Business Page November 16th, 2003

 

Just whisper - what is the unemployment figure? (Conclusion)

Christopher Ram

2003-11-16

Introduction

Business Page today concludes the article begun last week about the unavailability of unemployment figures and the little attention given in official documents to setting any clear targets to reduce the level, even as part of the much publicised efforts to reduce poverty. The Guyana Revenue Authority and the National Insurance Scheme are two agencies which on a monthly basis receive information which could offer some reasonably accurate indicator of the state of the employed workforce. However as this column has pointed out, an Annual Report of the GRA is required to be tabled in the National Assembly by the Minister of Finance.

However, so far not a single report has been tabled and the Minister appears disdainful of calls for him to comply with the law without a word of concern being expressed by the opposition political parties, the trade union movement or the private sector. The National Insurance Scheme also receives (or is supposed to receive) monthly remittances for employed and self-employed persons. In addition, because of the statistics which the NIS is required to maintain for actuarial purposes and in order to facilitate the remittance process, it also records and issues an identification number for new registrants.

NIS Reports

While Business Page recently had to comment critically on the misleading dates used by the NIS in forwarding its annual reports to the Minister of Finance, those reports show on an annual basis not only new registrants but also cumulative numbers. Since these reports are from entities over which he has ministerial responsibility and entities over which he has ministerial responsibility contain information that is objective and reliable and therefore more useful, one would expect that they would form the basis for any serious planning done by the Minister. This, however, has not been the case, and this column is not aware of a single instance where such data have ever been quoted in any public pronouncements by this or indeed previous governments.

Private investment?

Under the heading 'Job Creation' in Budget Speech 2003, the Minister referred to five areas of job creation: businesses facilitated by Go-Invest and the Institute of Private Enterprise Develop-ment, small business development and training, jobs emanating from the public investment and maintenance programmes and the Temporary Employment and Mainten-ance Programme. Yet only two sets of numbers were quoted by the Minister both from sources that are speculative and/or meaningless.

The Minister announced that private investment in the economy facilitated by Go-Invest was expected to grow to nearly G$18B, creating "over 2800 jobs" at about $6.5M per job! These figures are of course submitted to Go-Invest by potential investors in project documents designed to win government backing and quite possibly incentives. Does the Ministry or the agency undertake any follow-up work to verify the projections and statements? Can there be any serious credence placed on numbers that raise questions about whether the potential job numbers are understated or the investment overstated or indeed both? Where is the evidence of the US$90M of new investments in 2003 facilitated by Go-Invest, or is this playing with numbers?

Micro-enterprise

The other number quoted is in relation to projects funded by IPED and which is always stated as "jobs created/sustained." According to the Minister, the number of jobs created and/or sustained was 7,113 in 2002 as a result of financing of loans amounting to $670M - at an average of $94,193 per job. Now quite what does this mean? How many new jobs are created - ten, one hundred or one thousand? IPED's efforts at financing the micro-enterprise sector are indeed commendable, and its record quite impressive, but it should surely refrain from the misrepresentation of data that it must know are critical to an understanding of the wider economic and national interest. While IPED's high-interest lending rate policy has been widely criticised even in official circles, its loose use of numbers regarding employment is both convenient and helpful to the government which obviously and uncritically embraces them.

Declining numbers

The more objective NIS data paint a picture that is vastly different. The Annual Reports of the NIS show that the number of new registrants of employed persons in 2001(6,915) has been falling steadily since 1996 and is considerably down on the numbers registering in 1992 (10,712) and 1993 (15,517). The statistics on the number of self-employed persons registering annually is even worse with only 332 in 2001 compared with 1030 in 1992. In cumulative terms the position appears less serious with the number of active employed persons actually increasing over 1992 (+6.6%) but decreasing since 1996 (-5.4%). Compared with 1992, the cumulative number of self-employed persons has increased quite substantially (220%) but since 1996, the number of active self- employed persons with the NIS has declined by 31.4 per cent.

