WHAT MATTERS MOST: Labour the biggest loser
THE IDEA that a nation’s wealth grows as labour becomes more efficient, was a major breakthrough in economics over 200 years ago. It was recognised that an increase in the specialisation of labour dramatically improved the productivity and therefore the output of the workforce.
The following is an example of the impact of specialisation. Some workers on a huge farm were responsible for fencing its perimeter. Each worker was expected to plant poles and draw and nail the barb wire. A young man joined the workforce and convinced the men it was more efficient for them to specialise. Some of the men would specialise in planting the poles and the rest would draw and nail the wire.
As a consequence, the group produced more work at a faster pace and earned more money in less time. In this case, the self-interest of the workers was fulfilled and enhanced, and the business benefited from faster and better quality work as well. The well-being of the workers, the economy and the society was better served.
This is a classic example of workers’ compensation being increased as a result of improved productivity. In addition, their work effort was sustained by higher wages. In today’s world, there is a dramatic difference in the mix of technology and labour in the workforce, but the emphasis on worker productivity still remains.
In small economies, the need for labour productivity is greater as technology may be accessible but not affordable. In essence, smaller entities may not have the resources to update their technology in a timely fashion and therefore the emphasis on labour, including management, becomes more obvious.
The bigger issue is that in small economies, the growth of a nation’s wealth is even more intimately connected to the behaviour of labour income. It is therefore baffling to this day that the Government of Barbados embarked of a programme to deny workers any increase in salaries for the last six years. It was and continues to be a major error in judgement.
This brings me to the focus on small business as the engine of economic growth. In almost all economies, the small business sector (SBS) differently defined across them, is the engine of growth. However, it is also accepted that consumers drive the SBS, especially local consumers.
Unfortunately, there is a purely political attempt to suggest that the SBS is the key to getting out of the growth trap that currently characterises the Barbados economy. The first requirement is for Barbadians to have greater spending power. No attempt has been made to improve spending power in the last seven years. In fact, every effort has been made to dampen spending under the false assumption that the foreign reserves are being protected.
And if one doubted that the assumption was false, the governor of the Central Bank of Barbados recently suggested that more foreign reserves are not better and has now identified 12 weeks of import cover as adequate. Ironically, Barbados had its best ever import cover over a five-year period between 2008 and 2012. There was a concern about the reserves in 2013 because of the excessive printing of money that started in 2011.
The foreign reserves were used as the scapegoat or, more appropriately, as a scare tactic to justify the over-taxation of Barbadians. The tactic was also used to justify not giving a salary increase to Barbadian workers. The two policies were actually designed to reduce the fiscal deficit, not to protect the reserves. They ended up stifling the Barbados economy, including the SBS.
Any growth in specific areas of the SBS can be attributed to the creativity and innovation of the entrepreneurs. In the face of a declining economy, there were many losers and some gainers. Any analysis of these two groups should be done with the aid of credible information.
Some attempts are being made to put new legislation in place for the SBS. The real policy initiative is to find a way to increase spending in the economy. It must be repeated: there was never a genuine threat to the country’s foreign reserves.
In the absence of published information, it is not difficult to conclude that Barbadian workers have been the main victims of the prolonged economic decline. Furthermore, while some people are still in denial, the decline is principally the result of poor policy choices of the Government.
Unfortunately, labour has been the biggest loser in the declining wealth of Barbados.
Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email: firstname.lastname@example.org