Poverty, economic growth, and equity

WE AGREE with Nigel Clarke that poverty in Jamaica ought not to be a matter of mindless recriminations. But nor should it be taken off the table as a matter for robust debate as the potential outcome of the Government’s policy actions.

Which is why we not only welcome the finance minister’s intervention on the latest poverty data, but believe that they represent a call to vigilance for the Holness administration to ensure that it frames an economic agenda that delivers growth with equity.

According to the Government, based on its annual Survey of Living Conditions, the number of poor people in Jamaica rose by more than two percentage points in 2017, to 19.3 per cent, from 17.1 per cent the previous year. This uptick follows a more than four-point, or 19.3 per cent, decline in poverty between 2015 and 2016.

On the face of it, an increase in poverty in 2017 is counterintuitive. After all, the economy grew one per cent that year and unemployment fell from its 2016 high of 13.7 per cent to 10.4 per cent in October 2017 and has continued a downward slope since then.

The political Opposition, however, argues that the worsening poverty rate is the result of the administration’s imposition of J$30 billion in indirect taxes over two fiscal years to offset its hiking of the income threshold to J$1.5 million, in keeping with its 2016 election promise that helped it win power. “The Opposition warned that this would happen,” said the shadow finance minister, Mark Golding. “Low-income wage earners, the unemployed, pensioners, and micro business operators, who were already existing on the edge of survival, have been made to bear these additional taxes, while receiving no benefit from the election income tax break.”

In Dr Clarke’s, view, however, the more plausible explanation for the uptick in poverty in 2017 was the significant decline, from 35 per cent to 29 per cent, of the poorest households in the Kingston Metropolitan Area

(KMA) that received remittances in 2017. Real per-capita consumption in the KMA fell 30 per cent, and poverty, overall, jumped by 5.2 per cent after four years of decline in the region. On the other hand, there were sharp increases in remittances to poorer rural households.

The data, according to the finance minister, might have been further skewed by the general election in 2016, “which was accompanied by heavy spending by political candidates and parties, much of which would have been directed in areas associated with poverty”. This would have contributed to a large one-year drop in poverty, and, based on that logic, normalisation the following year.

We offer no opinion on the various positions, except to state the obvious: that an increase in poverty is not a good thing. Moreover, the debate begs for deep, technical analysis, in the face of the structural problems in Jamaica’s economy, some of which are the subject of ongoing reform, of the impact of the policy of indirect taxation on the country’s poor and the sufficiency of existing interventions to cushion any negative impact on the society’s most vulnerable.

Moreover, while sharp remittances have been an important pillar of the Jamaican economy for the past quarter of a century, their growth has slowed in recent years, and as Dr Clarke observed with regard to the 2017 poverty figures, a shift in inflows can be detrimental to vulnerable groups, which, unfortunately, represent a significant proportion of Jamaica’s population. Economic strategy, therefore, has to be aimed at lessening reliance on remittances.

Further, while most of Jamaica’s economic indicators, including growth and job creation, are pointed in the right direction, what is ultimately delivered, as leading businessman Richard Pandhoie recently said, can’t be skewed disproportionately to a narrow group if Jamaica is to maintain social harmony and its commitment to democracy.