Ebook The Global Economic Crisis and Labour Markets in the Small States of the Caribbean
Although it can be argued that the roots of the current global economic recession go beyond the collapse of the sub-prime housing mortgage market in the USA in 2007, it is the collapse of that market that has created economic difficulties for both developed and developing countries. The difficulties experienced in the USA housing market spilled over into the financial markets in the USA and Europe because of the interconnectedness of large financial institutions on a global scale. The housing and financial crisis in the USA sent the economy into a recession in late 2007. The contagion effects to other financial markets in the developed economies led to a global financial crisis in late 2008. This financial crisis then spilled over to the real sector as reductions in income, wealth and credit resulted in a reduced demand for goods and services and subsequently inventory decumulation and production cutbacks. Since several developing countries are closely linked to developed economies, the effects of the economic crisis have spilled over to the developing countries.
After a period of steady growth from 2003 to 2007, the world economy slumped in 2008 and has further declined in 2009. The world output grew from 3.6 percent in 2003 to 5.2 in 2007 and then declined to 3.0 percent in 2008. The ‘advanced economies’, including the USA, Europe and Japan grew from 1.9 percent in 2003 to 2.7 percent in 2007 and then slumped to 0.6 percent in 2008. While economic growth was much higher in the ‘emerging and developing economies’, that is, 6.2 percent in 2003 and 8.3 percent in 2007, there was a subsequent decline to 6.0 percent in 2008. The decline in economic output was accompanied by a fall in employment growth and a rise in unemployment.
The global economic recession has had differential effects on developing countries, with some being able to weather the crisis better than others. Several small developing countries (SDCs) were able to achieve national social and economic goals up to the time of the economic crisis. For example, several countries were making steady progress towards the achievement of the UN’s Millennium Development Goals (MDGs) and improving their ranking in the UNDP’s Human Development Index. The global recession has now severely hampered the social and economic progress of these countries.
The severity of the effects of the economic crisis especially on small developing countries depends on: the state of the country’s social and economic system at the beginning of the crisis, the degree of the country’s interconnectedness with the sources of the crisis and the policy responses implemented by the country. For small developing countries, the main effects have emerged through the reduction in the export of goods and services, remittances, foreign direct investment and the access to international credit. In countries with small open developing economies, the external sector plays a critical role in the development process. Indeed, SDCs are regarded as highly vulnerable to economic (and environment) shocks which can disrupt the social and economic life of the population. External shocks such as the current economic crisis can adversely affect the balance of payments (BOP), fiscal accounts, the labour market, poverty and other socio-economic variables. Skillful economic and social engineering is therefore critical to dampening the adverse effects of external shocks on the domestic economy and society of SDCs.
This paper examines the impact of the global economic crisis on the labour markets in the small developing states of the Caribbean. The focus is mainly on the countries within the Caribbean Community (CARICOM), namely, Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St Kitts and Nevis (SKN), St Lucia, St Vincent and the Grenadines (SVG), Suriname and Trinidad and Tobago (T&T). These countries have achieved a high level of human development and have been making steady progress towards the achievement of the MDGs.
The labour market constitutes the main source of income for a very large segment of the population in these countries. Since the demand for labour is derived from the production and demand for goods and services, any shock in the commodity market (for example, the export of goods and services) will have both direct and indirect effects on the labour market. The severity of the impact depends on the initial level of unemployment, the size of the informal sector, the existence of a social protection system, the ability to engage in social dialogue and the adoption of creative labour market strategies and measures.
The structure of the presentation is as follows: in section 2, an overview of the impact of the crisis on the Caribbean economies is presented. In section 3, the impact of the crisis on the labour markets in the region is examined. The policy responses adopted by Caribbean governments are discussed from a labour market perspective in section 4. This section also includes a discussion of the coping strategies adopted by households during the recession. The paper concludes with a set of recommendations and lessons which can be identified from the Caribbean experience.
Download
PDF Ebook The Global Economic Crisis and Labour Markets in the Small States of the Caribbean
Posted in :
