- FileGoodleigh..."Regarding the distribution of wealth, Jamaica already has one of the worst records in the world."
Lloyd Goodleigh, Contributor
The following are excerpts of the address made by Lloyd Goodleigh at the Grace Kennedy Foundation Lecture 2002, titled "Changing With Change - Workplace Dynamics Today and Tomorrow"
I WILL contend that, for Jamaican workplaces in a globalised world, change is ubiquitous and adaptability is essential but equity has to be assured. If those are our objectives, the framework of Jamaica's current response is inappropriate.
Since the end of the cold war and the intensification of the forces of globalisation, Jamaica's workers have been subjected to a call to work harder and longer.
At the workplaces, we are aware of determined efforts to ensure the loosening of regulations and collective agreements that protect the conditions of hiring and firing, and also the emergence of what can be termed a cost-based approach.
In practical terms, it means a downward spiral of wages and working conditions, downsizing, the creation of flexible enterprise, adversarial relations and union busting.
In Jamaica, this call seems to come from three sources those who experience competitive pressures and are unable to cope; those who regard regular wage labour as being overly protected by legislation and collective agreements; and those who seek to avoid any form of labour legislation.
Beyond the Jamaican circumstances, neoclassical economic theory contends that a free labour market is one devoid of institutional distortion. Whatever the source, this version of flexibility is not sustainable, does not enhance productivity and destroys the cohesion of the society.
It "produces short-term savings but that, in the long run, may destroy the trust and mutual commitment needed to sustain work organisation, innovations and flexibility".
The approach is short-term, is aimed at profit maximisation and impairs the ability of the organisation to reform itself. More critically, it will aggravate the growing levels of inequality in Jamaica.
DISTRIBUTION OF WEALTH
Regarding the distribution of wealth, Jamaica already has one of the worst records in the world. The distribution of income is skewed as is evident from the fact that the poorest 20 per cent of the population account for 1.9 per cent of total consumption, according to the latest UNDP statistics - a circumstance that would be aggravated by unfettered flexibility.
Economist Richard Freeman of Harvard University and London School of Economics posited the following views on unfettered flexibility.
The growth of flexibility, notably of the unfettered right to hire and fire, has a largely re-distributive effect; I am convinced that flexibility has no impact on output and employment levels, but that it strongly influences the redistribution of incomes in favour of the employer... The real problem is that of restoring strong economic growth conducive to massive job creation, not seeking to move people around more easily from one job to another?
Besides the redistribution implications mentioned by Mr. Freeman, there is a wealth of evidence supporting the Latin American experience that "the notion underlying current policy proposals in some Latin American countries, namely that flexibilisation of dismissals and employment contracts is sufficient to improve economic performance, is a gross misconception."
What Marshall found was that it was "not apparent that individual labour law had identifiable effects on the performance of aggregate manufacturing productivity".
Rather, that low investment, low labour costs (thus not stimulating labour substitution), regressive restructuring of manufacturing, opening up of the economy, played a much more crucial role in influencing productivity trends.
More specifically, that "permissive legislation on dismissal did not foster growth of labour productivity in Chile and Brazil, neither did comparatively tighter regulations hinder the increase of labour productivity".
Beyond those practical issues, what about the distortionary neoclassical claims?
The International Labour Organisation (ILO) argues that there is no clear-cut empirical support for the claim that high, non-wage labour costs necessarily hamper economic performance.
For example, studies have found that higher levels of social security contributions were associated with higher, not lower, total employment growth and had no significant effect on output growth in Latin America and the Caribbean.
They also show that severance pay, maternity leave and paid annual leave had no significant effect on the growth rate of either total employment or output in this region. Thus, none of the labour market policies traditionally emphasised by the distortionist view shows any of the hypothesised negative effects on employment and growth.
As the debate intensifies in Jamaica about unfettered flexibility and cost-based approaches, we are forced to look back to the realities of our experiences in sugar in 1840. We had better make sure that, empirically, we identify the real causes of our economic dilemma if we are to enhance our competitive capabilities.
