Episode Transcript
[00:00:01] Speaker A: The best insight, Instant feedback, Accountability the all new Talk Radio Freedom 106.5. We have Dr. Jamila Harris, an economist and researcher on the program this morning. Dr. Harris, good morning and welcome.
[00:00:15] Speaker B: Hi, good morning. Thank you very much for having me. Good morning to Renato and Tobago.
[00:00:19] Speaker A: Good morning to you again. Now this all important topic continues to be part and parcel of the minds of many Trin Begonians this morning. It has been a concern even pre elections. Now it has come and gone. The conversations are very much in the air. How are we going to sustain the economy? We would have seen and heard the doom and gloom painted by the previous administration that Trinidad and Tobago's economy is not doing well. We saw the deals with the Dragon Gas fall through, especially when it came to a shifting of power in the United States and how it affected us with the OFAC license being revoked and all these different factors. We depend heavily, we can't deny it, on the industry, the energy industry, to sustain us economically. What does that speak for us now, especially with this new administration? Your thoughts on this? Given the campaign promises made, do we have the money? What is the economy looking like for us in real time?
[00:01:17] Speaker B: Okay, so I guess just to start off, when we think about the effect that could be had on the economy, I think it's useful to think about it in terms of output and prices. And since we don't have a minister of finance appointed as yet, we haven't had a budget. Right. We have to go by what has been promised in the manifesto in the run up to the elections.
So thinking about it in terms of output and prices, the effect of the economy really comes down to what the UNC government will do in terms of how it affects households, how it affects businesses, what the government itself does. And a large part of our discourse is usually focused on government in terms of spending and revenue and also the impact that it will have on trade. And then when we think about prices, we have to think about not just prices that we pay when we go to buy our food, the supermarkets and the market, but all prices. And for example, the foreign exchange rate does a price as well. Right. We also need to think about prices in terms of interest rates.
So one of the things that I sort of noted when I looked at the UNC manifesto is there were lots of manifestos, but there wasn't one that was specifically focused on the economy. So you had to read through all of what was presented to get a sense of what will happen with the economy. So there was a manifesto for the workers Agenda for. For health, for crime, for government efficiency, for cannabis, specifically diversification and food security, youth development. So there were lots, but none spoke specifically to the economy, although they all did in some way. So the other thing that I would want to say before I go into what the fate of the economy looks like is the difference between data and perceptions. Because if we look at the data over time, the PNM wasn't going into the election in a bad way. If you just look at the numbers. Right. So inflation isn't very high at the moment.
Coming out of the COVID 19 pandemic, the economy has recovered relatively well and we have had positive growth. Unemployment is very low in terms of the RE8 figures is about 4%. So when you look at those things, it doesn't look that bad. Our foreign exchange cover has reduced in terms of how much imports we can afford is about six to seven months now.
But why I say we need to look at just perceptions and at numbers is because if I say to someone on the street, we have an unemployment rate of 4% and they are out of a job and they know a friend who's out of a job and they know a cousin who's out of a job, et cetera, et cetera, that 4%, although small, doesn't mean much to them if they are having a lived experience. Experience that's different to these statistics.
And it's the same thing for the rate of inflation.
[00:04:16] Speaker A: Repeat that part again with the 4%.
[00:04:19] Speaker B: Yeah. So the unemployment rate basically measures the share of people who are out there who want a job, looking for a job and cannot find one divided by the labor force. Right.
So even though 4% is a really low number, it's a low number historically and is a low number globally.
But when we think about numbers, and I think the Pan Am run a campaign and, you know, we've delivered as one of the things. There were other, other things in terms of fiscal responsibility as well.
When you say to someone, yeah, we've delivered, we have a low unemployment rate, but that person themselves is experiencing unemployment or they know several other people who are experiencing unemployment, doesn't really matter to them. The other thing is underemployment, because even though we might have a low unemployment rate, we might have a lot of people, especially our university graduates, who cannot find the jobs that they may have trained for to utilize their skills, and they might be doing something that they see as being below what they would expect.
