Friday, May 18, 2007

New pay policy in the works

If you look for clues about economic policy in Cuba, you tend to find a lot more about the problems they are trying to tackle than the solutions they have in mind. Last month’s speech by Carlos Lage is one example.

A just-published interview with labor minister Alfredo Morales is another.

Morales discusses Cuba’s new labor regulations, part of a process of “restoration of order and discipline” in the workplace. The goal is to improve productivity and quality, and to attack the problem of pilferage, where state enterprise workers lift items from work to sell on the black market.

Discipline and cost control are two keys to improving productivity and quality, he says.

He also adds another ingredient: compensation.

All state enterprises, Morales says, are now reviewing their systems of incentive pay – sliding pay scales that reward productivity. Incentive pay is not new; it exists in joint ventures, in state enterprises that have hard currency earnings, and in many that have only Cuban peso revenues. It is a key requirement of the “perfeccionamiento empresarial” reform process (pdf report on this topic here) that began in the military enterprises in the 1980’s and, with Raul Castro’s impetus, spread to the civilian sector in the 1990’s.

Morales sets the bar high. The goal of the new salary policy will be not only to tie pay to output, but to “guarantee” that workers “may live from their work,” i.e. that they will earn enough to take care of their needs and no longer have reason to resort to the black market.

That will require a lot of money. How much will earnings increase? When will a new salary structure take effect? Will Cuba create a single currency, or try to solve this problem in the current context of a dual-currency economy?

Morales says the review of salary policy will continue until June. Apart from that, we all have to wait for the rest of the answers.

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