LABOUR MARKET REFORM COMMISSION Terms of

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee

VISION: “An efficient and harmonious labour market sustaining a developed society and prosperous economy, grounded in globally competitive firms, inspired and coached by transformative, attuned and ethical leaders, motivating innovative mind-sets and practices within workspaces, supporting productive workforces and technologies that are attractive to quality job creating investments” (adapted from Vision 2030 Labour Market and Productivity Task Force)

Technology - Innovation - Productivity Empirical evidence from the domain of economics informs us that long-run economic growth is highly correlated with what was known in the 1950’s and 60’s as “technological change” (Solow) but is now popularly known as “growth in total factor productivity” or TFP. While some debate still swirls around the composition of TFP, and the factors fueling its growth, there is a general consensus that economic growth depends on the competitiveness of economies which literally translates as the competitiveness on the global stage of the firms within the respective national economies. Empirical evidence further informs that only firms with the highest levels of productivity tend to enter and survive on the global stage and that a high capacity for firm-level innovation is associated with higher levels of productivity. 


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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee In general, firm-level innovation comes from workplaces where the workers in the firm are highly motivated, are well trained; are committed; and where the leadership of the firm is supportive, ethical and trustworthy; where the leaders challenge their staff to achieve their highest potential; and are very smart in their identification, selection and engagement of technology Those leaders in firms that are able to wisely blend the talent of their employees with appropriate technology and that can motivate that talent to be engaged with their firms mission and goals, will over time enjoy high innovation levels. The causal chain may be illustrated thus;

Human Talent \ Leadership------>Innovation->Productivity->Competitiveness->Growth->Prosperity->Development / Technology

Individual-Level ENTREPRENEURSHIP

Firm-level

National Level

Technology The intersection of technology with efficient and harmonious labour markets occurs at four points; 1. how can technology enable labour market information to be quickly and widely disseminated, with minimum inhibition and stickiness, to the various economic actors (investors, talent-holders, policy-makers, businesses) who need it for their timely decision –making on best use of their resources 2. how can appropriate technology be easily and cost-effectively identified, assessed, selected and deployed into firms in order to increase the value proposition of the firm 3. how can the decision-making capabilities of leaders of firms be enhanced in order to enable the adoption, adaption and continuous improvement of technology

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee 4. how can the blending of technology and talent be developed as a dynamic capability for enabling continuous innovation within firms Innovation: Innovation is an inseparable function of entrepreneurial action within an economy. By definition an entrepreneur (Schumpeter) is one who creates; a. b. c. d. e.

new or improved products new or improved services new or improved business models new or improved processes new or improved markets

Whether through the rare radical or disruptive innovations or the more pervasive continuous and incremental variety, innovations are inexorably linked to sustainable competitive advantage. At its genesis, therefore, innovation emerges from the innovative work behaviour and subsequent innovative work output of individuals in firms. It is from these beginnings and upon these foundations that the phenomena of firm innovation, sector innovation, industry innovation and national innovation rests. The issues that arise are: 5. how can the leaders of businesses develop a dynamic culture of innovation and so assure higher levels of productivity and the sustained competitiveness of their firms 6. how can the overarching social and economic policy framework foster a climate of innovation and so assure higher levels of productivity and the sustained competitiveness of firms 7. how can leaders of firms coach their employees to higher levels of output performance 8. how can an innovation culture be created and embedded in firms

Productivity A significant factor in the productivity challenge may be identified as the “mis-allocation”