So this is all to say that even though we might be looking good in terms of the numbers, or at least not as bad as the incoming government may have painted it during the campaign.
It doesn't mean that the perception on the ground would reflect that. And that's the difference between the numbers and the perception. It's the same if we think about inflation, right? Like our inflation rate is about 4%, which again is not very high. I remember when I was, when I was in secondary school and we used to be talking about double digits inflation all the time. That was under the Patrick Manning administration and it was one of the reasons why the Pan Am was voted out then in terms of cost of living.
But when you think about a 4% inflation rate, it doesn't mean that prices aren't going up, it just means it's not going up as fast as it might have been going up during COVID 19, for example.
So I guess that's the second point I want to make the difference between the big numbers and what is actually being felt on the ground.
The third thing I want to say before we go into the discussion is we are small open economy.
So everything that I discuss in relation to what may or may not happen with this new incoming government, it has to be caveated by the fact that there's a lot that we cannot control.
So we saw during the COVID 19 pandemic, the government was doing a pretty decent job in steadying the economy. But then Covid happened and global supply chains were disrupted and that affected everything that happened in Trinidad. In terms of prices that we face when we go to the supermarket. I remember, I don't know if you would recall, but there was one day when the price of oil was negative. They were basically giving away oil and that affects us and we cannot set those prices right. So we are a small open economy. We take the prices as it comes to us globally, and that is really important for us because about 50% of our revenue is coming from a price that is not determined by us. When we think about the oil and gas sector, right?
The other thing with being a small open economy and a small open economy that imports a lot is that our food and a lot of what we consume is not driven necessarily by what happens domestically, but we're importing inflation as well. Because when you go to the supermarket and you think about your typical basket of goods, right? Most times we buy cereal as imported. All of the nice peas that we like to eat, the red beans, the lentils, the black eyed peas, etc. Those things are imported. I went to the market the other day. Well, I went, I Shouldn't say the market, the fruit stall opposite the supermarket. And it's cheaper to buy four apples than it is to buy four oranges. Right. So we are importing a lot and because of that we are importing inflation with it. So those are the three things I'm laying out before we get into the conversation. The government could affect through output and prices. They could affect.
Their effect might be limited because we're a small open economy and we don't have to just look at the big numbers, but we need to think about what's happening on the ground in terms of perceptions of the people.
[00:08:40] Speaker A: And that's it. So that's a long introduction, perceptions of the people. Let's talk a little bit about inflation. Mentioned inflation. A lot of persons don't understand inflation. Explain inflation, how it. Because they hear about it, but they don't thoroughly understand it. So from your perspective as a researcher and economist, can you explain to our listening audience what is inflation, how it comes about and how it affects the people?
[00:09:06] Speaker B: Sure. So I'll give you the explanation and I'll tell you a little bit about where I think it could be heading. Right.
So inflation is. It simply tells us how prices are changing over time. So every, every month, every year, let's say you would have a small increase in prices. So the inflation basically measures the rate of change of your prices. If you think about you're driving your car and your. You have to gauge, one will tell you the speed and if you accelerate and or decelerated, and the other one will tell you the speed that you currently travel at. So you could be travel 80 kilometers per hour, but your Rev is on 4, for example. Right. So inflation is telling us the rate at which our prices changes. So does how fast you're accelerating, essentially.
[00:09:57] Speaker A: Right. Okay.
[00:10:00] Speaker B: So when we think about historically, I was mentioning that we had really high periods of inflation. So if you think about 2008, 2009, I'm looking at the data here, inflation was about 12%, 10% then. Right.
