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 PresentationAnalytical Framework for a Small

Island NationOverview of the St Lucian Economy

1995-2011Labour Market Effects of Economic

ChangeBarriers to Economic TransformationConcluding Recommendations

ANALYTICAL FRAMEWORK FOR A SMALL NATION 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: 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

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 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 “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 1995-2010 with shocks in 2001-2, 2005, and 2009- present—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

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

-6

-4

-2

0

2

4

6

8

10

Growth of Real GDP (%)

Growth of Real GDP (%)

OVERVIEW OF ST LUCIAN ECONOMY

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

20

40

60

80

100

120

Banana Production (‘000tons)

Banana Production (‘000tons)

OVERVIEW OF ST LUCIAN ECONOMY

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

200

400

600

800

1000

1200

1400

1600

Total Tourist Arrivals (‘000)Tourist Expenditure (EC$m)

OVERVIEW OF ST LUCIAN ECONOMY 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

Demographic Change: 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

Labour Force, Employment and Unemployment 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

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.

LABOUR MARKET EFFECT OF CHANGE

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

10

20

30

40

50

60

70

80

90

100

Total Labour Force (‘000)Employed Labour Force (‘000)Unemployed Labour Force (‘000)

LABOUR MARKET EFFECT OF CHANGE

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

10

20

30

40

50

60

70

80

Average Annual Unemployment Rate (%)Total Labour Force Participation Rate (%)

LABOUR MARKET EFFECT OF CHANGE

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 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

SKILL DEVELOPMENT AND TRAINING NEEDS

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

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

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: 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

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201085

90

95

100

105

110

115

Lprod

Lprod

SOCIAL COHESION AND THE LABOUR MARKET

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 Labour Market:

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

Business Environment: 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

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 post-banana 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)

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