Labour Market Reform Lloyd Goodleigh July 28, 2015

Mr. Lloyd Goodleigh, National Coordinator of the Labour Market Reform Commission Secretariat and the current President of the Jamaica Confederation of Trade Unions (JCTU) was the guest speaker at the JCC Board of Director Meeting on Tuesday, July 28, 2015. His presentation focused on the initiatives to reform the labour market. In photo: Warren McDonald, JCC President (R) greets Lloyd Goodleigh, National Coordinator of the Labour Market Reform Commission Secretariat and the current President of the Jamaica Confederation of Trade Unions (L) at the Board of Directors Meeting.

On behalf of our Chairman Dr. Marshall Hall, the members of the Commission and the Secretariat of the Commission I would like to thank you for your positive response to our request to spend some time with you to discuss the state of the Jamaican Labour Market and the work of the Commission. I should preface my remarks by alluding to two matters.

The first concerns the fact that the complex relationship between Labour Markets, Economic Development and Social Stability has never really been understood in Jamaica. As a matter of fact I will posit that we would be hard put to find Labour Economists in Jamaica and in the wider Caribbean. Most Jamaicans, including our Policy Makers, do not even comprehend that a Labour Market exists. This ignorance and the absence of policy, I will argue, helps to explain our years of Economic Stagnation and Social Instability. It is ironic that in a society where most of the major events are about the ‘world of work’, we continue to ignore the significance of the ‘world of work’ to our prosperity.

The second issue concerns the fact that a further recitation of additional areas that had to be fixed might be interpreted as contributing to Jamaica’s Sub-Optimal Slump. These matters cannot be avoided because in the final analysis it is what we do about them that will determine their usefulness.

WHAT ARE LABOUR MARKETS?

Labour Markets perform two basic functions: 1. They allocate Labour among various sectors, occupations, jobs and they establish levels of remuneration 2. Labour market policies attempt to influence the allocation of labour and its remuneration by affecting the supply and demand for labour and their interaction

Labour markets are about the world of work. They are dynamic and have ever-changing faces.

WHY ARE LABOUR MARKETS IMPORTANT?

Properly functioning labour markets are critical to Jamaica’s survival and its future prosperity.

“The original and enduring cause of a nation’s wealth is its people, their number, skills, dexterity, work ethic, inventiveness and character. People more than land, natural resources, capital or gold and silver determine why some countries are rich and others poor.

Labour is a strategic asset for economic development and it can be made more productive through investment in human capital” (Adam Smith, Wealth of Nations, 1776).

For the nation – The future competitiveness of the Jamaican economy depends on the existence of highly skilled, knowledgeable and motivated human resources.

For the individual – Work is becoming increasingly knowledge intensive and requires that an individual becomes a lifelong learner and be flexible and adaptable. For the individual, there is mounting evidence that their life chances, is a direct relationship between an individual’s levels of education and skills, employability, life earnings and productivity.

THE HISTORICAL CONTEXT OF THE JAMAICAN LABOUR MARKET

The Jamaican labour market has historically been a problem. “A problem is normally defined as a discrepancy between what is (or will be) actually happening and what should (or might) be happening”. A problem can also be an uncertain or disturbed situation. Jamaica’s historic failure to understand the nexus between humankind’s technological revolutions and its labour market was demonstrated as far back as 150 years ago.

“What Jamaicans needed for agricultural development in the second half of the nineteenth century was roads, water supplies, agricultural research and extension services; and for development in manufacturing, trained artisans and engineers. Both required much more education at all levels. One reason why factories did not pay in Jamaica was that so much expatriate personnel for skilled workers had to be employed because of lack of trained Jamaicans.

All these problems require government action. But the Jamaican government failed to initiate effective schemes for education above primary level. The attempt to introduce industrial training was unsuccessful, and agricultural research and education suffered from lack of funds and poorly trained personnel. It is worth noting that at the same time, the Government of Japan was taking vigorous action in all these spheres” (Gisela Eisner).

Upon consideration, Jamaica finds itself in the same set of circumstances and we’re 3 technological revolutions away from the events of 150 years ago.

CHARACTERISTICS OF THE JAMAICA LABOUR MARKET

The Jamaican Labour Market is characterized by: 1. Its small size in a globalized world 2. High levels of vulnerability, for example, seasonal hazards, natural disasters, an open economy (free trade, capital flight, migration of skills) 3. Lack of productive capacity, lack of innovation 4. Low total factor productivity (wage and non-wage factors). Total factor productivity has declined on average by 1.74% for every year since 1973 5. Excessive levels of indebtedness. Jamaica is one of the most indebted nations in the world 6. External payments in balance 7. Limited access to early childhood education 8. Unequal access to all but primary education 9. Poor educational performance 10. Migration of skills – Jamaica is among the top 20 countries in the world with the highest migration rate, as a percentage of the educated and trained (ie, persons with 12 years or more of education). Interestingly, the top three countries are in CARICOM and Jamaica is one. 11. An ineffective tax system that relies on the taxation of labour 12. Inadequate training of the labour force – only 17% – 25% have been trained 13. Our human resources have inadequate social protection systems at a time when companies and the private sector are calling for a reduction in the legal protection of workers, for example, severance pay and maternity leave and minimum wages, companies are also retreating from medical schemes and pensions

