Download JOBS, LIVING STANDARDS AND SOCIAL COHESION IN ST LUCIA

JOBS,LIVING STANDARDS
AND SOCIAL COHESION IN
ST LUCIA*
Andrew S Downes PhD
Edwin St Catherine MA
Ezra Jn Baptiste MSc
December 2013
JOBS, LIVING STANDARDS AND SOCIAL
COHESION IN ST LUCIA

Structure of the Presentation
 Analytical Framework for a Small Island
Nation
 Overview of the St Lucian Economy 19952011
 Labour Market Effects of Economic
Change
 Barriers to Economic Transformation
 Concluding Recommendations
ANALYTICAL FRAMEWORK FOR A
SMALL NATION
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World Bank’s World Development Report 2013
focuses on JOBS
Distinguish between jobs from individual
perspective and jobs from a social perspective(
individual vs social values can differ)
From social perspective it looks at the concept of
“good jobs for development”---jobs which result in
three (3) transformations in a society:
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Increasing living standards/Reducing Poverty (PR)
Improving productivity (PD)
Building social cohesion (SC)
Job creation (J) can build social cohesion which leads
to higher levels of productivity and improved living
standards. National socio-economic welfare (W) is
improved
ANALYTICAL FRAMEWORK FOR A
SMALL NATION
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W=W (PR, SC, PD)
PR=PR(J); SC=SC(J); PD=PD(J)
W=W*(J)
The relationship varies according to the nature of the
economy (WDR has 8 different types including a
small state)
Possible trade-offs exist, for example, jobs for
improving productivity might not result in enhanced
social cohesion.
Jobs(high PD, low SC) versus Jobs (low PD, high SC)
can result same W.
SC—jobs involve teamwork, networking, community
based versus PD—jobs involve technology, export
orientation
ANALYTICAL FRAMEWORK FOR A
SMALL NATION
Small domestic markets and role of international
trade
 Production and export concentration, but import
diversification
 Low multiplier effects due to high leakages from
imports ( constrains job creation and linkages)
 Job creation influence by these elements—
sugar, bananas, tourism and distribution
 Government is a major employer ( of first resort
in some cases)
 Resource based activities create seasonality of
employment and migration (temporary and
permanent)-agriculture and tourism

ANALYTICAL FRAMEWORK FOR A
SMALL NATION
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Vulnerable to external economic and environmental
shocks—oil prices, recessions in trading partners,
hurricanes, sea level rise—creates volatility
Dependence on migrant remittances ( non labour
income) which affects employment and labour market
participation
Lack of critical mass for some occupations—skilled
professionals --and dependence on external labour
Existence of a “sharing mechanism” within
households creates “wait unemployment”—looking
for the “good job”. Concept of “community spirit” in
small island nations
Social network and relationships facilitate job search
ANALYTICAL FRAMEWORK FOR A
SMALL NATION
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“Good jobs” associated with primary labour market
of key productive sectors and also the public sector in
small nations( higher wages/salaries and benefits,
security of tenure, etc)
“Good jobs for development” relate to poverty
reduction, social cohesion and productivity
growth/global markets
Limited role of unions, given presence of significant
informal sector. Unions might be strategic in some
key areas ( ports, public service, sanitation etc)
In small island states increased focus on “green
economy” and “blue economy” jobs—renewable
energy, waste management, marine, aquatic,
aquaponic activities etc linked to other traditional
sectors- tourism, agriculture, energy......
OVERVIEW OF ST LUCIAN ECONOMY
Historical dependence on production of banana
production and exports to UK since 1950s—
80% of income and foreign exchange
 Decline in 1990s with end of preferential trading
arrangements and the new European Economic
Community regime
 St Lucia has been the main banana producer in
the Windward Islands
 Steady decline in agricultural sector ( 13.3% of
GDP in 1980 to 3.5% in 2010)
 Production diversification to services esp tourism
and financial services. Services sector now
accounts for over 70% of GDP

OVERVIEW OF ST LUCIAN ECONOMY
St Lucia has made the transition from an
agricultural to a services economy
 Growth in tourist arrivals ( cruise ships and stay
over). Doubling of tourist expenditure over the
1995 to 2010 period
 Relatively low growth rate—2.0 pa over 19952010 with shocks in 2001-2, 2005, and 2009present—vulnerability of the economy.
 Large number of small ( less that 20 workers)
and medium ( 20-50) enterprises. Large firms in
the export market.
 St Lucia yet the top performer in Doing
Business Index in the Caribbean

