Samuel Braithwaite Enhancing productivity is about advancing worker welfare
June 20 was celebrated as World Productivity Day. The simple but profound mantra of the Jamaica Productivity Centre, a unit within the Labour Division of the Ministry of Labour and Social Security, is ‘Productivity is everybody’s business’.
I suppose June 20 was often greeted with much angst in Jamaica. Indeed, cries about low productivity often join the chorus of lamentations on crime and violence.
According to the JPC: “Productivity measures how well resources are used to produce goods and services (efficiency) that meet the needs, requirements and expectations of the consumer (effectiveness).”
The common view of productivity focuses on the first part of the JPC’s definition, which is simply about how much output can be produced from a given amount of input – that is, labour, land, capital, etc.
Further, the word ‘efficiency’ is often used interchangeably with productivity, but there is a subtle difference. If a firm wishes to produce a fixed amount of output, then to become more efficient, more productive, simply means producing the same amount with less input.
Producing with less could mean less need for labour, thereby affecting worker welfare.
Productivity also encapsulates producing more with a given amount of input. If labour is the primary input of interest, as it often is, and assuming each unit of labour produces more output, all other inputs unchanged, then labour is now more productive.
Some years ago, I watched a presentation on Caribbean economies in which the productivity of Trinidad & Tobago was discussed. What was striking to me, but not surprising, was the precipitous decline in the productivity of Trinidad & Tobago post 2008 (see Figure 1).
The reason for that sharp decline was clearly linked to the fallout from the 2007-2009 financial crisis and the concomitant decline in oil prices. It was not that the people of Trinidad & Tobago had suddenly become lazy; rather, their oil exports were no longer earning high prices due to recessions in Europe and the United States.
Welfare-relevant TFP
On a very basic level, discussions on issues of economics come down to scarcity and choice. Every day we make choices due to the limited resources available to us. Our income and wealth allow us to buy goods and services for our survival and the enhancement of our well-being.
Increasing productivity is about increasing the quantity and quality of output, increasing our income, increasing our wealth, not simply to say that we have produced more, but that we can live better lives, lives where at a minimum our basic needs are satisfied, and our range of choices extended.
In many Jamaican households, incomes are supplemented with remittances and incomes earned abroad. When a Jamaican spends a few months working abroad that income is not counted in Jamaica’s GDP, it is not part of the productivity measures of Jamaica; however, money earned on such endeavours is spent in Jamaica, whether on domestically produced goods and services or imports.
A similar story can be told about remittances. Indeed, Jamaica continues to export its best resource, its people. Remittances can be seen as payment for said ‘exports’.
The consumption of goods and services in Jamaica, regardless of where they are produced, is the focus of the welfare-relevant total factor productivity measure, or welfare-relevant TFP for short (see Figure 2). The academic details of the welfare-relevant TFP need not detain us. What matters is that using this measure, we see a moderate increase over the period 1960 to 2019 for Jamaica, depicted in Figure 2, as compared to the decline in the commonly used total factor productivity for Jamaica for the same period as seen in Figure 1.
The foregoing aside, we must also recognise that there is a sizeable informal economy in Jamaica, which is about 33 per cent of the formal economy. The economic activity in the informal space is not accounted for and therefore worsens the dismal picture of national productivity.
The way forward
Notwithstanding the less dismal view shown in Figure 2, Jamaica does face challenges related to the perennial problem of low productivity. At the micro or firm level, the challenges include poor leadership and management, low levels of educational attainment, low levels of trust and poor industrial relations, and low levels of innovation. On the macro level there is the migration of skilled persons, high cost of energy, and crime and violence, to name a few.
Given the range of challenges, resolving them will require a multisectoral approach. This is truly everybody’s business. One specific recommendation is for the JPC to be given a greater mandate, and perhaps autonomy, to promote increased innovation and higher productivity at the micro level.
Douglas Orane has made several profound statements on advancing productivity in Jamaica, but there is one which is not readily evident, and I quote: “Build trust, be humble, respectful, engage in a truthful way those who surround us at the workplace, avoid conspicuous displays of wealth. We have designed a country with increasing inequality. Why create more resentment by flaunting material possessions? It cannot be in one’s own self-interest.”
Goal 8 of the United Nations Sustainable Development Goals, or SDGs, provides a ready framework for promoting productivity in Jamaica.
To be sure, SDG Goal 8 is concerned with “decent work and economic growth” and seeks to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”.
Productivity begins and ends with Jamaica’s greatest resource – its people.
Samuel Braithwaite is a lecturer in the Department of Economics, University of the West Indies, Mona.samuel.braithwaite@uwimona.edu