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee factor. This has also been alternatively termed the “sub-optimality” factor or the “sclerosis” factor. The World Bank tells us that for the last 40 years Jamaica’s average annual economic growth rate was 0.8% placing us as the worst performing economy among the over 150 countries globally that was tracked and studied (WB). Within the Caribbean the Jamaica statistic reflected the worst of a weak bunch as the Caribbean, in general, fared worse than other economies in the broader Latin American and Caribbean region. In a study on economies of the Caribbean the IDB attributed this poor performance to “a wide range of possible explanations: lower factor inputs (labour and capital) and total factor productivity, inferior competitiveness, worse institutional quality, weaker private sector, greater macroeconomic instability, tougher economic and geographical neighborhood, and frustrated regional integration agenda” (IDB). The Caribbean as a region has not been able to successfully harvest the wealth of markets external to their borders in order to enjoy sustained economic growth and rising prosperity for their peoples. The Caribbean Region performed worse than other small economies, globally, did in practically all of these factors tracked (IDB). Hence, it was not size that accounted for the Caribbean’s relatively poor economic performance. Instead, the study asserted, that there appeared “to be a generalized sclerotic effect on institutions and policy”. This study opined that “the conclusion had troublesome implications: policy inaction may be due to the powerful few who may lose out under reforms even though many may gain, that is, there is an economically and politically powerful alliance against policy changes.” The report posited two possible policy options in the context of the world economic forecast projections. Option 1 was termed the “let it be,” option meaning that the region should wait for world economic recovery to act as a locomotive to “pull up Caribbean economic growth”. The study found however that in the early 1970’s, the real gross domestic product per capita in the region was four times larger than that of other small economies. However by 2014, real gross domestic product per capita had slipped and was slightly less than that of other small economies globally. The study forecasted that, “the relative decline will continue under the “let it be” option.” Option 2 from the study was the activist “cross the Rubicon” approach. Option 2 offered the only hope for reversing the declines of the past four decades by recommending that the region engaged “in a process of stabilization and structural reform directed toward higher and more sustainable economic growth.” The “cross the Rubicon” approach requires that the culture of “sub-optimality” from whatever source and in whatever shape, be transformed. It requires that the vested interests in the status quo, of whatever form, be overcome and that rational decision-making be elevated to the norm. The acid-test for the Jamaican economy is its performance against the rest of the world; ie how well is it harvesting wealth from the globe. Without successful sustained harvests Ministry of Labour

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee from the outside, the domestic economy is compromised and the standard of living of our citizens stymied and so the issues to uncover and resolve are: 9. how do we lead all social actors to a mutual understanding and on-boarding that the Jamaican society needs to “cross the Rubicon” in order to grow its prosperity and development 10. how do we avoid sub-optimality in decision-making by economic actors in the allocation of economic resources 11. how do we change the orientation of the society, the economy and within firms to one of export-orientation and success in foreign markets as the key driver of productivity and innovation

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee Productivity Analytics at the Firm Level: Sector Segmentation Issues 1. Services vs Goods Producing: TFP as a measure of productivity was developed in an era when manufacturing and other goods-producing sectors dominated economies. Despite the emergence and eventually domination by the services sector, the TFP metrics and analysis has persisted largely unchanged. In Jamaica’s case the sector mix is reported as 65% services and 35% goods (PIOJ Labour market & Productivity, 2008) as elaborated below: In 2008, the services sector, which consists mainly of i. ii. iii. iv. v.

transport, storage and communication; finance, insurance, real estate and business services; community, social and personal services; electricity, gas and water, wholesale and retail trades, hotels and restaurant services

employed an annual average of 748,800 persons (approximately 65% of the employed labour force). On the other hand, the goods producing sector, which includes i. ii. iii. iv.

agriculture, forestry and fishing; mining; manufacturing and construction and installation

employed an annual average of 408,300 persons (approximately 35% of the employed labour force). 2. Export-orientation vs Domestic-focused: Typically those firms enjoying the highest levels of innovation and productivity are also the firms participating competitively in the export space. The segregation and analysis of the national firm-level datasets into these two broad categorisations promises to yield valuable insights: ie inward-looking domestic-focused forms vs outward-looking exportoriented firms. The key issues are;

