ARE BELARUSIANS CONCERNED ABOUT UNEMPLOYMENT?

It is a common truth that an economic system featuring commodity production cannot avoid unemployment unless it practices coercive work or artificially brings down its efficiency. In fact, unemployment is necessary since normal economy development involves various resources including manpower. Quite generally this can be explained in the following way: if the state of market is favorable, expansion of production and involvement of additional manpower will take place to ensure quick saturation of the market with goods of high demand. Unemployment serves here a natural bank of manpower resources and hence it decreases. On the contrary, reduction of demand for some goods entails curtailment of production and producer’s unloading from excess manpower, i.e. unemployment growth.

Undoubtedly, supply-and-demand relations in the modern market economy take more complicated forms. Therefore, it is wrong to suggest that regulation of these processes will be effected automatically by market mechanisms. Market regulators ensure rough adjustment. Since we talk about human resources, insignificant problems, from the viewpoint of the market, can lead to grave social conflicts. This is why the role of government in fine adjustment of the labor market, control of the processes in it and minimization of negative consequences is very important. Of course, one shouldn’t overestimate possibilities of bureaucracy like some left-wingers do persuading the society that this is the state that should create work paces. As a rule, this leads to squandering of budget and general decline in production efficiency. This is why we think the role of government should be confined to promotion of full-time work and elimination of social consequences following excess of supply at the labor market. This can be first of all implemented by encouragement of employment growth and decrease of unemployment to the compromise of production efficiency and social peace within the society. Second, the government should build the system of assistance to the temporarily unemployed.

The developed socialism normally denied any unemployment. As a result, there are no institutional, legislative or financial mechanisms able to overcome this social phenomenon or at least eliminate its consequences. Employment Service of the Soviet time only collected information about vacancies and introduced it to those who applied for this information. Hence, the government and the society were taken aback by legalization of unemployment after economic collapse of socialism and appeared not ready to overcome negatives outcomes of unemployment.

Backward socialist economy based on state-owned means of production, low working efficiency, poor compatibility with non-socialist producers because of high costs of manufacture and low product quality as well as inability of authorities to adapt the economy to the market-based management resulted in sharp decline of demand for homemade products and loss of marketing outlets when the borders opened. In its turn, this caused excess of workers at the enterprises and consequently led to reduction of work time, unpaid vacation leaves, lack of work, performance reduction and income abatement. Intention of the boards to dismiss redundant staff was suppressed by administrative measures which only slowed down adaptation to new economic conditions.

Of course, redundancies couldn’t be averted in Belarus. The official highest unemployment rate was registered in January of 1997. It made up 185 000 people, or about 4% of economically active population. As of today, unemployment level is obviously lower: 83 000 people at the beginning of 2005. (See Picture 1).

Picture 1. Dynamics of the registered unemployed in the period 1997-2004
(by the end of the month, in thousands of people)

This happened, first of all, due to administrative measures taken by the authorities. Thus, presidential decree on additional measures to ensure public employment adopted in March of 1997 tied up unemployment relief with public works. In this part, the decree contradicts to the conventions of the International Labor Organization (ILO) and Universal Declaration of Human Rights as it indirectly introduced coercive labor. Implementation of the decree led to unwillingness of unemployed get registered in the Employment Service since they couldn’t receive the tiny unemployment relief until they worked out the established norm in public works (cleaning of streets, public WC’s, sorting of vegetables, etc.) The Decree also compelled the Employment Service to establish tougher control over unemployed in public works which intensified their taking off the register without any employment assistance.

The Service monthly compared absolute values of employment effect and unemployment reduction, although there wasn’t any correlation between these indicators. Thus, in June of 1997, 7 800 unemployed were taken off the register while the number of employed increased by 2 500 people only. Data for July and December of 1997 is even more illustrative: the number of unemployed decreased by 6 300 and 3 500 people respectively while employment also decreased by 10 600 and 10 800 people respectively. In other words, a great part of unemployed was simply taken off the register without an employment relief.

This research reveals that introduction of administrative measures didn’t cut unemployment but converted it to a latent form. Thus, according to data of Minsk Research Institute of Socio-Economic and Political Issues, in late September of 1998 there was 5.3 not registered unemployed per 1 registered. According to IISEPS researches, a year after decree adoption latent unemployment in Belarus exceeded registered unemployment 3-3.5-fold. This means that general number of unemployed made up approximately 400 000 – 450 000 people, or 9-10% of economically active population.

There are yet several more factors which presently contribute to unemployment reduction. The most efficient is the shade employment, i.e. work without contract. By our estimates, the number of this kind of unemployed is nowadays up to 300 000 – 400 000 people. Administrative ban of “mass redundancy” which doesn’t let the boards of state-run enterprises cut down redundancy making now about a million people also withholds unemployment growth. Another yet less significant factor is the work abroad, in particular in Russia (several dozens of thousands of people).

