in this area if we are to achieve our Vision of being the place to live, work and raise families by 2030.

Dashan Hendricks is RJR's Group Business Editor