In its assessment of the Bahamian economy, a new World Trade Organization (WTO) Impact Assessment by global forecasting and quantitative analysis firm Oxford Economics found that Bahamian workers lack the necessary skills and education for firms to adequately perform in a global economy and this contributes to the high unemployment in comparison with other countries in the region.
It said that the skills gap combined with relatively high wages makes firms in the country uncompetitive.
The report compiled multiple scenarios and outcomes of The Bahamas’s WTO accession in an effort to pinpoint which policy priorities are needed as the country moves further along with accession negotiations.
“The labor market is characterized by poor skills and yet wages are high compared to other countries in the region, rendering firms uncompetitive,” it said.
“There is an urgent need to address the upgrading of the skills level and diversifying such skills to meet the changing trends in the global economy.”
WTO’s primary purpose is to encourage trade liberalization among member countries to promote economic growth.
The Bahamas currently holds WTO observer status, but the government has expressed its goal to complete negotiations to obtain full membership by the end of this year.
The report, which was commissioned by the Bahamas Chamber of Commerce and Employers Confederation, also found that output from traditional sectors of the economy, such as financial services, hotels and restaurants, has contracted in recent years.
“A problem for Bahamian tourism is that it is becoming increasingly uncompetitive because it is a high-cost destination and facing competition from other tourist markets that are in close proximity to the U.S., such as the Dominican Republic,” the report said.
It noted that a reduction in costs and a targeted plan to get more value out of the tourism sector is “urgently needed”.
The report also pointed to challenges facing the offshore financial services sector, which it said is “shrinking” due to “onerous OECD directives” which are proving to be a “disincentive” to offshore companies.
Aside from challenges in remaining competitive, the report found that the lack of adequate skills and education also contributed to the high levels of unemployment in the country.
According to the report, The Bahamas has the highest unemployment rate among high-income Caribbean countries.
“The unemployment rate has remained persistently high, which appears to reflect skills shortages and high relative wages,” it said.
The report added, “The IMF (2018) concluded that labor market regulations do not appear to be the main reason for the high levels of structural unemployment in The Bahamas.
“Rather, the narrow economic base and inefficient job placement services represent key issues.”
It added, “Skill gaps are also an issue, with an enterprise survey from the World Bank showing that firms most frequently cited ‘poorly educated workers’ as the most important business environment obstacle in The Bahamas.
“In fact, rates of educational attainment are reasonably high in The Bahamas, with 59 percent of the workforce having completed secondary education and a further 28 percent having completed tertiary education.
“However, outcomes for secondary school students have been much less impressive, as evidenced by consistently poor performances on the Bahamas General Certificate of Secondary Education (BGCSE) exams since their origin in 1993.
“For example, data from the Department of Statistics show that only 37 percent of candidates sitting the English language exam in 2017 achieved grades A-C, while 26 percent of candidates in mathematics earned grades A-C.
“Compounding the issue of an education system that is failing to equip students with the skills necessary to enter the workforce, wage levels in The Bahamas are relatively high. For example, average wages in the hotel industry are amongst the highest in the region.
“In part, the high level of wages in The Bahamas is reflective of the country’s high cost of living.
“Indeed, The Bahamas ranks amongst the most expensive countries in the world according to measures based on consumer goods prices, including groceries, restaurants, transportation and utilities. But real wage growth has outpaced productivity improvements in recent years, which may have hindered job creation.”