The most recent figures, inflation is about 4%. During the COVID 19 pandemic, we would have had about 5 to 6%. And that's because we were having things coming in that were a bit more expensive. Right. So when we think about the fate of the economy going forward and inflation, we need to think about what happens on the demand side of the economy and what happens on the supply side of the economy. One of the things that the government has proposed in the manifesto is, and this is a big one that was debated a Lot in the campaign trail is public sector wages and that starting negotiation at 10%. Right.
So this would have a significant impact on the economy because essentially if you give everyone back pay at the same time, it injects a lot of money into the economy. And oftentimes, economists often think of inflation as having too much money chasing too few goods. So you will have an increase in demand because we have a lot more spending power by some people in the population when they've gotten their back pay. So that could have inflationary pressures. The other side of.
I'm sticking on labor now, right. So the other thing that could have inflationary pressures is the government. And this is, I'm really interested to see how this unfolds because I think if it's done well, it could be something really good. Right? So I say that is the idea of having a living wage. Right now we have a minimum wage. A minimum wage is not the same as a living wage because the minimum wage at 20.5 might not necessarily enable you to have a decent standard of living.
And the benefit of having a living wage, it would take into account what is the minimum required to have a good standard of living. And this is a debate that has been happening across the world.
So in the UK for example, as an employer, you considered a good employee if you pay the living wage. But that also sees an increase in how much money people have. And if people have more money, they might buy more goods and services as a console.
[00:12:25] Speaker A: And that somebody is now messaging. That's the first time they heard of this living wage versus minimum wage. What is the difference between the two?
[00:12:34] Speaker B: Okay, so I, I'll explain how it, how it is set up. In the uk the minimum wage doesn't necessarily have to be a living wage. A living wage would see, would take account of, okay, this is the basket of goods and the basket of goods keep going up every year. We might think that we don't just want people to have enough money to buy rice, peas and chicken, but we might think, you know, they might, they need to have calcium and we want them to be able to buy a decent kind of cheese and milk, but to do that you need to have a bit more money. Or we might think, you know, we don't like to see people living in over cramped houses and we want people to have a decent rent so that they could have no more than two or three people to a room. So it thinks, it considers what is necessary to have a good standard of living.
[00:13:32] Speaker A: Okay, totally understand now. All right, so as we continue now you're saying that the living wage is what? Now, is it that government in the UK institute what, the living wage or that? So how does that come about? Who institutes that and come up with a figure as to what should be paid.
[00:13:49] Speaker B: Excellent.
So, and this is one of the things that.
So the minimum wage is, by law, the government would say what the minimum wage. And as an employee, you cannot pay below the minimum wage. You will be in breach of the law. The living wage, on the other hand, as it happens in the uk, and this is one of the issues that I've had with the UNC manifesto. And in my contribution the other night on a panel, I said that there are several points, but there's not a plan because they haven't explained how this will work. Right. So all I can say in the UNC manifesto, they mentioned that there would be a living wage. They didn't say how it would be operationalized. So how it works in the UK is that there's a minimum wage. And the living wage is decided by civil society who come together and use economists and statisticians and several people who would talk to people on the ground as well, so qualitative researchers, and they would determine the living wage. Then it is up to the employer to decide if they want to pay the living wage. And many employers choose to do so. Because in the UK you want to be seen as a good employer, because there's this idea of what a good job is and what a good employer means, but that is largely driven by civil society. And this is one of the things that I have been a little bit disappointed by, that we don't have that strong presence of civil society in Trinidad to drive that sort of discourse and change.
[00:15:18] Speaker A: But could it be, could we speak, hold conversations with stakeholders such as the chambers, the various chambers in various localities? Because what you're saying, for me as an employer, if I have minimum wage coming in or pegged right now, I think it's $20.50 an hour. Right? Minimum wage is pegged at 2050. I'm running my business.
Okay, let's just assume living wages could be $30 an hour or $10 more.
