Edward Seaga
Productivity, though of great importance as an underlying factor, is not
a prominently used index in Jamaica in assessing economic performance.
In a study of 10 countries by the Jamaica Promotions Ltd. (JAMPRO) on the apparel industry, the down playing of productivity measurements was eloquently stated:
"Despite the rhetoric about productivity, the country has not [been] captivated [by] the concept through measurement and procedures. Official statistics and publications, private and public, do not feature it. Hence, there is no imbibing of it by the general community, no utilisation in policy pronouncements, no inclusion of it in training and education programmes and no reference to it in organisation and industry planning."
Talk about productivity
As stated, there is much talk about productivity, but little more than on-and-off action despite the crucial nature of the measurement.
Recent studies on productivity all cite low productivity rates as one of the main reasons for the lack of competitiveness of Jamaican products.
Benthan Hussey, labour market consultant with the Planning Institute of Jamaica, in a comprehensive study of productivity among selected countries, compares average productivity over 1960-1990 in terms of contribution to GDP per capita, which is a proxy for the measurement of productivity:
Table 1
GDP per capita (US$) U.S.A.31,009 Canada 26,982 Trinidad 22,988 Singapore 12,657 Barbados 11,481 Dom. Republic 6,496 Jamaica 5,723
The same pattern holds for the wider Caribbean.
In a study of productivity rates in Caribbean countries, including Cayman, Puerto Rico, Haiti and Cuba, done by Hussey, Jamaica ranked an embarrassing 19 out of 25 in the comparative period of 30 years, 1960-1990.
This was not always the case. Looking at the data in 10-year intervals, Jamaica's productivity rate between 1960-69 was among the highest, comparable to Barbados and Singapore and much higher than the U.S.A., Canada, Trinidad and the Dominican Republic. But the Jamaican productivity rate decreased in the 1970s by - 1.36 per cent per annum and in the 1980s by 1.11 per cent - while other countries in the study improved their performance over that period.
Wages outstrip growth
One of the principal reasons for the low rating of Jamaican productivity, the study by Hussey found, was that wages increased annually by 1.8 per cent and unit labour costs by 3.1 per cent, while productivity was decreasing by 1.4 per cent. This movement is in the wrong direction. If wage increases exceed productivity, competitiveness in the price of goods and services will deteriorate, costs will be higher and the purchasing power of consumers will erode. The situation, as far as Jamaica is concerned, has not improved. Using GDP per capita as the proxy for productivity, Jamaica ranks a lowly 11th of 13 Caribbean countries for which data are available for 2004.
Some specific sectors of the economy illustrate the impact on the work force when wage increases out strip productivity growth.
Agriculture has a notoriously low productivity rate, in good part because of low and inefficient production in the sugar industry which dominates the sector. According to the findings of the Report of the Task Force on the Sugar Industry
in Jamaica, 2001, the average cost of production of sugar is considerably greater than other comparable countries:
Table 2
Jamaica US$660 per ton
ACP countries US375 per ton
This is understandable, given that production per man day in Jamaica is 0.87 tonnes, less than one tonne, in comparison with the international market which averages 3.0 tonnes per man day, three and one half times greater.
The problem extends beyond the agricultural sector. Apparel exports are a prime example of a thriving sub-sector in manufacturing which became one of the largest export earners in the economy between 1985-1995. It has since been reduced to a few surviving producers with most of the work force of 40,000 laid off.
A JAMPRO study sets out a cost comparison which shows up the over-pricing of Jamaican production. Measurement of the labour cost per available working hour in garment construction puts Jamaica at the top of the table with the highest cost of nine regional countries ranging from El Salvador at US$220 (J$14520) to Jamaica at US$364 (J$24024).
Another critical element is the abnormally high fixed costs in Jamaica compared to other comparable countries, as indicated in Table 3:
Table 3
Productivity and other costs
Utilities 167 per cent higher
Security 110 per cent higher
Telephone 34 per cent higher
Operating personnel 22 per cent — 42 per cent higher
These translate to higher unit costs and decreased competitiveness which strongly affect the ability of Jamaican producers to compete against imports domestically, as well as in the export market.
Hence, Jamaica lags behind other countries. Jamaican exports are priced out of the market and domestic production is unable to adequately compete against imports while neighbouring and other countries with lesser potential lead the way.
This is not a viable scenario. Current conditions of economic frailty and little evident prospects for overcoming non-competitive performance expose the Jamaican economy to still greater displacement of local production with no greater ability to compensate by expanding Jamaican exports. The trade gap will widen and the crisis in the economy worsen.
From the Jamaican perspective, the question must be asked: Is there room to improve productivity and competitiveness in Jamaican production?
While there are a number of weak features which decrease the productivity level, two of the most critical elements are:
The abysmally low performance of the agricultural sector and
The weak performance of GDP.
As indicated earlier, agricultural productivity is exceptionally low due to the use of low grade technology, or lack of technology, in the sector. There is no national agricultural plan which can point the way out of this Third World trap. Last November, as the luncheon speaker at the Private Sector Organisation of Jamaica (PSOJ) 50th anniversary celebration at the Jamaica Conference Centre in downtown Kingston, I noted that although other widespread, critical sectors like tourism had a national plan, there was none for agriculture. Such a plan should start from the marketing, not production end, as a new approach. Production should then seek the most advanced, appropriate technology. Agriculture is not an ordinary sector. It holds the key to productivity and poverty, nationally. I have written on this so many times but it bears repetition: agriculture is the only under-developed productive sector. Indeed, it is the only sector available for growth enhancement which will lift the economy through lifting people.
Low grade GDP performance and negative performance also is a principal cause of low productivity rating. This is easily seen from the 1980s when during the period of low GDP performance (1981-86) the average productivity rate was -0.3 per per annum. In the last part of the 1980s, (1987-1990) when GDP was at a much higher level of performance, the average productivity rate was also better, 4.97 percent. This clearly states the need to increase GDP performance substantially especially against the background of an average of 0.84 per cent growth over the past 15 years, that is, less than 1 per annum.
Both of these weak areas present formidable challenges caused by stubborn mind-sets among policy makers in comparison with other countries where superior technology and proven economic models are yielding far better results.
The time has long past when Jamaica should continue to be stuck in two speeds, dead slow and reverse! It is time for forward movement now.
Edward Seaga is a former Prime Minister. He is now a Distinguished Fellow at the UWI. Email: odf@uwimona.edu.jm.