Sentiments and preconception masquerading as fact will not accomplish that. If we are not having unfettered flexibility, how should we proceed? What degree of flexibility should we have? How inflexible are Jamaican labour markets? What is the empirical evidence? Is the call for unfettered flexibility a ploy for profit maximisation and redistribution of income?
Is Jamaica's Worker Protection Index appreciably higher than her counterparts in the region, the hemisphere, the world?
In the past, the problem has always been, when assessing the benefits or losses associated with labour legislation, how to measure protection.
The Inter-American Development Bank in 1998 attempted to resolve that problem. What the evidence indicates is that Jamaica's Workers Protection Index could not be classified as highly protective or even moderately protective.
What is instructive is that there are those who argue that a critical component in the U.S. economic boom under the Clinton administration was the flexibility of U.S. labour markets and the world we live in.
The U.S. market is held up as the model of flexibility. What the evidence indicates is that, although Jamaica's labour market is very flexible, we have failed to experience an economic boom.
Maybe this is because what really turned the American economy around in the 1990s was "the long delayed productivity premium from investment in basic research, education and training, and infrastructure and brought to market by private companies. Productivity growth in the high-tech sector has turned budget deficits into surpluses, tamed inflation and made it possible to contemplate another era of true prosperity." So much for the advocates of unfettered flexibility.
PROMOTING ADAPTABILITY
Jamaica must acknowledge change. It must promote adaptability in the context of equity and social justice. We need agreement that is based on the evidence and, given Jamaica's socio-economic circumstances, unfettered flexibility is not a policy option.
Not only would it be counter-productive, but also, the international variables I alluded to militate against this approach. Jamaica must be aware that a globalising world has a low tolerance for systems divergence. We must therefore craft a response that is sustainable and demonstrate the tenacity to implement it.
What should we do? Flexibility cannot be introduced by imposition, which implies that one of the social partners is in such a dominant position that it can simply implement the desired changes.
We will not support this approach. In the Jamaican context, it is not conducive to the creation of trust. In the final analysis, flexibility is about relations - industrial, employment, human. We will support regulated flexibility - a process of consultation that creates a balance between the interest of the organisation and its employees.
As a society, we must belatedly agree that the Industrial Age is over. It has drawn to a close. Its institutions, its patterns and its attitudes are in transformation.
The world has moved into the age of access, information, a new economy, and globalisation. We have no choice but to understand our new environment and redesign our competitive capabilities as a people and as a nation.
Given the issues of globalisation, the need for the Jamaican labour market to adapt to those circumstances and our own national priorities, we must move beyond a reliance on the World Bank's single objective for labour markets - efficiency.
We must embrace the following objectives of our own:
Efficiency, meaning maximum returns to human resources, maximum output and maximum income corresponding to the economic criterion for judging the allocation function of labour markets.
Equity, meaning equality of opportunity for all in access to jobs and training, equal pay for work of equal value - a concept which contributes to a more equitable distribution of income.
Growth, meaning that labour market operations today should contribute to, not impede, higher productivity, income and improved employment in the future.
Social justice, meaning that since labour market outcomes may have positive or negative impacts on workers' welfare, society should, under certain circumstances, act to minimise negative outcomes and redress their effects when they occur.
It is instructive that the Organisation for Economic Cooperation and Development (OECD) has always relied on efficiency and equity as the objectives of its labour markets.
FUNDAMENTAL CHANGE
Given those objectives, we need a value-added response to the challenges of globalisation. The way to enhance our competitive capabilities is to:
Encourage collaborative institutions and a collaborative society,
Stress teamwork - education/training/productivity, quality re-configure institutions in the labour market,
Pursue a new model of industrial relations,
Stress cooperation between labour and management through framework agreements and memoranda of understandings.
The goal is to pursue strategies designed to achieve fundamental transformation in employment relations - transformation to achieve outcomes of mutual benefit to enterprises and their employees.
In order to achieve those goals, the social partners have some specific roles that I will now outline.
THE STATE
In Jamaica, the state has historically played a major interventionist role in the economy and the workplace, whether it was the Spanish through Las Siete Partidas, or the English through the Slave Code, the Apprenticeship Act, the Master and Servants Act or, in our current circumstances, through the LRIDA and other measures of labour regulations, fiscal policy, education, training, health and transportation policies.
