Addressing the gaps in growth

Economic development is not just important to building a strong country – it is a core requirement.

It gives a country the ability to withstand the changing tides of the global landscape and manoeuvre through global shocks such as climate change and financial crises.

Economic development, in short, is important for the survival of a country and its people.

In a panel discussion hosted by Central Bank featuring key figures in multilateral financial institutions on September 4 at the Central Bank Auditorium, panellists agreed that for TT and the region as a whole to achieve their financial development goals, they must increase productivity and become even more inclusive.

Inclusivity – the practice or policy of providing equal access to opportunity and resources – is also a key tool to achieving the maximum amount of growth and development of a country and its people, which will in turn make it more resilient.

The human development index – a summary measure of average achievement in key dimensions of human development published by the UN Development Programme (UNDP), using three factors: life expectancy, average income and education – gave TT a grade of 0.814, increasing its grade by 0.10 from its 2020 score and placing it 60th out of 193 countries.

But TT still has a long way to go to develop to its highest potential. There are still disparities in the levels of productivity and inclusion of women and people of colour.

Decline in productivity, need for more inclusion

Panellists Dr Eric Parrado Herrera, chief economist and general manager of the Inter-American Development Bank (IDB); Therese Turner-Jones, acting vice president of operations at Caribbean Development Bank (CDB); Bernardo Requena, director representative at the Development Bank of Latin America and the Caribbean (CAF); and Petr Kakubik, financial stability adviser at the International Monetary Fund’s Caribbean Regional Technical Assistance Centre (CARTAC), highlighted their roles as multilateral institutions in the financial development of TT and the region.

Requena pointed out CAF’s intention to focus on productivity, highlighting gaps in productivity and female participation in the workforce.

Pointing to a graph which showed details of women in the labour market in 2011, he highlighted the correlation between participation in the workforce and schooling, particularly in rural areas.

“What you see there is that in rural areas, women tend to go to school less than expected, and in those areas, they participate less in the labour market,” he said. “There is a very strong relationship between years of schooling and participation in the labour market for women.”

He also noted that TT’s productivity is 60 per cent lower than that of the US, with metrics between labour, capital and productivity trending negative figures over the past few years.

“Of the nine most important sectors of the country, seven had very low productivity and only two had high productivity, which were energy and trade,” he said.

The World Bank’s 2023 gender equality index gave TT a score of 75 out of 100 based on three metrics: reproductive health, empowerment and the labour market.

The regional average is 81 out of 100.

The World Bank said young women in TT are four per cent more likely than men to be out of work and not in education or in a form of training. It added only 74 per cent of women have access to a financial account compared to 88 per cent of men, and adolescent fertility, though slowly declining, is much higher than the average rate. World Bank statistics indicated that in 2020, the adolescent fertility rate– the number of births per 1,000 women ages 15-19 – was 27.8. The standard is 11.2 per 1,000.

Men in TT are ten per cent more likely to have vulnerable jobs (jobs that you can lose easily) than women, with 13.6 per cent of the female working population and 23.7 per cent of men in vulnerable jobs.

Regionally, fewer boys complete lower secondary school than young women, but women are still under-represented in STEM fields. Young women are also more likely than young men to be out of employment, not in education or training and are less likely to control assets than men.

Turner-Jones said in Jamaica, boys are dropping out of school at the fifth-grade level.

DAILY COMMUTE: Backed-up traffic on the Churchill Roosevelt Highway. – File photo by Ayanna Kinsale

“We are seeing that across the region. That is not a good harbinger of the future,” she said. “We need to find ways to keep boys’ minds engaged in schools, because boys and girls learn differently.

“It is a big issue in the region, but that does not diminish the fact that we have not reached where we want to be in the region with regard to gender equality.”

Herrera said TT’s challenges are similar to those of the rest of the region.

“Declining productivity, fading competitiveness, low innovation – these are very common and these have been happening for the last 20 years,” Herrera said.

Central Bank’s economic survey said labour productivity improved in 2023, reflecting higher levels of domestic production and a slight increase in man-hours worked.

The most significant increases were recorded in assembly-type and related products and food processing.

But energy-sector productivity declined because of reduced levels of production across the sector. The index of domestic production showed a 6.2 per cent reduction in exploration and production of oil and natural gas in the upstream oil and gas sector (the sector that deals with exploration drilling and production of oil and gas) which contributed to a 12.1 per cent in the natural-gas refining industry and a 20.3 per cent reduction in the petrochemical industry.

However, man-hours worked in petrochemicals and exploration and production increased by 0.4 per cent and 3.4 per cent respectively.

More inclusion, productivity

= economic growth, resilience

Declining productivity stunts the GDP, or the economic output in comparison to the number of people in a country. It indicates the underutilisation of the skills of people in a country and could mean that it may have to increase its efforts to resource skilled people from outside the country.

One of the factors that affects productivity – traffic – costs TT billions in losses.

A study done in January by the UN Economic Commission for Latin America and the Caribbean (ECLAC) said the average person in TT spends almost two hours in traffic daily, and a total of 33 days – more than a month – in traffic a year.

The data was gathered from June-September 2023 through field surveys. It revealed that the direct cost of traffic delays alone is an estimated $2.26 billion per year – 1.37 per cent of TT’s GDP.

Herrera also made note of the losses that can be incurred through discrimination against women.

At the panel discussion on September 4 spoke of a survey done in Chile, in which actors were hired to go to banks and apply for loans. He said although the risk profiles of the actors were identical, banks approved loans for women less often than they did for men.

“If extrapolated, the loss in credit from that discrimination costs those banks US$12 billion in credit,” he said. “And if this is happening in Chile, it is probably happening everywhere.”

The International Finance Corporation (IFC) said that in 2020 while there had been advancements in women’s participation in the labour force in Latin America and the Caribbean (LAC), the rate was still lower than men, costing the region significant revenue. LAC countries are losing US$6.7 trillion in wealth due to differences in income between women and men,” the IFC said, using 2018 information from the World Bank.

Conversely, improved productivity means a better economy.

Herrera said a study that compared the growth factors between LAC and Asia proved that productivity could have a greater effect on growth than labour and capital.

“We did a counter-factual exercise that asked what would happen if LAC had the labour, capital and productivity of Asia, since 1960. It would be four times the GDP per capita. That is a huge impact, if you can increase productivity.”

 

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