What is going to, I guess based on Morales and, you know, morality, you had to kick in for me to say, well, listen, I'm gonna pay my employees this. Now, granted, there are companies in Trinidad and Tobago currently paying above minimum wage. There are companies doing so. So that a raise on a dollar or two on the minimum wage sector doesn't affect them. They already above it. You know, Exactly. But what would be encouraged, what should be encouraged in Trinidad based with the uk? How are we going to get companies in this country, the private sector, to buy into this notion of living wages, especially when their, their main consensus is the profit margin. And remember, the more money I pay in wage bills is, the less my profits will be. And if I want to declare bigger profits because I want to live better, I want to see my children, I don't really care about yours. That's how it comes across that, that's just the bottom line, you know, how do you, what kind of conversation is happening on the ground in Trinidad to bring that type of governance style to us?
[00:16:54] Speaker B: So I think this is really the role of labor and the unions. And I think that, and this is from my observation and I'm sure you might get a text pushing back on this or someone might call in and push back. But I think we have been stuck in, in a labor and a discourse around labor that is more associated with the economy that we used to have. And we have shifted structurally. We are no longer producing sugar like we used to. We are no longer producing cocoa like we used to. We no longer producing oil and gas like we used to. But the conversation around labor and the way in which labor negotiates hasn't shifted as the economy has shifted. And so I can tell you what do I mean when I say this. Like the majority of our lower paid workers, minimum wage or slightly above, they actually work in services, right? They work in services, they are domestic workers, they work as cleaners, they work in retail.
We have fewer factories these days, but some of them might work in factories. And when you think about the unions, the big unions, we're thinking about owt, you and the psa and we're not thinking about these workers. Right? And I can tell you that because my mother used to work as a cleaner, she used to work for Magic miss And I would always ask her, like, what is the union, what's going on? And because these workers are seen as lower skilled and not to, not to use a derogatory, derogatory term, but they could be easily replaced. So they have few bargaining, they have little bargaining power unless they, they have a strong union that stands up for them. And especially like now where we have, we have immigrants that come into the country, there's competition for those lower skilled jobs as well. So it's either you take what you're getting in terms of your earning or we could replace you. And that's the sad reality.
So in terms of having that conversation it requires, and this is why I say it requires a good civil society and it requires the unions to really speak up for those types of workers. And not just in terms of a living wage, but also in terms of the working conditions.
So, yes, wages and labour is a whole, is a whole other thing. And I think that whoever becomes the Minister of labor, they need to start thinking about serious, like how we could really think about labor in this changing world that we live in. Because labor is not the same as it was in the 1990s or 1980s.
[00:19:37] Speaker A: Or 1970s or even 1962. All right, let's take this WhatsApp note.
[00:19:42] Speaker C: Very quickly to Davi and to your guest, Davy.
An employer cannot pay what is necessarily called a living wage every time he may have to close down.
Because when you go to sell your product, this is your goods or your services.
If you don't get the amount of sales, if you don't come back with the amount of revenue and gross margin and so on, it's just natural that over time you will have to cut back on certain things. And once you get into that downward spiral, you know, so this idea that an employer could always afford a living wage, sometimes you have to work two jobs, you know, that's just how it is. Thanks.
[00:20:31] Speaker A: And I mean, that was something I was very much concerned about. Now, when we look at the economic future of Trinidad and Tobago, we see where, as I mentioned to you a few moments ago, we have about 10 minutes, 10, 12 minutes again to go on the program. I want to bear in mind that we need to focus now on how this, what recommendations or what thought processes as an economist, you think government should focus on. We're looking at the orange economy. We have seen very little tapped into there. Even the green economy as well. We continuously go on gas. Let's take this call before you make a pronouncement on it. Hello, good morning.
[00:21:04] Speaker B: Morning, lady and the honorable guest.
[00:21:06] Speaker C: I would like you to explain to us or define, when you use the term GDP in layman's language, what does it mean?
[00:21:15] Speaker B: The gdp?
