The Cuban government will dismiss more than 500,000 workers — 10 percent of its payroll — but will reportedly allow a major expansion of private economic activity in what would amount to the most significant overhaul undertaken by Raul Castro.
The half-million state employees will be cut by April 1, according to an announcement Monday from Cuba Workers' Central, the government-controlled confederation of labor unions.
The communist government also plans to allow a significant increase in private economic activity in hopes of creating 450,000 non-state jobs by the end of 2011, the Reuters news agency reported from Havana.
The two changes would amount to the most substantial initiatives undertaken by Castro to pull the economy — 95 percent controlled by the communist government — out of its worst crisis in two decades.
Overall, they indicate a government decision to turn small state enterprises such as repair shops into cooperatives run by their employees and expand the number of self-employed such as plumbers and wedding photographers.
Dissident economist Oscar Espinosa Chepe said Castro's reforms so far have been so small and shallow that he doubts the goal of creating 450,000 private-sector jobs next year will be met.
"We need much stronger, deeper measures, like allowing the establishment of small- and medium-sized enterprises," Espinosa said by telephone from Havana.
But there's so much pent-up demand in Cuba that the shift from state to private sector employment is likely to succeed, said Julia Sweig, a Cuba expert with the U.S.-based Council on Foreign Relations.
"There will be an adjustment period, for sure," Sweig said at a news conference Monday. "But the private sector is going to absorb them very, very rapidly."
The Cuba Workers' Central statement said economic plans for 2011-2015 "project the reduction of more than 500,000 workers from the government and state enterprise sectors" by the end of March. Rumors of the massive layoffs had been sweeping Cuba for several months.
Castro earlier this year acknowledged a surplus of more than 1 million workers on the payrolls of the government and state-run enterprises. About 5 million people work for the state — 85 percent of the labor force in a country of 11.2 million people.
"Our government cannot and should not continue maintaining … government entities with inflated payrolls, and losses that drag down the economy are counterproductive, create bad habits and distort the conduct of workers," the CTC added.
The confederation warned that the job cuts will start immediately and cover all sectors of the economy and will not involve the kinds of "indefinite salary subsidies" paid in the past.
Thousands of Cubans laid off from the sugar industry received up to 70 percent of their salaries for years while they studied new careers. Cuba's official unemployment rate is 1.7 percent.
Salaries for those who stay on government jobs also will be adjusted, the statement added, to "revitalize the principle of socialist distribution, of paying each according to the quantity and quality of their work."
The government also will expand the possibility of obtaining private sector jobs through arrangements such as "rents, leases of farm lands, cooperatives and self-employment" in hopes of creating "hundreds of thousands of jobs in coming years," the CTC added.
The statement did not detail those plans, but a report by Reuters in Havana said the government plans to allow a significant increase in private economic activity, which now accounts for only about 600,000 jobs.
Reuters reported that a document circulating among the higher ranks of the ruling Communist Party predicted the increase will allow for the creation of 450,000 non-state jobs in 2011.
About 250,000 of those jobs would be created through self-employment, the report added, a term used to describe small businesses such as family-run restaurants, bed-and-breakfasts, barber shops, plumbers and wedding and birthday photographers.
Virtually all Cuban shops, down to hamburger stands and shoe repair shops, were nationalized in 1968 by Fidel Castro, who surrendered power to his brother in 2006 after emergency intestinal surgery.
Trying to jump-start the economy, Raul Castro already has leased state lands to more than 100,000 private farmers, turned some barber and beauty shops into worker-run cooperatives and given state-employed taxi drivers the opportunity to lease the vehicles in exchange for flat payments to the government.
The new expansion calls for issuing more licenses for self-employment, expanding the categories of work permitted and loosening regulations on those activities, Reuters reported.
Among the restrictions to be lifted are the bans on obtaining bank credits to expand the enterprises, doing business with state entities and hiring employees who are not family members, according to the news agency.
But the self-employed, who now pay an income tax, will also have to pay sales taxes and a 25 percent social security levy for themselves and each employee, Reuters reported, and the newly created cooperatives will pay a tax on profits and social security.