IMF: Worker notice below world average

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A trade union leader yesterday hailed the IMF for confirming that the two-week notice period for terminated Bahamian workers is below international standards.

Obie Ferguson, the Trades Union Congress's (TUC) president, told Tribune Business that the International Monetary Fund's (IMF) Article IV report had vindicated the labour movement's arguments on the issue.

Data contained in the report reveals that The Bahamas' two-week notice period was shorter than all comparatives. It compared to an average 4.14 week "severance notice" in rival Caribbean tourism economies; a 4.78 week average for the whole Caribbean; 5.26 weeks for non-Caribbean emerging and developing economies; and 6.24 weeks for 'advanced economies'.

Seizing on the findings, Mr Ferguson told Tribune Business: "When I saw that, my first reaction was: 'At least the international community is consistent with our thinking' that the notice period, in my humble opinion, was never adequate.

"That is the view of the unions in our country. One of the major problems we have with it was that if you worked for an employer for 12 years, the notice and severance pay would be the same as if you worked for an employer for 35 years.

"On the face of it, that must be unfair. At least the international community is thinking along the lines of trade union movement in the Bahamas."

However, the IMF's study of the Bahamian labour market found that the 'severance notice' period was the only area where this nation 'lags' when it comes to the benefits provided to terminated workers.

The 'two-week' severance pay provided to Bahamian line staff who have only been working for one year is higher than that offered in Caribbean tourism economies and the region as a whole, at 0.89 weeks and 1.22 weeks' pay, respectively, plus the 1.53 in advanced economies. Severance pay was only higher for other emerging economies, at 3.31 weeks.

It was the same for Bahamian workers employed for five and 10-years, respectively, as the 10 and 20 weeks' pay offered again exceeded Caribbean and developed world averages. Only other emerging markets, excluding the Caribbean, were more generous when it came to terminated employees.

The IMF report appeared not to account for the fact that severance pay under the Employment Act is 'capped' at 12 years, but it said: "The Bahamas has a shorter period of notice but higher average severance payment. Disputes over dismissals are solved by the Industrial Tribunal, but the process can be lengthy as the law does not stipulate time limits."

The Fund also found that the Bahamas' minimum wage, at $5.25 per hour, was not out of line with regional or global standards. Comparing it as a percentage of per capita GDP, the report found the Bahamas' minimum wage was below that of Jamaica, Antigua, St Vincent and St Kitts and Nevis, but higher than in Mexico and the Dominican Republic.

"Compared with its peers in the Caribbean region, both minimum wage and the ratio of PPP-adjusted minimum wage to GDP per capita in the Bahamas do not stand out as outliers in the region," the IMF concluded.

The Fund noted, though, that the Bahamas' unemployment rate "has been persistently high" for the last three decades, averaging 11.3 per cent annually since 1991, with young Bahamians bearing the brunt of such structural weaknesses.

Unemployment peaked at 16 per cent in 2011, and the IMF said: "The youth unemployment rate is particularly high, hovering around 20 per cent from 2005 to 2017

"As of November 2017, the youth unemployment rate of 22 per cent was almost three times higher than the unemployment rate for the rest of the population of 8 per cent."

The Fund's report suggested "low-quality" and insufficient skills, especially among high school leavers, and 'poor matching' of available workers with jobs were the primary reasons for the Bahamas' high jobless rate rather than labour market regulations.

"Labour market regulations do not appear to be a major determinant of high unemployment," it suggested. "The high structural unemployment appears to be driven mainly by insufficient and low-quality skill-sets of the young, coupled with difficulties in the matching process between employers and job seekers, poor skill matches and limited labour market information.

"The labour market regulations do not seem to be a major constraint to labour market flexibility, though continued improvement and modernisation of regulations would ensure improved efficiency and flexibility."

As for solutions, the IMF said: "Improving the quality of general education should help sustain long-term employment. Research shows that while vocational training could smooth entry of the young into the labour market, developing strong cognitive skills through general education could help sustain long-term employment.

"Boosting the quality of high school education, including on math and English skills, is a critical step in this direction..... More generally, advancing structural reforms to improve competitiveness would foster investment and job creation. While, to some extent, diversifying the economy and broadening its base is feasible, the geography of the Bahamas implies that tourism will continue to play a major role in the economy. Therefore, actions to reduce structural bottlenecks would help spur investment and job creation."