[00:21:16] Speaker A: The Gross domestic Product. Okay. And that's another thing. I'm happy that he raised the call because for a minute, you know, I could have derailed. I always have the thought that every interview must be relatable. We can speak a language as economists and researchers and learned individuals. That does not resonate with our listenership because some of them may not understand. So he's asking about gdp. He often hear the talk about the GDP of the country and stuff like that. Could You. He would like you to explain and elaborate a little bit about that so that he can understand.
[00:21:48] Speaker B: Okay, so. So just to respond to the first point, it doesn't. The point is not to say that all employers should pay the living wage. The point is to say that we should have a conversation on what a good job is and we should have better jobs in Trinidad.
[00:22:02] Speaker A: Okay?
[00:22:02] Speaker B: So of course, depending on the type of employer, you might not be able to afford a living wage. However, what you could do as a good employer is if you pay the minimum wage, but then in a year that you have a year of plenty, you could give your workers a generous bonus. So there are ways in which you could be a good employer. And I mean, there's a whole literature on this, right, and different examples that you can use.
Gdp, it means gross domestic product. And it comes back to the first point that I was making when I said the way in which the government operates could affect households. So your GDP is basically made up of households in terms of what they spend. It could affect businesses, in terms of how businesses invest. It could affect the government, how the government spends and how much you trade. So gdp, if you just want to think about it, if you have a firm, a firm produces a certain amount of output in a given year, and if you have a country, a country produces a certain amount of output in a given year, and that's our gdp, it's very important because we use GDP to measure how we are growing and also how our average standard of living is. When we think about the GDP per person, which we call the GDP per capita in terms of the direction of the economy, which was your question and the third point that you raised there, what we're seeing in the manifesto is, I think, something that could look good in the long term, but for all long term plans, there must be some adjustment in the short term, right? So some of the good things in the manifesto, in terms of diversification specifically, is a conversation that we haven't had in a long time and that centers around what we would have had in the 70s, possibly in the 80s, around import substitution policy. So there's a part of the manifesto that talks about agriculture and food security. There's a separate part of the manifesto that talks about agricultural cannabis and using that to diversify. So with agricultural cannabis, what they're proposing is we grow weed, we export weed. Weed is used for medicinal purposes in many developed countries. Well, I said developed country. Trinidad is a developed country by economic measure. Right? But in the global north, let's say us, Europe, Et cetera. And we could benefit from that by exporting. And that is an avenue for diversification. There is questions around that in terms of morals, depending on where you are, if you should grow weed and export it. But it is a viable option for diversification in terms of more long term things.
There's the idea of a sugar factory in St. Madeleine. I'm very skeptical, very doubtful about that. I think that is even riskier than restarting Petrotrain in terms of the cost that could fall on government in the budget. But that's one to watch.
There is a very interesting proposal that ties into this whole idea of import substitution policy. So we have had a problem with foreign exchange. And with foreign exchange, as everything is in economics, it's about demand and supply. And essentially we have not been earning as much foreign exchange because we haven't been providing things to the rest of the world to the same extent that we used to, particularly oil and gas.
We have been spending a lot more because we like to buy nice, important things. Because I remember when I was growing up and you would be checking out any supermarket, you would see Catch and Charles Chocolate predominantly. Now when you're checking out, you're seeing Snickers and Cadbury's and all the other fancy things imported that we like to buy. So our tastes and preferences has led to us spending more foreign exchange. So the idea that was put forward in the manifesto, but wasn't really discussed a lot on the platforms, is to encourage local, to buy local, grow local. That's how it's written in the manifesto. And with that is a proposal to have a removal of VAT on local agriculture products, which would be a very good boost for buying local agriculture products. And if there's a bigger demand for local agriculture, hopefully supply should follow.
