The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

More than half of unemployed Bahamians have been jobless for a year or more, an Inter-American Development Bank (IDB) report warning that labour productivity had also declined between 2000 and 2007.

The Bank, in its country strategy for the Bahamas between 2013-2017, said such data pointed to this nation’s increasing problems with structural unemployment, noting that the official jobless rate remained high at 10.2 per cent between 2004-2005 - a period when the country was enjoying high foreign direct investment (FDI) inflows.

Unemployment, the IDB added, was most pronounced among young Bahamians, some 34 per cent of whom - more than one in three - lacked a job in 2011. This compared to just a 15 per cent youth unemployment rate a decade earlier in 2001.

“Unemployment spells in Bahamas are high: 52 per cent of the unemployed have been jobless for more than 12 months,” the IDB country strategy said.

“In fact, even in 2004 and 2005, during periods of high FDI, the unemployment rate in the Bahamas was 10.2 per cent. This is due in part to poor learning outcomes and lacking skill sets of students leaving the education system.

“Two main issues within the Bahamas’ current labour market are persistent unemployment and a skills supply mismatch with private sector demand. This labour market scenario reflects the interaction and evolution of economic, human capital and institutional factors.”

The persistently high unemployment rate, now almost 16 per cent, indicated that this was a structural problem and could not be attributed to just the 2008-2009 recession, as the Bahamian economy had achieved low growth in 2010-2012.

The IDB said a 2010 Enterprise Survey had found that Bahamian entrepreneurs “of all business sizes cited skills shortages as the main obstacle to running a business in the Bahamas”.

And it added: “The 2012 IDB-financed Wage and Productivity survey also revealed that the persistence of these skills gaps can be attributed in large part to inefficiencies in the design, provision and evaluation of skills-training programmes.

“The constraints of these training programmes include lack of a defined space for the private sector in the curriculum design of courses, in the quality control phase, and in the definition of the demanded skills and competences of the country.”

The IDB also cited concerns that “the lengthy procedure for updating training curricula of existing programmes creates disincentives to new developments in the curricula”, while there was “no autonomous national accrediting agency nor evaluation system of training programmes”.

And, just as concerning for the Bahamas and its economic/social future, the IDB report noted that workforce productivity was decreasing just as unemployment and poverty were rising.

“Labour productivity is decreasing, unemployment is high, poverty is increasing, and crime and violence have escalated,” the Bank summed up.

“Labour productivity, measured as output per worker relative to US values, decreased from 0.7 to 0.64 between 2000 and 2007. Total factor productivity, on the other hand, decreased from 0.75 to 0.65 when compared with the evolution of US productivity.”

The IDB report added that the number of households living below $5,000 per year had increased by 83 per cent between 2007 and 2011, while average per capita incomes were still 8.2 per cent below 2007 (pre-recession) levels.

Income inequality was masked, and the IDB added: “Reversing these trends is also made difficult by some of the inherent characteristics of this archipelagic nation.

“The internal market is small, and the production base is narrow – tourism and financial services account for 70 per cent of output . Ninety per cent of tourists are from a single country (the US, which also accounts for 90 per cent of imports and 70 per cent of exports).”

And, as if the outlook could not get any bleaker, the IDB added: “The country faces several macroeconomic risks in the medium term, and the timely implementation of policy reforms is key to maintain macroeconomic stability.

“The debt stock might reach unsustainable levels if the medium term fiscal consolidation plan is not implemented in a timely fashion...... The country’s fragility is increased by its high dependence on a single trading partner and two economic sectors.

“A deceleration of economic activity in the US would reduce visitors to the islands, which would have a negative impact on tourism activity, employment and fiscal figures. Furthermore, increasing international regulation jeopardises further growth in the financial sector.”

Looking to the future, the IDB added: “Growth in new product areas and access to new markets will require leadership by the private sector and facilitation by the public sector. Domestic players will need to be complemented by external investors.

“The Bahamas has shown it can attract substantial Foreign Direct Investment to its traditional sectors, and there is political will to implement the required reforms to increase competitiveness, encourage new activities and engage with new trading partners.

“There are structural obstacles to growth. The fiscal situation needs consolidation; the tax system is opaque and introduces several distortions to economic activity; energy supply is unreliable and expensive; there is a skills mismatch in the labour market; crime is compromising economic activity;certain public infrastructure is deficient, and bureaucratic inefficiencies hinder economic diversification.”