A cou­ple events oc­curred last week, which are very much re­lat­ed, but on face val­ue may not seem to be. Last Wednes­day, Fi­nance Min­is­ter Dav­en­dranath Tan­coo pre­sent­ed his mid year bud­get re­view. The fol­low­ing day, a pub­lic hol­i­day, Prime Min­is­ter Kam­la Per­sad-Bisses­sar stood shoul­der to shoul­der with trade union lead­ers at the Labour Day plat­form in Fyz­abad.

Giv­en the elec­tion re­sult and the com­po­si­tion of the Cab­i­net, this now goes be­yond sym­bol­ism as labour moves for­ward as a coali­tion part­ner, not just cam­paign sup­port­er.

The next ma­jor mile­stone on this jour­ney will be the pre­sen­ta­tion of the 2026 Na­tion­al Bud­get lat­er this year. Any­one who has mean­ing­ful­ly worked with bud­gets can at­test to the fact that it is more than num­bers and math. Since it in­volves trade­offs, it is ef­fec­tive­ly a state­ment about val­ues and the choic­es that are be­ing made, in sync with those val­ues.

In a na­tion­al con­text, one val­ue is that of trick­le-down eco­nom­ics, where the rich can and should get rich­er to have some ben­e­fit trick­le down to the the eco­nom­ic class­es be­low. Then the Gov­ern­ment steps in af­ter the fact to plug the dif­fer­ence via trans­fers and sub­si­dies.

Even if it is not the most palat­able ap­proach, it could have worked in an en­vi­ron­ment where rev­enues from abun­dant nat­ur­al re­sources al­lowed the State to sat­is­fy the needs of the gen­er­al pop­u­la­tion while those at the top were able to ben­e­fit by “get­ting rich­er”.

Our rev­enue po­si­tion no longer al­lows for that mod­el. We must move for­ward to re­struc­ture our econ­o­my, so that or­di­nary work­ers/en­tre­pre­neurs un­der­stand that they have to pro­duce and cre­ate wealth and then can cap­ture a fair share of the wealth they cre­ate, rather than be­com­ing ten­der­pre­neurs or wait­ing for gov­ern­ment hand­outs af­ter the fact.

How can this be done?

I will start by sug­gest­ing that it’s the op­po­site of what we have been do­ing all along. His­tor­i­cal­ly we treat in­equal­i­ty as some­thing to fix af­ter it hap­pens as op­posed to in­tro­duc­ing poli­cies aimed at pre­vent­ing it from oc­cur­ring in the first place. Up un­til now the fo­cus has been on re­dis­tri­b­u­tion of in­come through tax­es and trans­fers, which of course al­lows for po­lit­i­cal pa­tron­age at the back end of that ex­er­cise.

It re­quires much more work, but de­liv­ers far more ben­e­fits if we can re­shape the very struc­ture of pro­duc­tion and cor­po­rate gov­er­nance to pro­duce op­por­tu­ni­ties and wages that flow di­rect­ly from the work­place while still re­main­ing com­pet­i­tive in the mar­ket­place.

Again, I ac­knowl­edge this is eas­i­er said than done.

Malaise

Our eco­nom­ic struc­ture is chal­leng­ing be­cause we have fal­tered on the al­ter of di­ver­si­fi­ca­tion. The en­er­gy sec­tor is a ma­jor rev­enue con­trib­u­tor but em­ploys a small frac­tion of work­ers, while the ma­jor­i­ty work in ser­vices that of­ten have low pro­duc­tiv­i­ty and lim­it­ed growth op­por­tu­ni­ties.

This “com­mod­i­ty trap” leaves us vul­ner­a­ble to ex­ter­nal shocks while gen­er­at­ing in­suf­fi­cient qual­i­ty em­ploy­ment for our ed­u­cat­ed work­force. The in­creased al­lo­ca­tion to ed­u­ca­tion dur­ing the mid-year re­view of over $3 bil­lion by it­self does lit­tle if the peo­ple we are ed­u­cat­ing are not pre­sent­ed with mean­ing­ful job op­por­tu­ni­ties post grad­u­a­tion. Those op­por­tu­ni­ties have to be there be­fore they grad­u­ate. One on­ly needs to look at the cur­rent youth un­em­ploy­ment rate and in­ter­view re­cent grad­u­ates to un­der­stand this point.

