Trinidad & Tobago lost 79% of tertiary educated labour force via emigration to developed countries
Saturday, June 21 2014 @ 12:00 AM AST
Contributed by: AleemKhan
T&T has lost more than 70 per cent of its tertiary level educated labour force through emigration to developed countries, according to an Inter-American Development Bank (IDB) report released Tuesday (June 17). The report looks at events up to 2012. The T&T labour force, according to statistics from the Central Statistical Office is made up of 635,100 persons as at the first quarter of 2013.
The report entitled, "Is there a Caribbean Sclerosis? Stagnating Economic Growth in the Caribbean" said 79 per cent of the labour force in T&T who received tertiary level education up to 2011 migrated to member countries of the Organisation for Economic Cooperation and Development (OECD).
"The OECD has been called a think tank, monitoring agency, rich man's club and unacademic university. Whatever you want to call it, the OECD has a lot of power. Over the years, it has dealt with a range of issues, including raising the standard of living in memeber countries, contributing to the expansion of world trade and promoting economic stability," according to Investopedia. The term OECD countries is often used loosely in economics as a euphemism for developed countries.
"Euro sclerosis" was a term coined in the 1970s to describe stagnant integration, high unemployment, and slow job creation in Europe relative to the United States, authors of the report explained. Since then, the term has been used more generally to refer to overall economic stagnation, they said.
The report was prepared by members of the Caribbean Economics Team (CET) of the Country Department of the IDB.
The term "sclerosis" and that which it encompasses can be applied as well to a certain extent to the Caribbean countries, the authors said.
The almost-exclusive focus on economic growth in the report does not imply that it should be the sole criterion to judge economic performance, the authors said. Nevertheless, economic growth is the central concern of Caribbean policymakers, who recognise that it is critical to improve broad economic development, and hence to improve the welfare of Caribbean citizens.
The central focus in the report is on six countries in the region, which were referred to as the C6: The Bahamas, Barbados, Guyana, Jamaica, Suriname, and T&T. However, the analysis also included, most often in the aggregate, the countries of the Organisation of Eastern Caribbean States (OECS). The six members of the OECS used in the report were Antigua and Barbuda, the Commonwealth of Dominica, Grenada, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines.
"Economic growth can be due to increases in productivity, which in turn are driven by competitiveness. Without competition there are inadequate incentives for enterprises to invest in innovation to increase their productivity. Without innovation and productivity growth, economic growth stagnates. Thus, a hypothesis of what underlies the Caribbean growth gap is that the region has a lower level of productivity and an inferior level of competitiveness," the authors wrote.
One way to promote economic growth is to increase the amount and types of labour and capital used in production and to improve the efficiency of how these factors of production are used together, they said - that is, to improve productivity.
Productivity growth comes from more efficient use of inputs through improvements in the management of production processes, organisational changes, and innovation, the report said.
Thus, there are three main direct growth factors that could account for the Caribbeanís relative decline. The first is a decrease in the number of people working relative to the total population. The second is the lower use of capital per unit of labour. The third is inferior technological progress as measured by changes in total factor productivity (TFP), the report said.
"Growth decomposition quantifies the contribution of each factor to economic growth, and hence can be used to discern the roles of inputs (labour and capital) and TFP in explaining the growth differential between the Caribbean and the rest of small economies," (ROSE) the report said.
Labour input shows lower growth in the labour force in the Caribbean among the economically active population, which is used because employment figures are generally not available for the region, the IDB report said.
Lower population figures for the Caribbean are partly due to high net emigration rates, the report said.
"According to Mishra (2006), the Caribbean countries have lost more than 70 per cent of their labour force with more than 12 years of schooling through emigration. This is worrisome because one of the few noncontroversial stylized facts in economic growth literature is the positive contribution of education to economic growth," the report said.
Thus, migration affects the Caribbean countries' ability to generate economic growth and jobs, the report said.
This migration, however, does have an upside in terms of high remittances, it said. "Remittance flows are the largest source of external funding for the Caribbean; since the 1990s, remittances have been greater than foreign direct investment and official development flows (the latter has actually declined). Thus remittances ease the external constraint on growth," the report said.
However, according to Mishra (2006) the monetary value of the sum of emigration losses plus education expenditure costs is larger than the monetary value of remittances, the report said.
"Thus, migration represents a net negative shock to the Caribbean, in addition to the social cost of high unemployment and the political implications of lots of well educated unemployed people," it said.
Another input for economic growth is capital, the report said. Investment was historically lower in the Caribbean prior to 1992, became relatively larger for a while, and then fell back to the same level as the rest of small economies (ROSE) by 2010, the report said.
However, the rise in Caribbean gross capital formation was mainly due to an increase in public investment that was accompanied by an increase in the debt-to-gross domestic product (GDP) ratio relative to the ratio for ROSE. Private investment as a proportion of GDP fell below that of ROSE after 2000.
Further, as gross capital increased relative to ROSE, simultaneously TFP fell below that of ROSE and has continued falling. The report showed that since the late 1990s Caribbean TFP has declined more and more below that of ROSE. There is, however, a different pattern between tourism- and commodity-based countries. Tourism-based economies have a continuous decline while commodity-based have begun to close the gap.
Part of the answer of why there is a growth gap is because of lower inputs in production and a lower level of TFP in the Caribbean, the report said.
Lower inputs and TFP, in turn, could be due to a number of factors. The report said: "A competitiveness gap is often considered to be the reason behind an economic growth differential."
Citing the results of the Global Competitiveness Index, the report said: "The wide and widening competitiveness gap of the Caribbean countries could be a candidate to account for the regionís productivity growth shortfall."