Cuba Gov. Offensive to Cut Inflated Payrolls

Patricia Grogg

Renovation work in Old Havana.

HAVANA TIMES, Aug 3 (IPS) — Cuban President Raul 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.”

Malecon seawall, Havana, Cuba

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.

Hiring workers for small private business

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.

Experiments to increase production and wages

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.

Havana sunset.

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.


2 thoughts on “Cuba Gov. Offensive to Cut Inflated Payrolls

  • As a modern cooperative socialist I have no problem with anything Julio de la Yncera says here. The political party in power in any country must have the honest support of the masses, and if the ruling party cannot maintain that support, it should be replaced by a new leadership. State power should not be a “king of the mountain” acquisition whereby a certain party overthrows the old dictatorship and is then entitled automatically to rule, regardless of the results it obtains in the economy and society.

    This of course is abstract reasoning. The situation in Cuba is real life. It is enormously complicated due to constant attacks by U.S. imperialism. Socialist state power must be maintained in the face of severe aggression from the north, and the criminal, half-century economic blockade. The PCC, in spite of its gross failings in a number of areas–especially in the economic, the foundation for everything else–has held fast against monopoly capitalism, and this holding fast should be appreciated.

    Even so, it is long past time for the PCC to take a hard look at its performance, and its program for the future. This article indicates that the Party is barking up the correct tree, as it were, but only time will tell it the results will help revive the ailing economy.

    The PCC should stop being afraid that someone might make some money from effective small enterprise. There is no necessary contradiction between material and moral incentives, and material prosperity for the people is supposed to be the heart of the socialist vision.

    A central problem of any economy is enterprise leadership. All experience shows that entrepreneurial genius is a key element for a dynamic economy, and socialism should find a way to bring the entrepreneur into the socialist project. Our movement’s answer for this is to value private property rights and the conditioned socialist trading market, and devise a program to utilize them for socialist construction. In this way it may be possible to combine economic dynamism with the social justice of a post-monopoly capitalist system.

    Thanks, Patricia, for a really good article.

  • This is a very good step indeed I am still hoping there will be more. Like allowing independent free press. Allowing opposition to occupied assembly seats this should engender real meaningful discussions in that body that will really help solve the many problems with everyone’s agreement.
    Cuba needs to come back to give back participation to everyone not just one group.
    Will be extraordinary if one day Cubans can really choose between different political parties whose focus are on solving Cuba’s problem.
    One thing I have notice is that the opposition in Cuba is so fracture, I am guessing this is so because they have never been able to organized themselves. Almost each individual seem to be his own party. There is a need to actually foster dissent! 🙂 and allow them to meet and organize. This needs to be part of the Cuban constitution. Not giving preference to any one political party and do away with the one party system.
    I know is a big sacrifice for the party currently holding power for 50 years but is necessary if they are honest about the changes. This is needed to engender the spirit of a Cuba for all Cubans.

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