OVERVIEW OF ST LUCIAN ECONOMY
Growth of Real GDP (%)
10
8
6
4
2
Growth of Real GDP (%)
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-2
-4
-6
OVERVIEW OF ST LUCIAN ECONOMY
Banana Production (‘000tons)
120
100
80
60
Banana Production (‘000tons)
40
20
0
OVERVIEW OF ST LUCIAN ECONOMY
1600
1400
1200
1000
800
Total Tourist Arrivals (‘000)
Tourist Expenditure (EC$m)
600
400
200
0
OVERVIEW OF ST LUCIAN ECONOMY
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Main business constraints relate to: access to
finance, getting electricity, transportation and
inadequately educated workforce—some of these
relate to small size ( size can matter!!)
Inflation is import price determined ( link of dollar to
US$), with relative low rates of inflation over the
1995-2010 period
Highly open economy with exports and imports to
GDP ration of 1.18
“Structural Balance of Trade deficit” and reliance
on foreign direct investment and other capital
inflows- few years of BOP deficits ( also linked to
monetary union)
Link between fiscal accounts and BOP accounts.
LABOUR MARKET EFFECT OF CHANGE
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Demographic Change:
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Low rate of population growth—0.9% pa-due to falling
birth rate and constant death rate
High population concentration in capital city ( urban) in
2010
Increase in overall population density
Decline in young cohorts under 15 and growth of older
cohorts over 65 ( ageing of population and old age
dependency)—implications for pensions, future labour
supply.
Gradual decline in female to male ratio
Emigration a key feature especially educated to more
developed countries and in recent years more females than
males—implications for growth and development in new
areas requiring “high level skills”
Free mobility of labour under the CSME ( esp graduates)
LABOUR MARKET EFFECT OF CHANGE
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Labour Force, Employment and Unemployment
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Growth in labour force of 1.7 p a over 1995-2010 with
more males than females.
Females in care economy but increasing participation in
labour market activities ( esp educated ones)
Overall increase in participation rate during period up to
2006 with possible added (CWC) and discouraged worker
(Great Recession) effect s from 2007
Employment growth of 1.5 pa, with decline in
agricultural ( banana ) sector and growth in services over
1995 to 2010 period. Fall off in manufacturing sector
employment
Noticeable decline in “mid skill” jobs –technicians ,
associate professionals—partly associated with decline in
manufacturing and agriculture
LABOUR MARKET EFFECT OF CHANGE
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Gender segmentation ( females in clerical, sales and
service and males in construction, public utilities )
Growth in females in the professional category and senior
managers—” high skill” occupations---breaking of the
“glass ceiling” and role of tertiary education
Increase in females with tertiary education and decline for
males in 25 and over age group—more educated female
labour force than male. UWI graduation data supports this
observation
Issues of household formation and production, gender
relations in the workplace and household, fertility ( note
decline in less than 15 age group) given traditions in St
Lucia
Unemployment is an endemic problem esp among youth.
National rate moved from 16% in 1995 to 21.2% in 2011.
Self reporting of status ( NB Sen’s definitions)
LABOUR MARKET EFFECT OF CHANGE
Data for 2008 indicate that 41% of workforce in
“formal” jobs and 59% in “informal” jobs
 Wage employment accounts for 74% of employed,
21% reported as self-employed.
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LABOUR MARKET EFFECT OF CHANGE
100
90
80
70
60
50
Total Labour Force (‘000)
Employed Labour Force (‘000)
40
30
20
10
0
Unemployed Labour Force (‘000)
LABOUR MARKET EFFECT OF CHANGE
80
70
60
50
40
30
20
10
0
Average Annual Unemployment
Rate (%)
Total Labour Force Participation
Rate (%)
LABOUR MARKET EFFECT OF CHANGE
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Lowest rate associated with a major cricket event on 2007--impact of a major event in a small nation!!
Unemployed have secondary ( high school) level
“education” due to requirement of country to be in school
up to age 15, but many leave with poor certification ( none
or few)
Youth unemployment ( 15-30) between two and two and
half times the national rate. Reliance on sharing
mechanism to survive and informal/intermittent work
Issue of heads of households being unemployed creating
household poverty
Explanations--- limited opportunities, low growth,
mismatch between education and labour market,
reservation wage problem( does education create this??),
remittances( non labour income), drug trade
POVERTY AND LABOUR MARKET
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High level of individual and household poverty (
individual : 25% in 1995 and 30% in 2005/6; household:
19 % and 21%)
Poor have low human capital, low skill jobs, larger
households with more dependents ( with intergenerational
effects), are stigmatized and face social exclusion and have
weak social safety next
Government programs to assist poor—short term
employment, skills training, microfinance
Government labour intensive programs through the
continuation of the Basic Needs Trust Fund Program
(BNTF), the introduction of the Poverty Reduction
Program(PRP), the Short Term Employment
Program(STEP) and other SME programs through
James Belgrave Enterprise Development Fund and the
Small Enterprise Development Unit
SKILL DEVELOPMENT AND
TRAINING NEEDS
Post banana economy skill development is a
planning challenge with respect to skill
development and training needs
