Self-employment and the protection of workers when confronting COVID-19

Por Rachel D. Rojas  (Progreso Weekly)

HAVANA TIMES – If there’s a silver lining during this crisis, it is that in spite of its life-shattering and life-altering circumstances, it irreducibly reveals the vulnerabilities and strengths of the systems in which we exist. The most creative initiatives of solidarity and cooperation can be found throughout Cuba in times of coronavirus, since not everyone that lives here is prepared to deal with or have the same options or possibilities, to face the particular living conditions that the virus imposes. Some people are more exposed than others.

One creative initiative includes the monitoring being done on the self-employed sector by the Entrepreneurship Network of the University of Havana, which provides the know-how and analysis of researchers, in order to shed light on disadvantaged groups and their search for equitable solutions.

So far, the Network and a group of entrepreneurs with whom they work has set its sight on the situation of contract workers, the self-employed and those involved in the informal economy before measures announced by the Ministry of Labor and Social Security, as explained via WhatsApp by the Network’s coordinator Ileana Díaz.

Owners and employees

“Employers must pay hired workers the minimum wage, according to the measures adopted. The problem is that if an owner makes no money during a month, it would make it difficult to pay even that minimum wage. Under those circumstances, the employee would be left unprotected, because the most they could access would be Social Assistance,” said Díaz.

During the conversation she clarifies that there is nothing established about the need for business owners to have a contingency fund. These persons already pay the tax for hiring the workforce, which, as she explains, this specific collection policy is “a disincentive for growth. Initially this tax was paid after hiring the fifth contract worker, now it is paid starting with the first one.”

Among measures announced in recent weeks by the Ministry of Labor and Social Security is that in self-employment activities (TCP) whose activity level decreases, but continue to provide services, the employer guarantees contract workers remuneration in proportion to the real time worked, which cannot be less than the country’s minimum wage, according to the provisions of Law No. 116, Labor Code of December 20, 2013.

The main condition is that they “continue to provide services.” Something made more difficult with the paralysis of services such as public transportation, large shopping centers and the regulation of numerous products in terms of quantities one is allowed to buy. There is also difficulty in receiving clients, the search for supplies and the movement of workers from place to place.

Business owners who have had to cease working are allowed the temporary suspension of work and therefore don’t have to pay taxes (except for the social security) until the quarantine as indicated by the health and epidemiological authorities is suspended. The problem is that workers hired by these business owners are not mentioned in these measures.

“Similarly, there is the case of self-employed workers, the truly self-employed described under the simplified tax payment regime, who are only allowed to hire one person, and whose activities are difficult to continue doing under the circumstances. People like music teachers and others. These persons have also not been mentioned,” said Professor Díaz.

Another aspect of the study, according to the professor, was focused on the case of informal workers. “There is a group of people who neither study nor work, who live in informality, whose networks are cut off from the physical isolation that must be assumed in these times. These cases lose their livelihood and, regardless of whether it is legal or not, they remain human beings who are left unprotected.”

Just and complex, but just

The problems of the Cuban economy did not appear with the crisis represented by the new coronavirus on the Island, on the contrary, they have become more acute with it. The measures taken by the government in recent weeks have specific costs, and the negative impacts are still difficult to foresee given the high component of uncertainty in the country. Cuba’s First Deputy Minister of Finance and Prices, Vladimir Guerrero Ale, stated two figures during his participation in the Round Table television program that reflect a small part of these consequences: there are already 139,000 requests for temporary suspension of licenses, which implies an impact on the budget of 99 million pesos. There have also been around 13,000 self-employed workers whose monthly license payment were reduced by their territorial authorities that amounted to 2 million pesos less to the state coffers . And in this case we are not even talking about the serious recession that the tourism sector represents — until recently among the country’s main source of income.

However, there is no way to safeguard everyone without resources — many more resources.

Solutions offered by the Entrepreneurship Network of the University of Havana also require resources. “In the case of contracted workers and the self-employed, the possible option we saw was credit. In the case of those hired, a credit is granted to the owners with a minimal interest rate, or even zero interest, and a one-year amortization that covers more than the minimum wage, but the mean paid by the state business sector to those workers. It is not for everyone, because not all businesses have necessarily closed, and not all provinces have the same situation. Each case would have to be evaluated. The same for the self-employed, credit could be granted directly to them for their survival during this situation,” explained Díaz.

The creation of funds from the area taxes was also debated within the Network via emails. On the other hand, looking to the future and the necessary boost the self-employed sector will surely require in Cuba when the required physical isolation and the dire economic repercussions end, the idea of creating solidarity funds is being proposed. In the researcher’s words, these “are used in many countries, from donations that can come from anywhere, from the state, from non-governmental organizations, from private individuals, from other businesses, etc., in order to support the rebirth of TCP. They will have to be supported in some way so that they remain part of the business fabric of the country.”

“One of the problems highlighted by current events,” she says, “is the fact that TCPs are not legally approved as micro, small and medium-sized companies. Therefore, [self-employment] is complex because business owners are the same as employed workers. And they have different peculiarities, even in the face of the very measures that the government has established these days.”

“We know it is not simple,” concludes Professor Díaz. “The country’s economy was not in the best condition, and now it has become more complex amid the pandemic and the intensification of the U.S. blockade against Cuba.” Everyone knows this, from teachers, to the authorities, to the population in general.