Employment, growth and reforms in Jamaica

Executive summary The main objective of this study on 'Growth and Employment' is to determine the ability of the Jamaican economy to generate productive employment, and how this has been affected by reforms implemented in the last 15 years. To this end, the research focuses primarily on labour demand in the formal sector and the dynamics of salaried employment, although the importance of the informal sector and supply dynamics (volume and composition of labour); will be stressed as well.The findings are as follows: Wherever there has been growth and investment there has been labour absorption and this has been to the benefit to both males and females although males seemed to have benefited more overall. This has been the case for every other major sector except for traditional manufacturing, and agriculture which seemed to have suffered in the short run as a consequence of the reforms which removed much of their protection. While investment in manufacture has risen this has not resulted in increased growth, productivity or increased employment. In addition the employment has been in the area of a better quality labour force as the share of workers with limited education has declined in this sector. It is clear that the investment has been in restructuring and retooling rather than output expansion and over time it would be possible to see the impact of these changes. There has been a considerable informalisation of the labour market as self-employed workers, part time workers, contractors and generally lower level workers have been in demand. This has been the result of a structural shift in the economy as the service sector has expanded the expense of the goods sector. In this sectoral shift, women have benefited from the growth and investment in services. Productivity however, has not risen significantly in this sector and employment has expanded at the lower and the upper end of the workforce. This weakly suggests the phenomenon of 'de-skilling' and 'up-skilling' that is simultaneously taking place.There has been a general decline in the share of part time work in the economy as measured by the number of hours worked and an increase in full time employment. There has also been a decrease in overtime employment maybe due to the new tax regime which taxes overtime work. The decline in part time work however, has benefited men more than women as the number of women in part time work has not changed significantly while for men half as much were employed in 1972 as in 1996. This is a very important finding for clearly, while the quality of labour demanded has fallen, working hours have increased which may reflect the tendency to higher returns and less polarisation over time. Wage levels have increased despite the fall in productivity and the rise in labour costs. This may reflect the impact of strong labour unions in an environment of inflation in which wage rates are based on past inflation. This has been a source of conflict however, between trade unions and employers, as employers have been opting for more part time and contract workers on less stringent and legally binding wage contracts and demanding the right to downsize without large compensation packages. There is some tension between current institutional labour arrangements and employee demands for the right to strike in some services. In particular a source of conflict has been the essential services sector which legally their is no right to strike, but workers are demanding the right to strike for better remuneration. The reduced inflation rates to as low as 8 percent in 1997 will certainly remove this source of conflict. There has been increasing industrial tensions between employers and the unions as the reform force changes at the firm and industry levels especially in areas in traditional manufacturing and garments and agro-processing. The number of strikes over remuneration have increased with its resulting impact on days lost. The ESOP scheme was seen as a way to diffuse this situation as workers would own shares in companies and companies would get tax and other incentives. This however has not been effective in a climate of restructuring and downsizing.