 Available information suggest the following areas to
meet the “new economy”:
* hospitality and tourism
* information technology and management
* health, wellness and medical services
* modern agriculture
* financial services
* education ( special, technical and vocational
*renewable energy/aquatic services
These are “ high” and “mid” level skill needs
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SKILL DEVELOPMENT AND
TRAINING NEEDS
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Training institutions exist but question of whether they
can meet the level, quantity and quality of the skill and
training needs
In existence are a community college ( certificate,
diplomas, associate degrees), unit of the regional UWI,
foreign universities ( Munroe College and Medical Schools
from the USA), several training programs.
Question of alignment of production focus, skill and
training needs and the ability of the institutions too deliver
at the level and quality needed!!
High returns to tertiary/university education exist—over
20 % for 1996 and 2004 ( private returns—no data on social
returns to determine if there is signalling or profitable
investment). Returns higher for females and increase with
educational attainment.
SKILL DEVELOPMENT AND
TRAINING NEEDS
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Labour Needs Assessment Survey (2012)- new
employment in tourism, construction and
distribution—mainly mid-low skills and small
high level skills---missing “middle skill”
problem ( ie skilled craftpersons, technicians,
operators, associate professionals)
LABOUR PRODUCTIVITY AND
EARNINGS
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Volatility in aggregate labour productivity, but an upward
trend since 2000. Challenge with measuring productivity
in a services economy
Higher salaries received in transportation, financial
services and construction. Low salaries in distribution,
agriculture and social services
Wage discrimination along gender lines—females have
higher returns to education but lower wages
“Good jobs for development “ in St Lucia have the
following features:
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Require post secondary education
Found in construction, financial services, transport and
tourism
Associated with decent work precepts
Use modern technology
Provide high remuneration, prestige and social mobility
Associated with high productivity
/performance/competitiveness
LABOUR PRODUCTIVITY AND
EARNINGS
Lprod
115
110
105
100
95
90
85
1,995 1,996 1,997 1,998 1,999 2,000 2,001 2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,009 2,010
Lprod
SOCIAL COHESION AND THE
LABOUR MARKET
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Social cohesion disrupted by the decline in the
banana industry esp in rural communities
Migration from rural to urban areas esp by the young
in search of jobs ( urban-rural distinction apt for hilly
St Lucia)
Crime and social deviance esp among youth seen as
decline in social cohesion ( altho crises can bring
community cooperation—eg hurricanes, storms, fires
etc)
Job creation and employment can bring about social
cohesion—social acceptance, avoidance of socially
unacceptable behaviour, household stability and
improved standard of living
Social cohesion can assist with job/employment
search and facilitation
BARRIERS AND CONSTRAINTS TO
CHANGE AND TRANSFORMATION
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Labour Market:
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Person’s mindset and stigmatisation of certain jobs
Lack of knowledge/skills
Mismatch of education/training system and labour
market needs ( compulsory school attendance)
Inability of institutions to supply skill needs for new
economy
High level of poverty and inability to provide basic
needs
Lack of labour market information
Migration of skilled labour
Poaching of trained person
Costs, location, flexibility of training programs
Returns to drug trade and reservation wage issue
BARRIERS AND CONSTRAINTS TO
CHANGE AND TRANSFORMATION
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Business Environment:
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Lack of access to finance
Identification of new profitable opportunities outside
of bananas
High cost of inputs
Competition from imports
Inability to meet new standards for the global
economy
Inadequate marketing skills and ability to break into
new markets
Inadequate human resources
Threats from international institutions re: tax regime
( eg OECD harmful tax issue)
Building an entrepreneurial class
BARRIERS AND CONSTRAINTS TO
CHANGE AND TRANSFORMATION
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Socio-political:
Slow growth of civil society to give voice
 Political patronage and clientism—culture of
dependency and mendicancy
 Long term development vision for country
 Pace of the OECS economic union vs CSME

POLICY INITIATIVES FOR JOB
CREATION AND TRANSFORMATION
Integrated national development plan linked to
regional initiatives ( regional integration with a
global focus—production integration) for the postbanana new economy.
 HRD plan to reform education/training system
linked to labour market needs
 Social partnership to foster greater cohesion
 Community development to foster cohesion and
job creation
 Development finance plan to harness resources
from development partners to fund initiatives (
lot of development funds not used by Caribbean
countries)
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POLICY INITIATIVES FOR JOB
CREATION AND TRANSFORMATION
National productivity and service excellence
programme to strengthen service sector delivery
 Greater use of international agreements and
Diaspora
 Strategic leadership and management by
political, business, unions and civil society
leaders
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