Labour Market Issues in the Caribbean: Towards a Policy Research Agenda* Andrew S Downes PhD Professor of Economics and Director Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) University of the West Indies, Cave Hill Campus, St Michael, BARBADOS IADB Seminar on “Labour Markets and Migration in the Caribbean : New Trends, New Research”, Washington, D.C., July 27, 2010

Structure of Presentation Labour Market Trends Pressing Labour Market Issues Policy Research Agenda

Labour Market Trends Caribbean defined in terms of members of the Caribbean Community and Common Market (CARICOM) – 15 member states less Haiti Trends developed from labour force surveys, administrative records, population censuses, key informants Supply-side of the labour market:  Relatively low rates of population and labour force growth (less than 2 percent p.a. for most countries)  Ageing of the population (i.e., those over 65 years of age) with mandatory retirement in existence (60-67 years)

 Gradual increase in female participation rate (over 55% in recent years) and relative constancy and, in some cases, a decline in male participation rate  General improvement in the educational attainment of the labour force (more persons enrolled in tertiary level education), but still significant deficiencies in the labour force in terms of attainment/certification  For example, high enrolment in school system in Jamaica (universal primary and over 90 percent enrolment at secondary), but 70 percent of labour force indicates uncertified/untrained  Migration of skilled labour to developed country labour markets (nurses, teachers and other professionals)-brain drain

Demand-side of the Labour Market :  Growth of services-sector employment (esp. tourism, general and professional services) and a decline in agricultural/manufacturing employment  Significant increase in the number of persons reporting as self-employed or own-account workers (partly associated with informal sector growth). Varying estimates of the informal sector and associated labour market  Steady increase in contract workers in several countries  Slow growth in formal sector employment (low employment-output elasticities in some countries <1.00)

 Government is the single largest employer, but the private sector accounts for over 60 percent of the employed  Some degree of labour market segmentation – females dominant in certain occupations – clerical sales/services, but a growing trend of females in professional/technical occupations  Evidence of an increase in the working poor from CPA in selected countries. Relatively high poverty rates (18- 33% of persons below the poverty line in 2000s)  Steady decline in temporary worker programs in North America (changing from agricultural to service occupations—hotels/hospitality)

 Some intra-regional movement of labour especially from Guyana and Jamaica to other Caribbean countries (Barbados, Trinidad and Tobago, some OECS countries) – primarily semi-skilled labour in agriculture and construction Unemployment  Relatively high rates of unemployment – made worse by shocks (e.g., current economic recession, reduction in exports from agro-crops)  Very high rates of unemployment among the youth ( years of age) and especially among females. Youth rates tend to be twice the national rates

 Low level of human capital among the unemployed and the poor  Higher urban rates in geographically larger countries, higher rural rates in smaller countries  Unemployed tend to have high “reservation” wages influenced by remittance flows, drug trade, general wage structure, education received  Weak systems of social protection for the unemployed (wide use of family support system) and poor labour market information for matching people to jobs ( also weak transition from school to work for youth)  Evidence of long spells of unemployment (6-12 months) – hence skills depreciation. Some unemployment persistence exists – recent study of Barbados and T&T

Institutional Aspects of the Labour Market  General decline in the degree of unionization over the past 4 decades (from 30/40% to 20/30%). Unions are still strong in selected areas of the public sector  Very few changes in labour legislation over past 3 decades. New focus on OH&S in the workplace  Wages and conditions of service determined largely through the collective bargaining process (with spillover effects to non-unionized sectors) – can be a source of adjustment costs

 Industrial Court in some countries (T&T, Antigua/Barbuda), voluntarism in others (Barbados, Jamaica). Generally relatively low rates of industrial disputes. Some degree of political unionism exists  Social partnership (Barbados) and tripartitism – national, (ILO-focused) adopted in the region  Varying forms of minimum wage legislation – national, but largely occupational  Generally weak forms of social protection in labour market – severance payment laws in several countries; UI in Barbados, UB in the Bahamas. Economic shocks can result in unemployment and transient poverty

