How is Jamaica faring in the war against poverty?Wednesday, April 07, 2021
The Caribbean Policy Research Institute (CAPRI) recently published a study entitled 'The components of an effective social safety net for Jamaica. I quote, in part, from the report. “In 2017, 19 per cent of the population failed to meet the minimum level of expenditure necessary to meet basic consumption requirements, whether household or individual, with the extreme poor representing five per cent of the population. With more than two-thirds of households reporting income loss two months into the pandemic, the number of households reporting an income level below the national minimum wage increased from 42 to 62 per cent.”
The CAPRI research identified holes in Jamaica's social safety net that need mending and, in some cases, overhaul. The National Insurance Scheme (NIS), Programme of Advancement Through Health and Education (PATH), National Health Fund (NHF), Jamaica Drugs for the Elderly Programme (JaDEP), Human Employment and Resource Training/National Service Training Agency (HEART/NSTA) Trust, among others, are under-resourced, suffer from targeting errors and conditionalities that reduce access, and, in some cases, are not sufficiently pro-poor. The estimated budget to do the repair is a hefty $40 billion to $50 billion.
This brings me to the just-ended national budget debate in Parliament. There is a predictable knee-jerk negative reaction to proposals intended to assist the poor. The debate was reduced to theatrics, including exhibiting a basket of food supposedly consumed by the poor, a shopping list of basic items made unaffordable by inflation, and charges of those living in glass houses throwing stone levelled by the finance minister against his counterpart in Opposition. Absent from the discussion, however, was the fact that assisting the poor is not just giving them a handout, but a hand-up; not a cost, but an investment that will pay dividends in future years. Without this understanding the budget debate ended with the perennial excuse — the country cannot afford it, and a promise to address the problem as soon as things get better.
“If you think education is expensive, try ignorance.” This timeless quote attributed to former Harvard President Derek Bok is equally true of poverty. People living in poverty cost the economy more than the cost of getting people out of poverty. In the United States, a country of admittedly far greater means than Jamaica, one sees the Joe Biden and Kamala Harris Administration applying this progressive principle and adopting a different approach. The $1.9-trillion COVID-19 relief Bill targets vulnerable groups for substantial assistance. For example, there is an ambitious plan to end child poverty, which costs the US economy more than $1 trillion per year. On the surface this may seem like another socialist giveaway, but on closer examination the maths say otherwise.
Take, for example, a child's early education — an area in which many poor children flounder. It is estimated that every $1.00 invested in early childhood education results in $7.30 savings from better educational outcomes, better health, increased earnings, and lower incarceration rates over a child's life. The same is true for other Government-assisted programmes targeting people at the base of the social and economic pyramid, whether the expenditure seeks to address low wages, poor health care, sub-standard housing, or high rate of crime and violence.
A section of the CAPRI report is dedicated to discussing social protection as a precursor to and necessary investment toward stimulating inclusive social development and equitable economic growth. This will not happen automatically, even if the Jamaican economy experiences the hyper-growth predicted by the minister of finance and the public service in the post-COVID-19 period. Investing in the country's human and social capital must be a priority of Government supported by deliberate policy initiatives if equitableness and inclusivity, along with faster economic growth, are desired outcomes.
Balancing the budget and people's lives is becoming a political issue as the Opposition pushes for Government to increase spending in assisting those at the base of the social and economic ladder who have been ravaged by the COVID-19 health crisis. One proposal put forward in the budget debate by People's National Party (PNP) spokesman on finance Julian Robinson is for expenditure to be increased by one per cent of the country's gross domestic product (GDP), which would have the effect of freeing up an additional $21.5 billion. The rationale behind the proposal is patently clear. How to demarcate resources in the budget to implement it is more complex, as pointed out by Prime Minister Andrew Holness.
Speaking in a virtual meeting of selected heads of government, engineered primarily by our prime minister and involving United Nations Secretary General Antonio Guterres and Canadian Prime Minister Pierre Trudeau, Holness was at his best explaining the conundrum in which small, debt-burdened economies find themselves; caught between the need to maintain good faith with the credit rating agencies while making prudent investments in human and social capital.
In a March 30, 2021 Jamaica Observer article, 'Holness wants credit rating agencies in on debt crisis talks', Senior Staff Reporter Balford Henry reported him saying the following: “We need to bring the credit rating agencies into our discussions, as many countries are afraid to apply for debt relief because of the threat of a ratings downgrade.”
What then can one reasonably expect from the budget in the fiscal year beginning April 2021? First, the positives: Growth rate of 4.5 per cent in GDP; reduction of debt-to-GDP ratio (from the present COVID-19 spiked 110 per cent); attainment of the targeted fiscal surplus and favourable rating by international credit rating agencies, among other positive macro-economic indicators. But these will be at the expense of worsening income inequality, reduced economic inclusiveness, lower social mobility, and a feeling among the populace that life has not got better, which will serve to undermine the economic gains.
One step forward and two steps backward is not progress.
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