UNDERSTANDING THE CURRENT CONTEXT OF THE JAMAICAN LABOUR MARKET

Jamaica has to face the reality that we are in a world that is increasingly volatile, uncertain, complex and ambiguous. What we see around us is that “uncertainty is the inseparable henchman of the New Millennium. Destructive forces are felling the protective barriers of established ways. With the advent of neo-industrial conditions and globalization, a convolution comparable in its implications to the Agricultural Industrial revolutions is eventuating” (Kelly). These circumstances are fuelled by:

1. Human kind’s 4th technological revolution 2. Globalisation 3. Post – modern age 4. Rise in power of multi-nationals and multi-laterals 5. A shift from a euro-centered world 6. Emergence of trading blocs 7. Internationalization of labour markets with a bias towards educated and skilled human resources 8. Growing equality between nations and within nations 9. Concepts of lifetime employment in one organization or firm is receding; in the face of competitive markets and constant technological change. Workers are expected to hold successive jobs with intermissions of no work. Social insurance, quality education and training and healthcare become critical in those circumstances.

FIVE MODULES OF THE LABOUR MARKET REFORM COMMISSION

1. The importance and role of productivity, technology and innovation.

“The significance of productivity in increasing national welfare is now universally recognized. There is no human activity that does not benefit from improved productivity. This is important because more of the increase in gross national income, or GNP, is produced by improving the effectiveness and quality of manpower than by using additional labour and capital. In other words, national income, or GNP, grows faster than the input factors when productivity is improved.

Productivity improvement, therefore, results in direct increases in the standard of living under conditions of distribution of productivity gains according to contribution. At present, it would not be wrong to state that productivity is the only important world-wide source of real economic growth, social progress and improved standard of living” (Joseph Prokopenko).

2. Education/training and human capital growth in the relevant areas of work

“Human capital refers to the productive capacity of individuals, that is, the knowledge and abilities that allow them to receive a flow of income during their lifetimes. Some of these abilities are natural (inherited), while some are acquired through education and training.

Education is one of the most important assets a worker can bring to the labour market. Better-educated workers earn on average higher wages, have better health and suffer less from unemployment. Education is also important for growth, as more educated workforce is better able to deal with new technologies and is more innovative.

By increasing the efficiency of individuals in their occupations, education also augments the productivity of their firms and, therefore, increases growth in the long run. Indeed, education is often considered one of the most efficient mechanisms of achieving growth with social justice, because it increases growth and reduces inequality at the same time” (Naercio Aquino Menezes Filho).

3. Social Protection Social protection must be one of the tools used by Economic Policy to increase production and national income. In a world that is increasingly volatile, uncertain, complex and ambiguous. Jamaica needs to put in place, appropriate social protection measures that assist its human resources to cope with these exigencies.

4. Policies

Historically, labour market policies are regarded as those measures that help to influence the demand and supply of labour. These policies, that is, job search assistance, training scheme, public employment program and income replacement, have been assigned in other modules. There is a need for a comprehensive and integrated policy and institutional framework to emerge overtime.

As a consequence, this module will concern itself with specific policy issues that will impact the labour market, such as:

1. Employment policy 2. Emigration policy 3. Tax policy (example, minimising income tax; eliminate tax from labour and increase it on consumption to make the labour market more attractive) 4. Labour policy in special economic zones 5. Youth unemployment and any other issues that the Commission may decide

5. Industrial Relations

It should be geared towards fostering efficiency, co-operation, stability, peace and positive sum outcomes, among Jamaica’s human resources, those who manage those resources and the State.

METHODOLOGY

It is intended that each component must answer the following questions: – Where are we now? – Where do we want to go? – What are the forces that are preventing us from getting there? – What do we have to change in order to enable us to get there? – What are the actions vital to achieve the requisite changes? – How do we implement those changes and reflect them in policy and/or law? – Implement and evaluate the changes

Many social norms exist simply because no one has bothered to think about options, long and countless succession of that choice has brought us to where we are and we are not in a good place. We will fail to garner the benefits of mankind’s current Technological Revolution if we continue to not conceive of options about many of our social norms. We have to change our Labour Market and align it with the imperatives of the current Technological Revolution or spend another half century in Economic and Social stagnation.

Again on behalf of our Chairman, the members of the Commission and the Secretariat I would like to thank you for giving us the opportunity to raise certain issues with you. We sincerely hope that over the duration of our existence we can seek your opinion and your advice on some of the major issues that are critical to Jamaica’s Labour Market.