This circumstances is unlikely to change any time soon. We cannot therefore speak of Jamaica's workplaces without a major reference to the State and its critical role in workplace reform.
Having accepted globalisation, the state must seek greater international cooperation on monetary and fiscal matters. It must seek international understanding as to what political actions can be taken to regulate the consequences of globalization and develop a growth strategy.
Trade is the glue that binds the world's economy together. In matters of trade and labour standards, the government must cooperate in establishing procedures and institutional frameworks for the worldwide adoption of ILO Core Labour Standards Conventions 29, 105, 111, 100 and 138 as a minimum requirement in the world's workplaces. These Conventions have been said to be essential to prevent destructive competition worldwide as they discourage a country from presupposing that it would gain an economic advantage by the use of forced labour, child labour, discrimination or the downscaling of wages or social security, or occupational health and safety, or the suppression of worker or management rights of association.
Labour standards promote competition based on better products, higher quality products, enhanced productivity, better production processes and new markets,
There are two specific areas that must be addressed - inclusion of core labour standards into the FTAA process, and moving the World Trade Organisation (WTO) beyond its sole "precautionary principle", the protection of health and safety, to embracing concerns about ILO core labour standards and issues related to the environment. In a world where there is no equality of power, standards are Jamaica's only workplace protection.
The state must also seek a resolution to the dilemma posed by the unilateral stance of US "commercial diplomacy" that contends that the prime purpose of U.S. foreign policy is the promotion of U.S. exports. The approach of the U.S. and Europe of having individual Generalised System of Preference (GSP) should be replaced by an agreed international GSP.
REGIONAL STANDARDS
The state must push for the completion of the harmonisation of labour regulations in the CARICOM Single Market and for the finalisation of CARICOM'S Labour Market Information System (LMIS), as well as for the certification of Caribbean workers.
The state's macro-economic policy of stablisation is founded on a fiscal and monetary policy that is tightened to the point of creating a recession/depression large enough to break indexing, stop inflationary expectations, and force wages and prices to fall.
This policy has adversely affected most Jamaican workplaces. It has aggravated the nation's unemployment situation and posed many unanswered questions.
For example, how much unemployment is acceptable? What are the social consequences of continued use of these deflationary measures?
Given financial globalisation and the need to guard against the sudden outflow of funds, has the state lost the ability to pursue expansionary policies?
These are some of the crucial questions that need clarification and a call for a major study of the relationship between macroeconomic policy and workplace issues.
The link between the state's macro-economic policy and workplace instability and underproductivity has rarely been made in Jamaica. I feel compelled to establish, in a general way, that linkage.
The state, by a policy of liberalisation - those stabilisation measures I alluded to - continued to raise interest rates to astronomical levels that proved destructive, in the sense that they exceeded the rates of return on all but the most profitable investments in physical capital.
The equity of most existing firms was therefore reduced, discouraging risk-taking and the creation or expansion of business. In a perverse way, what occurred was the redistribution of wealth from debtors to creditors.
The real wealth of holders of interest-bearing deposits was raised at the expense of firms and those who had large debts.
Workers, as bank depositors or privy to other investment instruments, were receiving the benefits of high interest rates.
On the other hand, the firms and organisations for which they worked, and whose productive initiatives should have been the basis for this rise in income, were being pushed to closure because the value of their own equity was being pushed to zero because of the payments they had to make to their creditors.
For the workers in the indebted companies, their employment is put at risk as the situation is both unstable and unsustainable.
The state, in an effort to re-establish quasi-stability, introduced "financial bail-outs" in order to prevent a generalised collapse of the productive sector. It does so by widening the state deficit and, in my view, there will be a resurgence of inflation that the original stabilisation measures were put in place to resolve.
I sincerely hope I am wrong, but those are assumptions based on other scenarios. In my view, the state must move towards a macro-economic policy that nurtures economic growth and jobs.
To be continued next week
Lloyd Goodleigh is the general secretary of the National Workers Union and general secretary of the Jamaica Confederation of Trade Unions.