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee

12. What are the key factors differentiate export-oriented firms from domestic-focused firms 3. SME vs Government vs Large Firms: The largest firms within the Jamaican economy tend to be foreign-owned or controlled. Particularly where these firms are exporting, the assumptions are that these firms would tend to be operating at world-class standards of technology adaption/adaptation/diffusion, innovation, productivity and competitiveness. It may also be the case that where large trans-national corporations are inward-looking or domesticfocused that they may, over time, settle into a state of domestic complacency brought on by the sclerotic environment and may eventually exhibit weak external global competitiveness. Of course these assumptions would need to be tested. Where the firms are SME’s, the same assumptions could be made ie the most highly productive SME’s are already deploying their goods and services onto a global stage. The assumption is also that these most highly productive SME’s are a small minority of the firm population. These assumptions would need to be tested. If we assume that SME firms can be categorized as: a. high efficiency, high productivity firms or stars b. medium efficiency, medium productivity firms c. low efficiency, low productivity firms the challenges then become: 13. how do we support high efficiency, high productivity SME firms to maintain and sustain their growth trajectory in global markets 14. how do we facilitate medium efficiency, medium productivity SME firms to make the transition to high efficiency, high productivity firms and so enter the global market spaces 15. how do we facilitate those low efficiency SME firms, with the potential, to make the transition to medium efficiency firms 16. how do we avoid, and resist, the temptation to support, and facilitate, low efficiency SME firms, without any upward potential, so as to enable them to, in effect, persist in a low-efficiency mode In relation to the government sector, the notions of agility, responsiveness and innovativeness are almost an oxymoron. Despite this, it cannot be over-emphasized that Ministry of Labour

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee the efficiency and productivity of the government sector is of huge significance to the efficiency and productivity of individuals, firms, sectors and the economy. The sector requires superlative transformational and ethical leadership and inspired public sector motivation (PSM) to avoid the sub-optimality and sclerotic effects mentioned above. The issues then are: 17. How can the efficiency and productivity of the public sector be improved in terms of customer service delivery, business facilitation, social trust, social cohesion, transparency, justice 18. How can the public service, as an instrument of policy, support the drive for firmlevel efficiency and productivity improvements through an enabling business and economic climate Logistics Venue: Frequency of Meetings: Administrative Support: Research Support: Base Documents:

JPC Twice Monthly Labour Market Reform Secretariat and the Jamaica Productivity Centre Labour Market Reform Secretariat and the Jamaica Productivity Centre 1. Basadur 2004 Leading others to think creatively together 2. Basadur & Gelade 2003 Simplifying OrganizationWide Creativity – A New Mental Model 3. Carter 1994 Why workers won’t work 4. Clarke 2011 Strategies for enhancing Jamaican competitiveness in the global knowledge economy 5. Clarke 2015 An EPIC journey to grow fast and realize a US$1billion SME Export vision by 2030 6. Cowell 2004 Is work a four letter word ? 7. De Jong & den Hartog 2003 Leadership as a determinant of innovative work behaviour 8. Douglas 2012 A model for enhancing competitiveness, sustainability and economic growth JEF 9. Hussey 2002 Labour market reform support to Jamaica’s economic reform programme

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee 10. Hussey 2015 Strengthening labour market monitoring in the Caribbean: Jamaica’s labour market UWI WB 11. IDB 2003 Productivity and Competitiveness in the Jamaican Economy 12. IDB 2014 Is There a Caribbean Sclerosis? Stagnating Economic Growth in the Caribbean 13. Imoisili & Henry ILO 2004 Productivity improvement through strengthening ManagementLabour Cooperation - the Caribbean experience 14. Kellier 2015 Labour Market Reforms, Productivity and Social Protection: Consolidating the gains, Sectoral Debate 2015 – MLSS Presentation by HMLSS 15. MLSS LMIS 2015 Labour Market Trends 16. OECD 2015 Universal basic skills: What countries stand to gain 17. Schumpeter 1934 The theory of economic development 18. Solow 1956 A contribution to the theory of economic growth 19. Stone 1982 Worker Attitudes Survey: A report to the Jamaican government 20. WB 2014 Foundations for Growth and Competitiveness 21. WEF 2015 Human Capital Index 2015 Talent not capital will drive the 21st century 22. WEF 2015 What drives productivity growth WEF Agenda Reporting: Deadline for draft document:

Quarterly reporting to the Chairman of the Labour Market Reform Commission To be determined

Membership of Committee: Membership will cover critical thematic areas drawn from TOR:  

SME Exporting Firms

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee               

Services Firms Goods producing firms Statistical Analysis Economic Analysis Firm-level analysis (Performance / Capital Investments / Talent development) Individual Level of Analysis (Work or Occupational Psychologist / OB) Technology Innovation Productivity Government Competitiveness Leadership Motivation Economic Growth Prosperity

Membership / Invitees To Date: Chairman: Commissioner Silburn Clarke CLS, FRICS, DFJCS, MScEng, MBA, MScMIS Commissioner Brenda Cuthbert Commissioner Lloyd Goodleigh Commissioner Prof. Gossett Oliver Commissioner Robert Gregory

(representative of firm owners) (representative of labour) (workforce development) (workforce development / human talent)

Dr. Charles Douglas, CEO, JPC (government / economic analysis) Mr. Benthan Hussey (productivity / economic analysis) Dr. Andrea Barrett (innovation) Dr. Vanesa Tennant (technology adoption / diffusion) Ms. Sonia Jackson (national statistics policy-making) Dr. Marina Ramkissoon (work / organisational psychology) Prof. Neville Duncan (SME / economic analysis) Mr. Mervyn Eyre (large globally competitive technology business) Dr. Andre Jones (SME / exports / innovation / competitiveness) Dr. Kavian Cooke (industrial engineering) Ms. Tashana Briscoe (organisational psychology) Mr. Shane Palmer (labour market research) A representative of the Technology Sector A representative of Ministry of Science, Technology, Energy and Mining A representative of STATIN A representative of the IDB A representative of the Economics Department of the University of the West Indies Ministry of Labour

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee

Some Targeted / Specific Actions Background The TIP Committee has been given the complex tasks of 

recommending programmes and services for small and medium enterprises (SMEs) in meeting the global competitiveness challenges that they confront.



enhancing the Jamaica Labour Market Information Systems



drafting policies and programmes intended to strengthen and accelerate Jamaica’s capacity in technology generation, adoption and transfer



strengthening and modernizing the Jamaica Productivity Centre (JPC),

Productivity “The significance of productivity in increasing national welfare is now universally recognized. There is no human activity that does not benefit from improved productivity. This is important because more of the increase in gross national income, or GNP, is produced by improving the effectiveness and quality of manpower than by using additional labour and capital. In other words, national income, GNP, grows faster than the input factors when productivity is improved. Productivity improvement, therefore, results in direct increases in the standard of living under conditions of distribution of productivity gains according to contribution. At present, it would not be wrong to state that productivity is the only important worldwide source of real economic growth, social progress and improved standard of living”(Joseph Prokopenko). “According to JPC data covering the period 1973-2005, on average, growth in output is driven largely by growth in capital input (2.67% per annum), labour input (1.58% per annum) and total factor productivity (TFP), (-1.74% per annum). This negative TFP growth for Jamaica has been observed in several other studies. This could be attributed to several factors including lack of synergies as well as absence of technical progress and innovation” (Vision 2030).

