A new premium on job creation

On a more serious note, the interesting question about the prospect of gradual, large-scale layoffs in Cuba (as reported in this Reuters story) is what will come with them.

In carrying out the layoffs, the Cuban government is taking action following its acknowledgement, delivered by Raul Castro himself, that up to a million workers may be unproductive.

The government will not want to maintain laid-off workers and their families forever – after all, it is already looking for ways to cut social services spending, and it wants to boost economic production.

To generate new jobs, it could try new government projects – new state enterprises or new joint ventures with foreign partners.

But capital is scarce, and there is little in the economic track record of the past few years that gives confidence that on its own, the government could generate hundreds of thousands of new, productive jobs each year over the next several years.

I’m not going to predict what the Cuban government will do. But it is safe to predict that if these layoffs proceed as outlined, the resulting jobs puzzle will not be solved without expansion of the private sector. An expansion of self-employment (trabajo por cuenta propia) accompanied large-scale government layoffs in the 1990’s, and the government has already been carrying out pilot projects (accompanied by lots of public discussion) that could lead to conversion or state retail and service enterprises into cooperatives, a form of socialist property that already exists in the countryside.