 Indices of labour market rigidity/flexibility are lower in the Caribbean than in LA Pressing Labour Market Issues Downes (2006) study identified the main challenges/issues:  Youth unemployment  The creation of jobs  The mismatch between the educational system and the needs of employers  The low levels of labour productivity coupled with relatively high wages

 The emigration of skilled persons from the region (i.e., the brain drain)  An inadequate labour market information system IADB/ABT (1998) study had earlier identified the main labour market issues as: Demand side  Lack of adequate economic diversification to create jobs and stem migration  Slow economic growth rates (related to the above)  High labour costs  Labour market rigidities

 Lack of an adequate social infrastructure  Declining public sector employment Supply side  Low productivity of workers and poor work ethic  Low level of skills  Lack of well-trained labour force  Out-migration of skilled labour  Poor industrial relations among social partners  High unemployment among youth and women  Growing casualization of labour (informal labour market)

Issues above have been reiterated in World Bank (2005): A Time to Choose These issues/challenges inform the development of a policy research agenda for the region Policy Research Agenda Focus on research which can result in policy measures to resolve the pressing labour market challenges/issues in the region Need for priority-setting given technical resources, data availability, policy impact/response, involvement of stakeholders etc. Need for research groups to be organised— IDB/World Bank/UWI/UG/Statistical Depts./Ministries of Labour Critical issue of data availability needs to be resolved.

Selected Research Areas:  The Nature of Unemployment:- Nature (esp. Youth), Extent, Duration, Determinants, Effects, Coping Mechanisms, Policy Initiatives (e.g., Social Protection Systems (UI, UB, etc)), Crime and Unemployment  Determinants of Labour Productivity:- Worker Motivation, Work Ethics, Wages and Working Conditions, Skill Formation, Complementary Elements (capital equipment), Labour utilisation in enterprises. Payment systems.

 Gender Relations in the Labour Market:- Wage Gaps, Sex Discrimination, Household Decision-making, Productivity differentials in Enterprises, Motivation/Job Satisfaction  Education/Training-Labour market Interface:- Nature of School and Training System, Human Resource Needs (Establishment Surveys), School to Work Transition  Wage and Earnings Determination:- Wage Bargaining, Wage/earnings Inequality, Reservation Wage, Wage- Education Link, Minimum Wage Effects, Alternative Compensation Schemes

 Employment Creation:- Economic Diversification, Trade and Employment, ‘Green’ Business Enterprises and Green Jobs, Working Poor, SME and Employment, Informal Labour Market  Institutional Aspects of Labour Market:- Social Dialogue, Decent Work, Role of Labour Unions, Labour Legislation/ Reform/Labour Flexibility, Social Protection Measures  Migration:- Nature, Determinants, Re-draining the Brains, Diaspora and Caribbean Development, Regional Mobility of Labour (CSME)

Selected Reviews of the Caribbean Labour Market 1.Baker J.L. (1997): Poverty Reduction and Human Resource Development in the Caribbean (World Bank) 2.Strachan G. (1996): Promoting Productive Employment for Poverty Eradication: Issues, Policies and Programmes in the Caribbean (ILO) 3.World Bank (1994): Caribbean Countries’ Policies for Private Sector Development (Washington, DC) 4.ABT Associates (1998): Workers and Labor Markets in the Caribbean (CGCED Report for IADB, May) 5.Downes AS (2006):Caribbean Labour Market Challenges and Policies (UNECLAC)

6.Downes AS (2008): Labour Markets in Small Developing States (Commonwealth Secretariat, chapter 1)—review of the literature 7.World Bank (2005): A Time to Choose: Caribbean Development in the 21 st Century (Washington, DC) 8.McArdle T (2006): Firm and Worker Training in the Caribbean (World Bank).