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Economic disruption of mass layoffs in Cuba could lead to exodus

Workers prepare food at a cafeteria in Havana on Tuesday. The island leaders expect many more of the 500,000 laid-off workers to move to private sector jobs, including raising rabbits, painting buildings, making bricks and collecting garbage.

Associated Press

Workers prepare food at a cafeteria in Havana on Tuesday. The island leaders expect many more of the 500,000 laid-off workers to move to private sector jobs, including raising rabbits, painting buildings, making bricks and collecting garbage.

The Cuban government's announcement Monday that it intended to slash 500,000 government jobs — 10 percent of the island's entire workforce — sent a clear signal that the communist nation intends to accelerate the growth of its minuscule private sector. Unemployed workers will be encouraged to find jobs raising rabbits, making bricks, painting buildings and collecting garbage, according to an internal government document. Johannes Werner, editor of the Cuba Standard news website, has observed Cuba's hesitant steps toward economic reform for 12 years. He assesses the implications of the layoffs, which have already begun and are expected to continue through March.

Can Cuba's private sector absorb these new workers?

I don't expect co-op owned retailers, family restaurants, bed and breakfasts, taxis, and car repair shops to absorb 500,000 people. Agriculture has some potential — in fact, co-ops and private farming have already absorbed some 50,000 people recently, through long-term leases of state land for private farmers.

That said, the most obvious chance for the newly unemployed in the short- and mid-term will be to find another state job.

The announcement says state companies and institutions will continue to hire in the oil sector, construction, biotech, teaching, police and industry. People doing these hard or highly skilled jobs have been woefully underpaid. That's why these are all sectors with pronounced labor shortages. Now that there is an excess labor force, these state companies likely will begin to see an influx, which will increase as performance pay is becoming the norm.

Will Cuba encourage more foreign investment to create jobs for these workers?

The expanding space for private business in Cuba is likely not going to open additional space for foreign investors. The standard 49-51 joint venture arrangement between foreign investors and the Cuban government will continue.

More than anything, a resurgence of foreign investment will depend on the global economic climate and on new regulations, such as for foreign real estate ownership.

What does this mean for the U.S. economic embargo?

The failure of U.S. sanctions has been obvious, but it's a domestic political issue. I would be very surprised if the entrenched embargo-and-vengeance industry in Miami and Washington would suddenly stop finding fault with Cuba. Even with Cuba's economic opening, there's little domestic incentive for the Democratic leadership — in terms of power, popularity or campaign contributions — to move that little island up on their agenda.

If this economic overhaul doesn't work, should we expect a mass exodus from the island?

It's hard to say what will happen. The outlines of economic reform seem to satisfy both the pragmatics (more space for private business) as well as leftist critics in Cuba (collectivization and more workplace democracy via co-ops). It also seems the government continues to prioritize health care and education in their spending, while continuing some subsidies for food and housing. That should give the government broad backing and some leeway should the reform hit serious bumps.

The biggest resistance will come from an entrenched bureaucracy. It remains to be seen whether inflated ministries will also be reduced in size.

Doubtless, the transition means a massive disruption. And any substantial disruption of the economic structure — look at Puerto Rico in the 1960s and '70s, Mexico in the 1980s and '90s, Dominican Republic in the 1990s — inevitably produces mass emigration. The question is how Cuba and the United States will channel the migratory pressure.

Bill Duryea can be reached at duryea@sptimes.com or (727) 893-8770.

To read Johannes Werner's monthly column in Business on Cuban economic and political news, go to links.tampabay.com.

Economic disruption of mass layoffs in Cuba could lead to exodus 09/14/10 [Last modified: Wednesday, September 15, 2010 7:50am]
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