Economy & Trade, Headlines, Labour, Latin America & the Caribbean

CUBA: Government Set to Cut Inflated Payrolls

Patricia Grogg

HAVANA, Aug 2 2010 (IPS) - Cuban President Raúl Castro announced a series of measures to gradually reduce the “considerably bulky” payrolls in the government sector, with excess estimated at around one-fifth of the economically active population.

In a speech closing the first period of sessions of the National Assembly of the People’s Power, Cuba’s unicameral congress, the president recognised on Sunday that it is a “sensitive” matter. He gave assurances that “nobody will be left to their fate” and that those who “truly do not have the ability to work” will receive support.

Castro had mentioned this issue in April, when he admitted that there was an excess of hundreds of thousands of people in the state’s financial and business sectors. Citing analysts’ estimates, the president put the total excess employees at more than one million, out of a national population of 11.2 million.

The measures agreed by the Council of Ministers in mid-July will be implemented in phases. The restructuring means abolishing “paternalist approaches that discourage the need to work for a living, and with it, reducing unproductive expenses brought about by equal pay, regardless of years of employment, of guaranteed salaries over long periods of time for people who are not working,” said Castro.

The socialist-run island’s largest employer is the government, which controls more than 90 percent of economic activity. A new labour regime would be less condescending and based on the principle that “the first one interested in finding a socially useful job should be the citizens themselves.”

Castro said the success of the reform would depend on political guarantees. “It is essential to build a climate of transparency and dialogue in which the top priority is clear and timely information for the workers, in which decisions are appropriately agreed and the necessary organisational conditions are created,” he said.

The good news for many is that individual enterprise will be expanded as another option for absorbing the excess workers, eliminating several existing prohibitions related to issuing new permits, hiring workers and other factors of the private sector.

The government opened the door to private work in the 1990s, when many state-run businesses and factories were forced to close as a result of the crisis that hit the country when the Soviet Union and the European socialist bloc disintegrated. But after some boom years, in 2009 there were just 140,000 permits in existence for pursuing private enterprise.

Currently, employment and productivity are among the Cuban economy’s biggest challenges, especially if it is to respond without massive layoffs or other shock measures. The government has begun to implement some options — whose outcomes are an exercise in uncertainty.

The official measures adopted so far include payment for positive results to the entire Cuban business sector, such that everyone benefits based on their job performance, and the legalisation of multi-employment, although neither of the two has so far been able to reactivate productivity.

Other initiatives applied in recent months as experiments include a bid to reduce what the government pays in salaries by renting barber shops and styling salons to their staff, who in addition pay personal income taxes and contribute to social security.

That option, which also applies to new private taxi permits, “should be extended to other services,” Economy Minister Marino Murillo told journalists during a break in the congressional sessions. “The government does not have to look after everything,” he said.

Castro, meanwhile, said he is confident that the government will have the support of the working class to make the employment measures a reality, because those workers understand that “without an increase in efficiency and productivity it’s impossible to increase salaries, boost exports and substitute imports, to grow in the area of food production.”

According to official figures, production fell 1.1 percent last year while salaries rose 2.9 percent.

In the first quarter of 2010 there was some improvement and productivity grew 4.3 percent, while the average salary (equivalent to about 17 dollars) saw a 0.9 percent decline in relation to the same period last year.

Economic studies warn that the purchasing power of most of the public sector’s salaries is a long way from recovering from the crisis of the early 1990s and remains “weighed down” by low work productivity in most cases.

According to those sources, the purchasing power in 2009 was equivalent to 26.6 percent of the pre-crisis salary in 1989. On top of this are the bigger problems posed by emigration of skilled workers, illegal businesses, lack of work incentives and inequalities, among other economic “distortions.”

For the government, the key dilemma is that if the inflated payrolls are maintained in most areas of work, and salaries are paid regardless of results, thus elevating the volume of money in circulation, the high cost of living will continue to climb, and with it the purchasing power of family incomes will continue to deteriorate.

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