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee

Jamaica is in dire need of productivity growth. Productivity growth comes from Technical Progress (either by learning, by doing or by upgrading technologies in existing industries and changes in the industrial structure towards higher productivity sectors). It has been argued that Productivity in Jamaica is not necessarily low, because more productive technology is unavailable; but because of the lack “Social Capability”, that is, inability to realize the potential of existing technologies. If that is the case, only through a complex and gradual process of learning can social capability be enhanced. The institutions in the Labour Market play a pivotal role in hindering or promoting that process. The State is the most important single Institution in the Labour Market and the JPC is the State Agency that must assume the lead role and act as a catalyst in the process. As the catalyst, the Centre must be able to address some critical functions.  Productivity Analysis  Productivity Improvement Techniques  Improving the use of Capital Resources  Human Resource Management  Productivity Promotion The TIP Committee is required to act as a Task Force dedicated to strengthen and modernize the Jamaica Productivity Centre by:    



Ensuring that all the relevant stakeholders are involved in the strengthening and modernizing process; Designing a proposal outlining structures, functions and institutional set up of the modernised Centre A proposal for the training of and the capacity building of the resources of the Productivity Centre Developing a proposal that links the Productivity Centre to UN Agencies, intergovernmental and regional organizations, professional organizations and international and regional banks that deal with productivity issues. Creating a financial proposal for the sustainability of the Productivity Centre

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee

Labour Market Information System (LMIS) “The LMIS consists of three major components, namely: Labour Market Information (LMI), Electronic Labour Exchange (ELE) and Related Services. It is a one-stop data and information source, as well as a job search and placement facility. It also provides on-line information on key labour market issues such as the labour force, employment, education and training, industrial relations, economic activities, and local and international labour market trends”. (Vision 2030). The identification of Labour Market issues critically rests on the availability of data, information and analysis. Labour Market information and analysis provide the essential basis for Employment and Labour Policy and informs the design, implementation, monitoring and evaluation of policies that are better focused and targeted. “The availability and dissemination of accurate and timely labour market information needs to be increased. More forecasting and targeted research needs to be undertaken in the Labour Market aimed at encouraging better planning in the Labour Market” (Vision 2030). The TIP Committee is required to act as a Task Force for the enhancement of the Jamaica Labour Market Systems by: -

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Ensuring stakeholder involvement Creating a proposal outlining the functions, target groups, plan, analytical methods, sources of data and outputs for the enhance system; software consideration as well as the institutional set up of the system taking existing arrangements into account. Developing a proposal for training and capacity building of the LMI system Creating a financial proposal for the sustainability of the enhanced LMI system

Overall, for the establishment of an integrated private/public, Labour Market Information system, as a subset, The TIP Committee should enhance the National Employment Service to ensure that it can perform the functions of job brokering, labour market information, labour market adjustment, counseling and career guidance, and assist job seekers.

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LABOUR MARKET REFORM COMMISSION Terms of Reference Technology, Innovation and Productivity Committee

Technology and Innovation in SMEs “Jamaica spends very little in scientific and technological pursuits. This is in the order of 0.4% of the gross domestic product (GDP), a figure which is low even by Latin American standards, and well behind expenditure ratios in science and technology (S&T) in most of the Organisation for Economic Co-operation and Development (OECD) and East Asian countries. In fact, Jamaica’s innovation system has so far played only a marginal role as a source of innovation and productivity growth. At the very minimum, policies and programmes are needed to strengthen and accelerate the country’s capacity in technology generation, adoption and transfer” (PIOJ). The TIP Committee is expected to draft a proposal to strengthen and accelerate Jamaica’s capacity in technology generation, adoption and transfer. “Large segments of Jamaican enterprises lack adequate product design capabilities, process reconfiguration and production organization that will give them a competitive edge even in niche markets. For instance, the majority of SMEs require assistance to begin understanding what their needs really are in terms of new market opportunities, product design, production, organization, logistics, supply chain management, international marketing, inter alia. The provision of such services and technological assistance should be thought of as providing a ‘public good’, much in the sense of the what has been done for many years now in the Small Business Administration in the United States or the British Ministry of Industry, that is, disseminating free of charge technical advice to small medium size enterprises”(PIOJ). The TIP Committee is expected to explore and make recommendations with regards to providing these SME enablement / empowerment / developmental services as a ‘Public Good’. Silburn Clarke FRICS TIP Committee Chairman 21 May 2015

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