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Vol 3, No 9
5 March 2001
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Sam Vaknin Unemployment:
The case of

The final part of a six-part series
Sam Vaknin

Read part one of Sam Vaknin's unemployment series of articles first.
Read part two of the series.
Read part three of the series.
Read part four of the series.
Read part five of the series.

Unconventional modes of work

In Central and Eastern Europe, work used to be a simple "seven-to-three affair. This is no longer the case.

In richer countries, such as Denmark, the worker can take special leave. He receives 80% of the maximum unemployment benefits plus no interruption in social security, providing he uses the time for job training, a sabbatical, further education or parental leave. This can be extended to taking care of old people (old parents or other relatives) or the terminally ill—as is the case in Belgium (though only for up to two months).

It makes economic sense, because their activities replace social outlays. In Britain, part time workers receive the same benefits in case of layoffs and wrongful dismissals, and in Holland pension funds grant pensions to part time workers.

Countries in transition cannot yet afford this largesse, but special treatment is granted by law and in collective agreements to night shift and weekend work (for instance, no payment of social benefits in some countries and, of course, a multiple of the regular hourly wage paid for each hour of overtime, night shift and so on).

All modes of part-time, flexitime, seasonal, casual and job-sharing work, as well as working from home, are encouraged. For example: in some countries, two people sharing the same job are allowed to choose to be treated, for tax purposes and unemployment benefits, either as one person or as two persons. Shift workers should be treated the same. In Bulgaria, a national part-time employment program encouraged employers to hire the unemployed on a short-term, part-time basis (like the Macedonian equivalent program Mladinska Zadruga).

One can safely say that—quite surprisingly in view of their Socialist heritage—labour markets in the countries in transition are less arthritic than their West European counterparts. One shudders at the thought of the outcomes of the forthcoming onslsaught of the EU's acquis communautaire and the Social Chapter on these efficient labour markets.

Macroeconomic policies

The macroeconomic policies of Macedonia are severely constrained by its international obligations to the IMF and the World Bank. Generally, a country can ease interest rates, or provide a fiscal boost to the economy by slashing taxes or by deficit spending.

Counter-cyclical fiscal policies are lagging, and, as a result, they tend to exacerbate the trend. Fiscal boosts tend to coincide with booms and fiscal contraction with recessions.

In view of the budget constraints of the Macedonian government (more than 97% of the budget is "locked in"), it is not practical to expect any employment boost either from the monetary policy or from the fiscal policies of the state.

Macedonia is considering the introduction of a "full employment budget." A full employment budget adjusts the budget deficit or surplus in relation to effects of deviations from full or normal unemployment. Thus, a simple balanced budget could be actually contractionary. A simple deficit may, actually, be a surplus on a full employment basis and a government can be contractionary despite positive borrowing.

Apprenticeship, training, retraining and re-qualification

The current labour laws allow for apprenticeship and training with training sub-minimum wages. Mandatory training or apprenticeship is a beneficial rigidity because it encourages skill gaining. Germany is an excellent example of the benefits of a well-developed apprenticeship program—and so, though to a lesser extent, is the Czech Republic.

Most of the unemployed can be retrained, regardless of age and level of education. This surprising result has emerged from many studies.

The massive retraining and re-qualification programs needed to combat unemployment in Macedonia can be undertaken in collaboration with the private
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sector. The government will train, re-train or re-qualify the unemployed worker—and the private sector firms will undertake to employ the retrained worker for a minimum period of time following the completion of his or her training or retraining. Actually, the government should be the educational sub-contractor of the business sector, a catalyst of skill acquisition for the under-capitalized private sector. Small business employers should have the priority in this scheme.

There should be separate retraining and re-qualification programs according to the educational levels of the populations of the trainees and to the aims of the programs. Thus, vocational training should be separated from teaching basic literacy and numeracy skills. Additionally, entrepreneurship skills should be developed in small business skill training programs and in programs designed to enhance the management skills of existing entrepreneurs.

All retraining and re-qualification programs should double as advisory services. The instructors/guides/lecturers should be obliged to provide legal, marketing, financial, sales-related or other consulting. Students who volunteer to teach basic skills will be eligible to receive university credits and scholarships.

Entrepreneurship and small businesses

Small businesses are the engine of growth and job creation in all modern economies. In the long run, the formation of small businesses is Macedonia's only hope. The government encourages the provision of micro-credits and facilities to set up small and home-based businesses by the banking system. Despite the absence, until recently, of reaction from or collaboration with the banking system, the state itself has (justly) refrained from stepping in to provide the needed funds and facilities (physical facilities and services).

But the state has encouraged small businesses through microcredits and incubators. It is now considering the introduction of tax credits, the encuragement of intrapreneurship (entrepreneurship within big and estasblished enterprises) and giving preference to small businesses in government procurement.

Sam Vaknin, 5 March 2001

The author:

The author is General Manager of Capital Markets Institute Ltd, a consultancy firm with operations in Macedonia and Russia. He is an Economic Advisor to the Government of Macedonia.

DISCLAIMER: The views presented in this article represent only the personal opinions and judgments of the author.

Moving on:

After the Rain cover

After the Rain:
How the West Lost the East

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31. "Republic of Macedonia—World Bank—Social Support and Technical Assistance Project—Labour Redeployment Program—Semiannual Report—June 1999" by The Privatization Agency of the Republic of Macedonia—Project Coordination Unit—Coordinator: Vladimir Sarac—Skopje, 31 July 1999.
32. ILO Convention No. 160—"Convention on the Statistics of Labour Force" (ILO 1992, p 1325).
33. "The Consequences of Labour Market Flexibility: Panel Evidence Based on Survey Data," by R Di Tella and R MacCullouch, Harvard Business School and ZEI, University of Bonn, 28 April 1999.


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