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/ Wednesday, May 4, 2022
PR’s shifting labor market, a legacy of COVID-19
The pandemic changed the negotiation leverage from employers to employees
D
Juan A. Hernández, The Weekly Journal
espite the recently reported increase in the number of people currently employed, Puerto Rico’s labor participation rate is still below what could be considered “a minimum” to guarantee economic development for the near future. “The slight increase in the number of people employed, as reported by the Business Establishments’ Survey is in the service sector, particularly restaurants, hotels and other services where the negotiation leverage from productivity and real economic employers to employees. Now The sectors with growth are difficult to measure,” we have higher salaries that the greatest said economist Heidie Calero do not stem from increased positive growth during the Society for Human productivity,” she argued. “With are: healthcare, Resource Management’s (SHRM) higher inflation rates, and entertainment and Labor Symposium. no unemployment benefits, transportation. According to Calero, “to or Covid incentives, even the increase labor participation we disabled are joining the labor would need to promote 20% of force,” she added in response the current number of part-time to Pierluisi’s claim about the jobs to full-time, and we still be number of people employed. facing serious difficulties recruiting in the service To curb the inflationary spiral the salary increase sector.” may trigger, said increase must be linked to an The economist’s remarks contrasted with those increase in productivity and employers must put of Governor Pedro Pierluisi, who said that “the in place better and more reliable mechanisms to number of people currently holding jobs in Puerto measure it. Rico is now greater than 2009” and that it is all But, while the governor admits “we still need due to “the increase in the minimum wage and to improve in terms of our productivity,” he is work incentives benefits provided by the federal convinced that a well-paid labor force with the government.” Pierluisi also pointed to the “sustained proper incentives “will result in greater productivity increase of the island’s economic indicators.” and will help us to bring back our population and But Calero dismissed Pierluisi’s assertions, deter our youth from leaving the island. recalling he never presented a study to show the The economist argued demographic changes impact that the increase in the minimum wage would have on the island’s economy. “In theory, when salaries go up, productivity should also go up. But these two indicators are divorced from one another… and it is important that both employers and employees be aware of this,” Calero said. The economist insisted wage growth must follow productivity growth “to avoid an inflationary wage spiral.” “The biggest shift in Puerto Rico’s labor market Economist Heidie Calero. is a consequence of COVID-19, because it changed
In fact,
In theory, when salaries go up, productivity should also go up. But these two indicators are divorced from one another. Heidie Calero Economist
during the last decade have affected Puerto Rico’s working age population (16 years and older) and have left the island with “a decreasing, aging and poorer population.” Also, structural reforms enacted thus far (tax, labor, and others), have contributed little, or nothing at all to the island’s economic growth. According to industries outlooks presented by Calero, the sectors with the greatest positive growth outlook up to 2028 are: healthcare, entertainment, and transportation, among others. On the other hand, the segments with the least expected growth for the same period are: education, retail, pharmaceuticals, manufacturing (furniture) and government, among others. Still, Calero concedes it is possible to significantly improve productivity, but only if the administration turns away from its dependence on federal funding for short term economic growth and adopts a comprehensive vision for the island’s labor market and economic development in general.
