Dominican Republic has not fared badly in labor productivity

The country is among four Latin American and Caribbean nations whose labor productivity has grown more than that of the United States of America.

The Dominican Republic is doing better than most Latin American and Caribbean countries regarding labor productivity growth.

Although labor productivity in the region has remained stagnant since 1980, according to ECLAC data, labor productivity in the Dominican Republic and three other countries has increased more than labor productivity in the United States.

This contrasts with the period between 1950 and 1979 when labor productivity grew by an average of 2.6% per year, higher than the average growth rate recorded in the United States, which was 2.0%.

The increase in labor productivity in the region during the period analyzed was mainly due to changes in the allocation of jobs within each productive sector, which contributed 0.83 of the total change of 0.88 in productivity during that period.

Only 0.05 of the 0.88 is associated with the effects of labor reallocation among the different productive sectors. In the case of the Dominican Republic, 2.47 (the highest among the countries) was due to the former and 0.14 to the latter.

“In other words, after 41 years, the region has not been able to return to the productivity levels it had before the debt crisis. The performance achieved between 2004 and 2013 brought it very close to the 1980 level, but the end of the commodity price boom caused a break in this trend and, from then on, a permanent downward dynamic was recorded,” expresses a report by ECLAC and the International Labor Organization (ILO) on ‘Dynamics of labor productivity in Latin America,’ Coyuntura Laboral en América Latina y el Caribe (Labor Situation in Latin America and the Caribbean).

This has not been the case in the Dominican Republic, which is among four countries (the other three are Brazil, Chile, and Costa Rica) that have achieved higher labor productivity growth than the United States. It is worth noting that labor productivity in Bolivia, Colombia, and Peru has been approaching in recent years to have labor productivity growth above that of the United States.

The opposite has occurred in most of the region’s economies, whose labor productivity has grown less than 1.7%, thus widening the gap that existed in 1950. In addition, since the 1990s, labor productivity growth in the region has slowed.

Despite the DR’s improved position, it must not let down its guard. It must continue to work to create the conditions for further increases in labor productivity.

According to the ECLAC and ILO report, one cause of the less-than-encouraging performance of total factor productivity is the low investment rates shown by the region’s economies.

The lack of appropriate infrastructure (ports, roads, electricity, water, and communication systems) makes it more difficult for a company in the region than for a company in a country to produce goods and services with the same amount of inputs.

Low levels of investment in research and development and technological innovation could also reduce total factor productivity in the region’s economies.

Low levels of human capital accumulation, particularly in health and education, could cause the region’s total factor productivity to diverge from that of other economies.

Also, the presence of institutional barriers, which increase the cost of operating in the region, could induce the observed dynamics in such productivity.

In addition, the lack of equal access to opportunities, sources of financing, and, in general, the development of economic and educational activities may explain the limitations to the region’s productive potential, especially in light of the high levels of informality that characterize the economies.