While peo­ple are com­plain­ing about a lack of mean­ing­ful em­ploy­ment, trade union par­tic­i­pa­tion has de­clined to less than 20 per­b­cent of wage earn­ers and is con­cen­trat­ed main­ly in the pub­lic sec­tor and state en­ter­pris­es. Col­lec­tive bar­gain­ing oc­curs in si­los, with lit­tle sec­toral co­or­di­na­tion. Most sig­nif­i­cant­ly, ei­ther through poor rep­re­sen­ta­tion or sim­ply not be­ing in­volved, work­ers have lit­tle voice in strate­gic gov­ern­ment or cor­po­rate de­ci­sions about in­vest­ment, tech­nol­o­gy adop­tion, or busi­ness mod­el changes that de­ter­mine their eco­nom­ic fu­tures.

The tra­di­tion­al ap­proach is high­er tax­es and ex­pand­ed so­cial pro­grammes, lead­ing to ben­e­fits for the un­em­ployed and the un­der­em­ployed. Again, this treats in­equal­i­ty af­ter it oc­curs rather than pro­vid­ing op­por­tu­ni­ty at the start. The ex­ist­ing ap­proach faces in­her­ent lim­its. It sti­fles in­no­va­tion on the one hand and it cre­ates sub-op­ti­mal be­hav­iours, in­clud­ing de­pen­den­cy, amongst its re­cip­i­ents.

Over­all, it does not ad­dress the un­der­ly­ing struc­ture that pro­duces low-wage work in the first place. In our con­text, it al­so de­pends on en­er­gy rev­enues that are both fi­nite and volatile.

We need to weight and con­sid­er chang­ing the rules of the game for ca­reers and for op­por­tu­ni­ty rather than re­dis­trib­ut­ing in­come af­ter­ward. This is where the ar­ti­fi­cial in­tel­li­gence dis­cus­sion be­ings. Do we use AI to en­hance labour and pro­duc­tiv­i­ty or do we use AI to re­place labour?

The for­mer means widen­ing the base of peo­ple and work­force op­por­tu­ni­ties, steer­ing tech­nol­o­gy to­ward labour en­hanc­ing rather than labour re­plac­ing us­es and giv­ing work­ers mean­ing­ful voice in cor­po­rate de­ci­sion mak­ing. The lat­ter lat­ter is about au­toma­tion and the re­place­ment of work­ers and af­ford­ing them a uni­ver­sal ba­sic in­come.

The labour move­ment has a role to play in this. Go back to when First Cit­i­zens Bank went pub­lic in 2013, the Bank­ing, In­sur­ance and Gen­er­al Work­ers Union took an ide­o­log­i­cal­ly rigid stance, warn­ing work­ers that pur­chas­ing dis­count­ed shares would make them com­plic­it in pri­vati­sa­tion.

Work­ers who ig­nored union ad­vice and bought shares saw sub­stan­tial re­turns, those shares that trad­ed at $22 in 2013 have since dou­bled in price and then some, along with div­i­dends. The union’s po­si­tion re­flect­ed out­dat­ed think­ing that views work­er own­er­ship as be­tray­al rather than em­pow­er­ment.

For­mer Prime Min­is­ter Dr. Kei­th Row­ley be­gan his tenure with the es­tab­lish­ment of the Na­tion­al Tri­par­tite Ad­vi­so­ry Coun­cil. It rep­re­sent­ed recog­ni­tion that eco­nom­ic mod­erni­sa­tion re­quired labour’s ac­tive par­tic­i­pa­tion. It didn’t last. The po­ten­tial for in­sti­tu­tion­al co­op­er­a­tion is there but the chal­lenge is that of mov­ing be­yond ad­ver­sar­i­al re­la­tion­ships.

Lessons

The most suc­cess­ful ex­am­ples of work­er em­pow­er­ment come from coun­tries that have em­bed­ded labour’s voice di­rect­ly in­to cor­po­rate gov­er­nance. Ger­many’s code­ter­mi­na­tion sys­tem re­quires com­pa­nies with over 2,000 em­ploy­ees to re­serve half their su­per­vi­so­ry board seats for work­er rep­re­sen­ta­tives, while firms with 500 to 2,000 em­ploy­ees al­lo­cate one third to work­ers.

