Oil and gas sector can redistribute employment in Guyana

Oil and gas sector can redistribute employment in Guyana – Economics expert

Aug 22, 2017 News

By Murtland Haley
Guyana is scheduled to become an oil-producing nation in 2020. When this begins, the possibility exists that there can be a redistribution of employment within the economy.

Dr. Roger Hosein

This was posited by Trinidad and Tobago Economics Expert, Dr. Roger Hosein last Thursday, while he was delivering a lecture on ‘Corporate Social Responsibility in Small Oil Producing States’ at the Pegasus Hotel.
Dr. Hosein is a senior lecturer in the Department of Economics at the University of the West Indies, St. Augustine Campus. He said that when production starts, people will leave the services sector and try to go and work in the oil sector where the salary would be almost seven times higher.
He also said that persons working in the agricultural and eco-tourism sector will move to the oil sector, since their present salary is considerably low.
“As the oil sector generates more wealth it is going to need more factors of production, so it is going to increase wages to attract the best engineers, the best accountants, the best lawyers and of course, the best economists, to come and work for them. So the salaries of these professionals would rise.”
In light of this development, the economics expert said that the traditional sectors would be forced to make changes to the salary scales offered. He said that the manufacturing, agricultural, eco-tourism and export sectors will have to increase their salaries so as to preserve a certain amount of employment of skilled people.
When this is done, Dr. Hosein said that wages in the economy would generally be higher. Further, the UWI Lecturer said that this development does not pose a problem, as long as the current account balance and fiscal balance in the economy, motivated by improved energy sector revenues, remain stable.
“So no love lost; everybody gets higher wages, the non-energy exports fall and there is redistribution in employment in the economy.”
He said that ultimately, employment in the services and oil sector will expand while employment in the manufacturing, agricultural and eco-tourism sectors will contract, because there will be a reduced amount of the factors of production.
Using Trinidad and Tobago as an example, Dr. Hosein explained that the neighbouring island country had experienced an expanded services sector as a result of oil and there was a contraction of the other sectors.
“We made the dangerous technical error of falling diversification and increase of production in the services sector.” He said that an expansion of the services sector creates entities which absorb a large amount of foreign exchange.
As a result, he said that currently, Trinidad and Tobago is probably the only country in the Caribbean whose current account balance is in deficit. He said that over the years the current account balance of Trinidad and Tobago was maintained by the price of oil and gas.
He said that the decreased prices of these commodities have resulted in the current account balance being in its current state.
“So the expanded services sector is a problem in the context that it uses a lot of foreign exchange; it is a problem in the context that it has lower productivity on average than the manufacturing, export, agriculture and eco-tourism sector and the petroleum sector.”
Dr. Hosein said that a number of structural problems enter into the economy on the account of oil production. He said that the entities which will have to fix these problems, if they occur, will be the entities that produce oil, which include the company extracting the resource and the State of Guyana. He said that these two parties have a role to play in breaking back down the problems that emerge in the economy from a structural perspective, from the start-up of production.