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September 14
11:45 2018
REPORTER: News Staff, -

In the last Business Perspective we had commenced a conversation on the skills mismatch, as measured via the skills mismatch index (SMI), a tool that helps us gauge whether the “gap” between the supply of skills and the demand for those skills is narrowing or widening. And, when calculated using country-level data for working-age population and employed, the SMI indicates a welcomed downward path.However, as was discussed previously, it is worth looking at the SMI a bit closer.

As a first step, this closer look includes looking at the SMI at the “district levels.”For example, when one looks at the labour force data for September, one would note that not all individual districts are seeing a reduction in their SMIs. As shown in the accompanying image, apart from the sharp declines for the Belize District and Orange Walk’s fairly stable path for the last two years, the remaining districts all demonstrate increases in their respective indices.

The immediate take away from the dissimilar trajectories is that the country-level downward trend is likely being heavily influenced by the large role that the Belize District—which houses the commercial capital, Belize City—plays. One would find that if the country-level SMI would exclude only this district, the aforementioned downward trend would be reversed.

However, the preferred downward trend is not only halted when one excludes the Belize District under the “broad definition” of labour supply. If the SMI is recalculated using labour force (“narrower definition” of labour supply), which only looks at persons employed or actively looking for work, one would find that the country-level SMI demonstrates signs of widening from 2016 to 2017.

Given that the labour force figures would be more sensitive to the business cycle, it is not very surprising to see a reversal in the downward trend in 2016, a year when Belize’s GDP per capita growth rate indicates a contraction of more than two percent. It is natural to expect that during depressed economic times the number of employed (used for the “demand side”) would decline while the labour force (“supply side”) would see increases.

Actually, while the data points available are too few to confirm for Belize any long-term relationship between per capita GDP growth and the labour-force-based SMI, it is worth noting that—as shown in the image entitled “Labour Force SMI 2013 to 2017”—the index was also higher in 2013, a year that shows a 1.5 percent contraction. For the few years where the SMI declined, per capita growth was positive.

Regardless if one utilizes the broad or narrower definition of labour supply, there are clear signs that continued efforts towards reducing the skills mismatch in Belize are more than necessary. On the one hand, this involves ensuring that there is sufficient job growth that would be triggered by a healthy business environment. At the same time, there is need to ensure that members of the labour force are equipped with the requisite skills.

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