While statutory bodies will always have some difficulties in registering members of the public, the decline can only partly be attributed to NIS inertia since the same process produced significant increases from 1993 to 1996.

Private sector

There is also some corroboration between these numbers and the findings of the annual Business Outlook Survey Report done by Ram & McRae, in which respondents had reported increases in their staffing up to 1997 and decreases thereafter. Now even if the numbers are better in 2001 than they were in 1992, what about all the persons who have entered the job market in the past ten years including those who write the CXC examinations annually?

The success of any poverty strategy depends on the creation of jobs for the majority of the unemployed and the capacity and willingness of the private sector to generate those jobs. Here the story is also not a good one.

Training

Despite the ever present platitude which appears in directors' reports that the company's employees are its most valuable asset, employers have consistently said that in the event of a business downturn, staff cuts are among their top two preferred options. Expenditure on training currently makes up only a tiny part of the annual expenditure of any of our companies. Pre-privatisation, the state-owned companies expended considerable sums for training their staff, many at the University of Guyana which the private sector now loves to criticise.

The army, the police force and the public sector, including teaching and nursing, still probably train a much larger number of persons annually than the combined private sector which has developed an impressive capacity for poaching the better-trained persons from the public sector. In the areas of employment generation and training, the private sector has been a major disappointment, with its emphasis on short-term maximisation of shareholders' wealth, tax minimisation and capital export by a large number of the players in the sector.

What can be done?

The undeveloped political culture has of course retarded economic progress, and helps to explain the sluggish performance of the economy over the past five years. But this is only part of the problem, since the economy had been losing steam after the expected rebound from the economic disaster of the seventies and eighties. In truth, only the most extreme pessimist would have believed that there was any direction the economy could go but up, particularly given all the adjustments which the poor and the employed class (referred to as working class pre-ERP) were asked to bear.

Experimental models/false assumptions

The country has become locked in a model of experimental economic development dictated by the IMF and the World Bank, based on several simplistic and sometimes misleading assumptions, including the ability of market forces to produce balanced economic development. Even the advocates of such economic recovery programmes, however, saw so-called safety nets such as SIMAP and now the PRSP as inherent to economic development, though they like to represent such nets as temporary. These are, however, only temporary in name, going through several reincarnations.

Another of the false assumptions is that the private sector is inherently superior to the state, particularly when it comes to ownership and management of economic activities, and that the state's role must be relegated to facilitator and provider of physical and other infrastructure.

Appalling record

Taken to its logical (?) conclusion, this ideology will see the private sector running education, health, police, the army and ultimately the government, raising interesting possibilities about the fate of the professional politician! While bad governance and political interference and control certainly created a poor image of state-ownership, referred to by the ANC of South Africa as "an inferiority complex about public ownership," many of the privatised entities have been no more successful than when under state control. This holds true when profits are measured in accounting terms, and their record is even more appalling if considered in economic terms, when other factors such as employment creation, capital retention and human development are taken into account.

Conclusion

The market model of development has also placed capital out of the reach of the masses of people ignoring the immense potential of the co-operative movement which is often more suited for this country's level of development. Just think of the potential implications of a fundamental restructuring of the country's social security system including unemployment benefit underwritten by the government. Could it then play with the unemployment numbers?

The assumption is also made that privatisation is the only way to mobilise investment and management, an assumption to which Guysuco has proved a major exception which could have been replicated many times over with the right level of political will and commitment. But with the proceeds of privatisation already spent, and reduced control over major economic sectors lost, how much better off are the workers and, not unusually in many cases, former workers?

The ERP had a number of features which were both commendable and necessary, but which also contained serious flaws. When combined with the country's backward political culture and unrestrained private sector behaviour, these makes the high level of unemployment unsurprising. Does anyone care? If so, can we start with a serious and honest effort at determination of the available working population across region, gender, age, qualifications, etc, to form the basis not only of a real economic and social development programme, but also for the formulation of sector policies on industrial, regional and other areas of development. Understanding where we are is an important step in getting where we want to be. Accurate information would be a good place to start.

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