Cuba to cut 500,000 gov't workers, reform salaries

[September 14, 2010]  HAVANA (AP) -- The big economic changes Cuba's communist leaders have been promising for years appear finally to be happening in earnest -- and they will be hard.

Cuba on Monday said it is laying off nearly half a million workers, an eye-popping figure in any country, but especially in a nation where the government so totally dominates the economy.

The shift would mean that one-tenth of the island's 5.1 million-strong work force will be looking for jobs in the private sector by April 2011, a drastic change that could mean a radically altered economic outlook, especially for Cubans in their 20s and 30s who have known nothing but a paternalistic communist system ushered in by Fidel Castro in his 1959 revolution.

The changes are the most dramatic yet in a reform program that began when Raul Castro permanently took over the presidency from his brother in 2008 -- but which have sputtered in fits and starts since then.

But they were not entirely surprising. Raul Castro has warned for years that the state could no longer afford to subsidize every part of Cuban life, nor pay workers who contribute little. In April, he floated the idea that up to 1 million workers were superfluous and must go.

The layoffs announced Monday will start immediately and continue for months, according to a statement from the nearly 3 million-member Cuban Workers Confederation, which is affiliated with the Communist Party and is the only labor union allowed by the government.

"Our state cannot and should not continue supporting businesses, production entities and services with inflated payrolls, and losses that hurt our economy are ultimately counterproductive, creating bad habits and distorting worker conduct," the union said.

Some workers said they were caught off guard.

"I heard the rumors about firings a while ago," said Luis Estrada, a 55-year-old health clinic worker. "I hope nobody will be left defenseless. Here, everyone has a job."

In a country where even those who are employed have to scramble to make ends meet, it was not clear how families would find the means to support unemployed relatives, or how much assistance they will get from the state.

Yierser Gonzalez, 35, said he would be happy to give up his state job and set up his own food stand, but that he worried about others.

"About 100,000 will find private employment, but what will they do with the rest?" Gonzalez asked.

The union's outline hints at more layoffs to come, saying that eventually the government will only employ people in "indispensable" areas such as farming, construction, industry, law enforcement and education.

To soften the blow, the statement -- which appeared in state newspapers and was read on television and radio -- said the government would increase private-sector job opportunities, including allowing more Cubans to become self-employed. They also will be able to form cooperatives run by employees rather than government administrators, and increasingly lease state land, businesses and infrastructure.

The announcement was short on details of how such a major shift could be achieved.

Still, Arch Ritter, an expert on the Cuban economy at Carleton University in Ottawa, Canada, said the payroll at state-run enterprises is bloated, a reality that could not continue in a country perennially strapped for cash.

"What this (announcement) said is there have been a number of people who are 'unemployed' but on the job," he said. "Getting paid, in effect, for not doing anything."

Currently the state employs 95 percent of the official work force. Unemployment last year was 1.7 percent and hasn't risen above 3 percent in eight years -- but that ignores thousands of Cubans who aren't looking for jobs because wages -- which average $20 a month -- are so low. Ritter said the official rate was laughable.

While Castro has insisted his reforms are in keeping with socialist ideals, he has sternly told Cubans that they must stop expecting too much from the government, which provides free education and health care and heavily subsidizes housing, transportation and basic food.

Even before the announcement, interviews with scores of workers across several government sectors showed that layoffs were already under way -- with many complaining the state was not doing enough to find them new jobs.

Larry Birns, director of the Washington-based Council on Hemispheric Affairs, said a series of small changes -- such as privatizing some state-run barbershops, licensing more private taxis and distributing fallow land to private farmers -- have moved Cuba toward economic reform. While none of those were blockbusters, Birns said, Monday's revelation has the potential to be one.

"Cuba is rapidly becoming like any other country," he said. "It is not going back. These are big changes."

Others, like Ritter, were skeptical.

"To imagine that the private sector is going to absorb so many people is a bit of a stretch," he said. "It's going to be a major problem for the country."

Building on his April remarks, Castro warned in August that layoffs would be coming and said Cuba would expand private enterprise on a small scale, increasing the number of jobs where Cubans could go into business for themselves.

Monday's announcement also said Cuba will overhaul its labor structure and salary systems to emphasize productivity so that workers are "paid according to results."

The labor overhaul comes less than a week after Fidel Castro caused a stir around the globe when he was quoted by visiting American magazine writer Jeffrey Goldberg as saying Cuba's communist economy no longer works.

Castro later said that while he was not misquoted, his words were misinterpreted -- and that he meant to say capitalist reforms could never work in Cuba.

Goldberg said Monday he was surprised by Fidel Castro's claim, since he has made similar statements in the past. He said economic reforms such as the one announced Monday prove the Cuban government realizes the need for change.

"Not only has he said things like this before, but the on-the-ground reality is that it is a truism that the Cuban model is not working, and that is why they are starting this large-scale experiment with privatization," Goldberg told reporters.

[Associated Press; By PAUL HAVEN and WILL WEISSERT]

Associated Press writer Andrea Rodriguez contributed to this report.

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