Working Paper Series: Special Edition of 2016 to 2018 Interns

by labour market rigidity. This type of unemployment involves a mismatch between the sufficiently skilled workers looking for jobs and the vacancies available in the sector. Structural unemployment results in the labour market unable to adjust itself when confronted by shocks that affect the economy. Despite the long standing debate as to the direction of causality in the unemployment-growth association, many economists view the labour force as the engine of growth or at the very least a major contributor to economic growth (Acemoglu & Pischke, 1999). In fact, in the early 2000s, theoretical analysis of what accounts for the differences in growth rates across nations find the role of human capital to be consistently significant (Hanushek & Kimko, 2000). This aligns with the body of research which proposes that economic progress is the result of population dynamics. In particular, places that can attract a labour force with high levels of human capital will grow with special rapidity because of the entrepreneurial, creative and innovative energies that these workers carry with them (Storper & Scott, 2009). As early as the 1960’s Okun, an American economist, identified the statistical relationship between the labour force and economic growth. The findings predicted that growth slowdown typically coincides with a rising disengaged segment of the labour force. During the great recessions of the century this phenomenon has been observed. In Saint Lucia, historical data reveal that both growth and unemployment move cyclically (Kandil et al., 2014). Mapping the two against each other shows however, that unemployment moves cyclically but with a lag to growth in some instances, but appears to be mostly constrained as the economy gradually shifted away from banana production (Kandil et al., 2014). A snapshot of the labour market in 2012 provides some evidence of this possible constraint. Of job openings surveyed 44 per cent required tertiary education while only 7 per cent of job seekers surveyed possessed tertiary certification (Labour Market Needs Assessment Survey, 2012). Unemployment has been particularly hard on Saint. Lucia’s young adults (Gimenez et al., 2015). This is a particularly worrisome circumstance as research points to several adverse socio- economic implications of persistent high youth unemployment. These include “scarring”, which describes a situation whereby high youth unemployment could lower permanently the probability of future employment and/or lower future wages (Gregg and Tominey, 2005) by this group or persons, thus undermining future economic growth. Additionally, high youth unemployment is

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