And the other side of that, and which is why it comes down to, we call it import substitution. You substitute in a way from imports to domestically produce goods and to have an import duty hike on foreign items to protect local production. So the outgoing PNM administration tried to do a little bit of this in terms of the levy that we faced on importing goods. The UNC is proposing targeting this on agriculture. They're also proposing having a local content policy for manufacturing firms operating in Trinidad. And this is also really interesting because a local content policy for manufacturing would mean if I am making a particular product in Trinidad, let's say I'm making soap, I have to use locally sourced materials to produce that soap, or at least a certain percentage. So it gives our local enterprises Some opportunity to develop and grow.
So I think those are exciting things that I see in the manifesto. Those things don't come in the short term. It requires a period of adjustment. So it does mean that for some, if they push for this and they go forward with this, it would mean that for some period, we might not be able to buy all the nice things we like from foreign agriculture specific. So my apples might no longer be four for $20. It might go up to four for 30 if they put a duty on it to encourage me to buy more oranges. The price of oranges won't immediately be lower because farmers would need to adjust. So there's always an adjustment period in the short term. Right?
[00:28:13] Speaker A: All right, so we have a question here. How about the banks dropping lending rates to stimulate the economy? Now, we know the bank fe, I think the former Prime Minister was speaking, engaging talks with the banks in terms of doing away with those fees. In some banks, you pay $10 just to cash a check even though you have an account with them. Some banks refuse to cash checks altogether if you don't have an account with them. But the ones that you do have an account with, there's one particular bank, you have an account there, business and otherwise, but they still charge you $10 to cash a check. And these fees, I mean, they're high. They encourage online banking. I recently learned, I don't know how factual it is, that every online transaction you do, it's $20 by one particular bank. I did not know that. I still don't know how factual it is. However, could the lower lending rates stimulate an economy 100%?
[00:29:10] Speaker B: Yes, completely. So there are two different things there.
So the lending rate and the price. The interest rate is a price. You get paid a price for saving at the bank. That's the interest rate. And you also get charged a price if you borrow money. That's the lending rate. And there's usually a spread. The spread between those two is significantly high in Canada. And that's how the banks make money. They take your savings, give you a low interest rate, and lend your money to someone else and charge a high interest rate. There are also fees. And the fees that they charge, just administrative transaction fees. Right.
In terms of what the government can do, banks in Trinidad are largely private.
So what former Prime Minister Young tried to do is moral suasion. He met with the banks, he tried to talk to them. He said, listen, you know, we should think about the people a little bit more. Can't have all these fees, etc. That's moral suasion. If you really wanted to do something, you would just have legislation, you would bring legislation that change how banks interface with their consumers. Because we are living in a society where we are being charged for what sometimes is not a particularly good service. You can't even go to the bank and use the bathroom. You're being charged all these fees. And as an elderly person, there are no toilet facilities available. Right. And then at the end of the year, we read in the papers that the banks are reporting this much profits and that much profits and it's grown from last.
[00:30:40] Speaker A: That's a very good point.
[00:30:41] Speaker B: So we really need to think about what type of society we want to live in. And this comes back to. In the Prime Minister's speech yesterday, she spoke about.
Well, it was the campaign slogan, when the UNC wins, everyone wins. And that is very much an example of the banks are winning and the customers are not. Right. So how do we balance that? Because if you want everyone to win, someone's going to have to give in that. In that scenario there.
[00:31:08] Speaker A: I thank you very much, Dr. Harris. It's so much more we can talk about. I'm so sorry that we are out of time and we have to leave it there, but you made a very salient point and I never even thought about it that way. All these exorbitant fees in the bank, yet our senior citizens in society doesn't have a restroom facility to even use. That. That resonates with me very strongly. Have yourself a great day. I will speak with producers and of course we'll bring you back on the show as we continue talks on diversification of the economy and how it can be sustainable. Thank you very much and have yourself a wonderful day.
[00:31:41] Speaker B: Thanks for having me.
[00:31:42] Speaker A: All right, bye bye. The best insight, Instant feedback, Accountability. The all new Talk Radio Freedom 106.5.
