Economic growth and job creation (PART ONE)
By Dennis Morrison, Contributor

Job creation must, in the main, flow directly from the activities of the private sector, as the State does not possess the capacity to itself direct the job creation process by setting up businesses.

BOTH OPINION polls have found that the most critical issues in the minds of the electorate are: job creation, crime and violence and education. It is not surprising that these are the main issues that have come to the fore because they are closely related and are manifested in our daily lives to a much greater degree than other concerns.

In crafting their respective manifestos, the major political parties and the minor parties as well would have been sensitive to the public's agenda and the election debate can be expected to be largely centred around these issues.

From all appearances, the major political parties have placed the greatest emphasis on job creation and have put themselves under pressure to show big plans for job creation as they vie for popular support. This is ironic because it is crime and violence and education that are the direct responsibilities of the State and are the areas where State agencies are expected to be the primary active bodies in ensuring that our needs are met.

The private sector can, and does play a supplementary role. On the other hand, job creation must, in the main, flow directly from the activities of the private sector, as the State does not possess the capacity to itself direct the job creation process by setting up businesses.

ROLE OF THE STATE

Not only does the State not possess the capacity but, in the framework of a market economy, that is not its role. That role is clearly one for the private sector and this is a matter on which there is a broad consensus in the country. Our political parties should therefore be careful not to confuse the role of the State in their anxiety to placate voters. Equally, it is about time that our voters make the mental shift from the traditional mindset, which holds politicians as being the ones to directly create and distribute jobs. In this regard, the media has a job of education to do and it should begin in this election campaign.

As we make further advances in the transition to a market economy, the responsibilities of government in terms of the economy are very different from the days of State-directed development. In the new dispensation, the State is responsible for setting the policy framework, providing stable and prudent management of the macro-economy, and being active in business facilitation and promotion of investment. Even while drawing more and more upon private investment to spur infrastructure development that is required to support expansion of production, it will still be required to directly fund certain capital works related to roads, water supply, drainage, etc. And in some instances it must, pragmatically, engage in direct investment in some strategic areas where the private sector may still show a high level of risk aversion.

So, in other words, the responsibility of the State in relation to job creation is that it should provide an enabling environment and facilitate business activity, as well as ensuring that critical physical infrastructure and the soft infrastructure of education and training are in place. In this context, we may well ask the question: What are the prospects for job creation in the period ahead?

CHANGING LABOUR MARKET

The spectre of layoffs across many sectors of the economy has dominated public perception of the state of the economy and the performance of the government. And even where displaced workers have subsequently found new jobs or grasped opportunities for self-employment, the public's outlook is still focussed on the initial job losses. But it is true to say that many people have been displaced over the past decade or so.

This has arisen from a number of factors. First, the economy has undergone major restructuring in response to both local and international factors. The liberalisation of trade caught many enterprises in the manufacturing and agricultural sectors unprepared and major losses have occurred in these areas. Then there is the fact of the worldwide trend of downsizing or rightsizing, which has come about as a result of the competitive pressures which are pushing firms to achieve increased output and profitability by raising efficiency levels through modern technology and management practices. A potent example of how this has worked in our situation is the bauxite industry where today we are producing twice the amount of alumina that we did in 1988, with 50 per cent less workers.

In the cases of the sugar and banana industries, there has been an outright contraction of production, due to our failure to modernise our production systems, competitive pressures, and changes in the international trade arrangements. The effects of these forces are that employment levels in the goods-producing sectors of the economy have fallen by 21.2 per cent, from 440,600 in 1989 to 347,900 in 2001. This is in keeping with the performance in the agricultural and manufacturing sectors, which were among the three weakest areas of the economy in the 1989-2001 period, as was described in a previous article.

Commensurate with the shift in the structure of the economy towards a service orientation, employment levels in the services sectors have increased. In 1989, 425,700 people or 48.8 per cent of the employed labour force were engaged in those sectors. This had increased by 38.9 per cent to 591,500 in 2001, and now represents 63 per cent of the employed labour force. Tourism and related activities have been a major source of increased employment, as has the transport and telecommunications sector. There has also been a significant expansion in the self-employed group which covers a wide range of activities that are still to be fully captured in the statistics covering the formal economy.

This trend is not unusual internationally, as even in the USA micro and small businesses have been the most dynamic areas of economic activity and have shown the most rapid growth in terms of employment levels. The liberalisation of trade and business activity that has taken place in Jamaica over the last decade in particular has been an important reason for the expansion. What may be of concern is the extent to which such business activities are sufficiently broad-based to include export activities and can grow into sustainable entities.

PLATFORM FOR JOB CREATION

Given the changing domestic conditions and the highly competitive global environment, the prospects for job creation are going to depend on:

the preparedness of businesses to restructure their operations to attain competitiveness and viability;

success in attracting local and foreign investment;

the pace and nature of future economic growth;

the flexibility of the domestic labour market, and;

the quality and skill levels of our workforce.

Of course, the State will have to deliver on its responsibilities of ensuring a stable macro-economic environment, which is vital to both workers and investors, and that interest rates are reduced to make working capital cheaper. Hence, the need to resolve the fiscal and debt problems on a timely basis should be of paramount importance to those who are anxious about the security of existing jobs and expansion of employment opportunities, especially for young people.

Too many of our leaders in business, politics and the trade union movement are oblivious to the interconnectedness of these issues. And some of those who pose as commentators are equally ignorant of the threads that connect these elements of the economy.

Part 2»