Companies Urged to Adopt Productivity-Linked Wage System

Executive Director of the Jamaica Productivity Centre, Dr. Charles Douglas, is encouraging companies to adopt a compensation system that is linked to productivity.
The move, he said, will not only increase the productivity of workers, but improve working conditions and enhance the standard of living of employees.
Explaining he said, “the productivity-linked wage system is nothing more than the basic salary arrangement that is negotiated between the company and the trade unions.there is an additional component that is linked to productivity, so if your productivity increases, your compensation package will rise.”
Dr. Douglas, who was speaking in an interview with JIS News, pointed out that productivity is a necessary condition for competitiveness as well as a prime determinant of the standard of living of people. “The productivity of our human resources determines employee wages while the productivity of capital determines the return it earns for its owner,” he noted.
In dispelling the notion that productivity will result in loss of employment, Dr. Douglas stressed that “improved productivity improves profit and if you improve profit, you improve the capacity of the company to expand and then the company will want more labour.”
As for those workers, who are of the belief that they are not going to benefit from working harder, Dr. Douglas said that they are misguided. “When you look at it, it is not true,” he said, pointing out that there are some companies that have instituted a productivity-linked wage system. Workers are compensated based on productivity, which results in further improvement in productivity.
Turning to some of the conditions for an improved productivity rate, Dr. Douglas cited good labour management relations and investments in human and physical capital.
Research findings from the Productivity Centre have revealed that Jamaica has been lagging behind other countries, both developed and developing, in its use of productivity indicators to guide policies aimed at improving living standards. “When you look at labour activity and output per worker per hour, what you find is that there has been some slippage as far as Jamaica is concerned relative to some of our main trading partners. So it is essential that we return to productivity growth in Jamaica to be able to compete,” he stated.
Dr. Douglas pointed out that increasing productivity is particularly important in light of the CARICOM Single Market. “The only way we can enjoy and benefit from this kind of market relationship and actually compete is if we improve productivity. The new market relationship is certainly not a panacea unless we step up our productivity,” he stressed.
Statistics from the Jamaica Productivity Centre indicate that from 1950 to 2000, Jamaica had a 1.5 per cent average annual rate of labour productivity growth, which Dr. Douglas said indicates that it would take 47 years for output per worker to double. This, he said, is low when compared to the performance of Trinidad and Tobago where labour productivity grew at an average annual rate of 3.1 per cent over the same period.
“It should not be surprising that if output per worker is growing faster in one country than another, then that country will have a higher standard of living,” Dr. Douglas pointed out, noting that, “we need to realize that we have not been doing well in this regard and as such, we need to work harder to develop that kind of productivity conscious culture in Jamaica”.
He noted that Trinidad’s impressive improvement in living standard should be of no surprise as labour productivity in that country is “more than three times that of Jamaica and has been growing on average by approximately 3.4 per cent per annum over the past 10 years.” For the same period, Jamaica’s labour productivity has declined on average by approximately 0.12 per cent per annum.
Citing inadequate investment in science and technology as one of the reasons for Jamaica’s low productivity rate, Dr. Douglas suggested that firms should reduce waste and replace old technology with new and efficient ones, as part of measures to increase productivity. “You go to some factories and you see them utilizing technology that is more than 100 years old. You cannot compete in 2007 using these types of equipment,” he argued.
He also noted that the layout of plants and companies can affect output. “If you have workers tumbling over each other, there is a problem, so you have to look critically at how operating processes work,” he advised. “It is simple things like these and others which help to improve productivity,” he added.
National Productivity Awareness Week will be observed from November 18 to 23 under the theme: “Enhancing Living Standards through Productivity Growth”.