In Cuba, Reforms Mean Layoffs

Communist Cuba is laying off hundreds of thousands of public employees as part of a move to reform one of the two surviving Soviet-style command economies.

To absorb those let go, the Caribbean island's government plans to issue hundreds of thousands of new licenses to those interested in working on their own or mounting small businesses, lease operations such as taxi services or barber shops, and will turn some small state services and manufacturing into cooperatives.

The official trade union federation announced today that half a million workers would be laid off over the next six months, and over a million in the next few years, and most would have to find employment in a rapidly expanding non-state sector.

Last month, Cuba liberalized regulations governing foreign use of its land, extending the time limit on such use from 50 years to 99 years in a move many experts forecast will boost real estate development around still-to-be-built golf courses and marinas.

"Our state cannot and should not continue maintaining companies, productive entities, services and budgeted sectors with bloated payrolls (and) losses that hurt the economy," the trade union federation said.

"Job options will be increased and broadened with new forms of non-state employment, among them leasing land, cooperatives and self-employment, absorbing hundreds of thousands of workers in the coming years," it said.

Laid-off state workers will be offered at least one other state job, and if they do not accept it they will have their unemployment benefits, equal to 70 percent of their wages for no more than three months, depending on their seniority, cut off, sources said.

The unemployed will not be totally out in the cold, because all Cubans receive free health care and education, subsidized utilities, a subsidized food ration and automatic adjustment of mortgages to 10 percent of the top breadwinner's income.

Many Cubans also receive remittances from family abroad worth far more than the average monthly wage, which is equivalent to around $20.

According to Communist party sources who have seen the detailed plan to "reorganize the labour force," Cuba expects to issue 250,000 new licenses for self-employment by the close of 2011, almost twice the current number, and create 200,000 other non-state jobs.

Geographical limitations on self-employment and prohibitions on obtaining bank credits, doing business with state entities or hiring labor outside the family, will be eliminated along with some other regulations.

The government's definition of self-employment includes many entities that are essentially small businesses, including such things as family-run restaurants and cafeterias, auto repair shops and jobs in the building trades.

The non-state jobs will include, among other things, workers hired by the small businesses, taxi drivers who will now lease their cabs from the state and employees of small state businesses that will be converted to cooperatives.

The plan amounts to the most important reform undertaken by President Raul Castro since he succeeded older brother Fidel Castro in early 2008 and the biggest shift to private enterprise since all small businesses -- 58,000 in total, with an average of five to eight employees, according to Cuban economist Juan Triana -- were nationalized in 1968.

Raul Castro has called for conceptual and structural reform of the economy ever since he first took over temporarily in 2006.

Even Fidel Castro, who stepped down to undergo intestinal surgery and suffered complications, recently quipped "the Cuban model doesn't even work for us anymore."

The now semi-retired 84-year-old leader of the Cuban revolution emerged from seclusion in July and made the comment over lunch with U.S. journalist Jeffry Goldberg.

"For four years, Raul Castro has been preparing Cuba's population and party cadres, repeatedly stating Cuba can no longer finance the omnipresent state-model of the past," said Bert Hoffman, a Latin American expert at the German Institute of Global and Area Studies

"If the state scales down, opening private employment opportunities becomes inevitable. Finally, this appears to be getting under way," he said.

Cuba currently has only 591,000 people working in the private sector, a number that includes mostly small farmers and agriculture workers as well as 143,000 self-employed, according to the National Statistics Office.

Castro has fostered discussion in the media and grass-roots meetings on what ails the socialist economy, and made mostly minor changes aimed at boosting productivity by putting more incentives in the system.

The most important reforms up to now were in agriculture, where state lands have been leased to 100,000 new farmers and the state's monopoly on the sale of farm supplies and produce have been loosened.

Many analysts say Raul Castro's efforts are similar to those undertaken by Chinese and Vietnamese Communists at the start of their reforms decades ago.