The re­sults chal­lenge con­ven­tion­al eco­nom­ic wis­dom. Re­cent stud­ies show Ger­man firms with work­er rep­re­sen­ta­tion have cap­i­tal bases that are 40 to 50 per cent larg­er than those with­out, in­vest more in train­ing and re­search, and demon­strate greater re­silience dur­ing eco­nom­ic down­turns. Rather than ham­per­ing com­pet­i­tive­ness, work­ers’ voic­es ap­pear to en­cour­age long-term think­ing and stake­hold­er ori­ent­ed strate­gies.

These out­comes make eco­nom­ic sense. Work­ers have dif­fer­ent time hori­zons than share­hold­ers. A work­er can­not eas­i­ly di­ver­si­fy their hu­man cap­i­tal in­vest­ments the way share­hold­ers can di­ver­si­fy fi­nan­cial port­fo­lios. This gives work­er rep­re­sen­ta­tives in­cen­tives to sup­port in­vest­ments in train­ing, re­search, and pro­duc­tive ca­pac­i­ty that boost long-term com­pet­i­tive­ness even if they re­duce short-term prof­its.

More­over, work­er rep­re­sen­ta­tives bring op­er­a­tional knowl­edge to board­room dis­cus­sions about tech­nol­o­gy adop­tion, work­place or­gan­i­sa­tion, and hu­man re­source strate­gies. This in­for­ma­tion ad­van­tage can im­prove de­ci­sion-mak­ing qual­i­ty, par­tic­u­lar­ly in in­dus­tries where tac­it knowl­edge and em­ploy­ee co­op­er­a­tion are cru­cial for pro­duc­tiv­i­ty.

The se­cret of course be­ing, that work­er rep­re­sen­ta­tives, have to have more skills than pos­sess­ing the loud­est voice and the abil­i­ty to ad­dress oth­ers as “com­rade”.

We can do a few things quick­ly and con­sid­er some oth­ers over time. The In­dus­tri­al Re­la­tions Act needs up­dat­ing but I will leave it to oth­ers to pro­nounce on the de­tails. Be­yond that I re­ferred in my last col­umn to the gov­er­nance mod­el of the Na­tion­al In­sur­ance Board and there should be ac­tive con­sid­er­a­tion giv­en to ap­ply­ing this mod­el in the State sec­tor and de­pend­ing on its suc­cess then even­tu­al­ly to the cor­po­rate sec­tor.

The com­bi­na­tion of tech­nol­o­gy and a more ma­ture work­force means we have to tie tax ben­e­fits to ev­i­dence of em­ploy­ee up­skilling. The open ques­tion is - where is the in­cen­tive to in­vest in tech­nol­o­gy in a man­ner that demon­stra­bly in­creas­es rather than re­duces em­ploy­ment.

The key in­sight is that tech­no­log­i­cal progress is not pre­de­ter­mined. Pol­i­cy choic­es about en­tre­pre­neur­ship and tech­nol­o­gy, in­flu­ence whether in­no­va­tion com­ple­ments or sub­sti­tutes for hu­man labour.

I am not here to enu­mer­ate re­forms but to point out that the cur­rent po­lit­i­cal mo­ment of­fers un­usu­al op­por­tu­ni­ty for such re­forms. The need for eco­nom­ic di­ver­si­fi­ca­tion and on­shore eco­nom­ic de­vel­op­ment high­lights the press­ing need for mar­ket-dri­ven ap­proach­es to eco­nom­ic de­vel­op­ment. The sup­port of labour in the re­cent elec­toral suc­cess al­so pro­vides a plat­form for a more in­clu­sive ap­proach, pro­vid­ing of course that labour it­self is will­ing to rec­og­nize that their role is much more than the tra­di­tion­al em­ploy­er-labour re­la­tions.

Just as im­por­tant­ly, busi­ness lead­ers should al­so recog­nise that the old mod­el of cheap labour and tax in­cen­tives has reached its lim­its. With en­er­gy rents de­clin­ing and glob­al com­pe­ti­tion in­ten­si­fy­ing, pro­duc­tiv­i­ty growth through ac­tive work­er par­tic­i­pa­tion and path­ways to en­tre­pre­neur­ship may be the on­ly so­cial­ly sus­tain­able path for­ward.

Ian Nar­ine is a fi­nan­cial con­sul­tant who laboured over the Labour Day week­end to pro­duce this col­umn. Please send your com­ments to ian@ian­nar­ine.com