In the current year the situation at the labor market of Belarus has slightly improved due to favorable situation at the energy market and improvement of economic situation in Russia which accepts dominating part of the Belarusian export. At the enterprises in all fields quitting employees are replaced by newcomers in almost the same amount. At the same time, average unemployment term is getting longer (by 10% as compared with 2003). Most unemployed (80%) quit voluntarily due to low wages. It should be noted that vacancies at the labor market, quite many, don’t satisfy the employment demand because of the low wages (below minimum consumer budget). Some unemployed use these vacancies for temporary employment (one-two months) continuing search of a more suitable position. Therefore, employee turnover if calculated by the old Soviet methods reaches 20%.

Female and youth employment still remains an acute problem. Among present-day unemployed, women make over two thirds and the youth aged 30 and below – about a half. Unemployment is a very acute problem in the places with mono-production and in the former military establishments.

In general the number of unemployed, according to IISEPS data, is nowadays 2.5-3-fold higher than the official data shows, i.e. about 230 000 – 270 000 people or 5.5-6.5% of economically active population.

In the village, unemployment is a less acute problem despite global crisis in the current economic-organizing system of agriculture. This is due to extensive naturalization of agriculture that took place in Belarus over lately. Collective farmers earn their living from their own plots mainly and try to work these lands in the first place. Those who have agricultural machines or horses also get income from cultivating the lands of cottage owners and pensioners. Agricultural enterprises pay little money and always with delays up to six months or more and therefore work for “social production” has actually turned into a secondary employment and an opportunity to earn some money for pensioners.

More grave consequences are expected in the other economy fields where over a quarter of enterprises, first of all state-owned, are non-profitable. Such enterprises are especially many in the light (55.3%), fuel (43.2%) and food (41.8%) industries as well as in housing economy (40.4%). Unfortunately, the official statistics doesn’t introduce to the number of employees at non-profitable enterprises. According to experts, their general number reaches one million people. Readjustment of such enterprises or their possible bankruptcy can lead to the burst of unemployment.

Economically inactive population, which is over 700 000 people, is another potential for unemployment growth. If the conditions change (for example, increase of unemployment relief), some of these people may apply into the Employment Service. This will involve additional financial and organizational measures.

Residence permit or bureaucratic limits at the housing market impeding prompt movement of manpower don’t help unemployment reduction either. Manpower mobility is also restricted by the Soviet myth, still promoted by the authorities and official propaganda, on the necessity of working long at one and same place of work.

To sum up, the general scale of actual and potential unemployment in the country can be estimated as up to a quarter of economically active population.

Topicality of unemployment among population is as well revealed in sociological data. Thus, the results of the nation opinion poll conducted by the IISEPS in September of 2005 demonstrate that unemployment stands on the fourth place in the list of problems which cause anxiety of Belarusians. (See Table 1). Those facing this problem are 11.9% of citizens aged 18 and over.

Table 1. Distribution of answers to the question “What problems does your family face nowadays?” (open question, more than one answer is possible)

State Employment Service was set up in Belarus in accordance with the legislation adopted in 1991. Its branches were opened in all Belarusian regions. They registered unemployed, paid unemployment relief, organized training and retraining, collected information about vacancies, provided employment assistance for those who moved to different areas, etc.

Financing of employment assistance as well as employment programs annually approved by the government was carried by the State Fund of Employment Assistance which until recently was an insurance and non-budgetary organization. The employers were bound to wire on its account the insurance payments amounting to 1% from his/her wages considered as product’s net cost. The amount of unemployment relief almost didn’t depend on wages and was established in the amount from one to two Base Rates almost irrespective the applicant’s service time and dependants. As of now, the average unemployment relief makes slightly over $15 and only 46% of registered unemployed do receive it. Unemployed from the state apparatus are given the relief in the amount of an average wages and former military men – 60% of their allowance.

From September of 1999, at the decision of the government the State Fund of Employment Assistance was reorganized from insurance into the budgetary organization. Its funds were moved into the management of Finance Ministry and some part of them was used for a different purpose (for example, for financing of the Belarusian Youth Union). In reality, the Finance Ministry expropriated many-years insurance capital of employees saved for their protection from unemployment.

At the decision of the president, recently single state Employment Service was closed almost entirely. Its regional departments were submitted to local authorities with large-scale redundancies and expropriation of property accumulated for insurance fees. They finally turned into traditional bureaucratic bodies concerned about implementation of the “unemployment reduction plan” and necessary accounting rather than employment assistance. The Employment Service’s headquarters shared the same lot. Slightly earlier, they were transformed into the Ministry of Labor and Social Safety – a purely administrative body which cannot influence the employment policy of local offices.

This all implies that the authorities don’t consider unemployment an objective phenomenon, don’t tie up its scale with the carried economic policy and, of course, don’t consider that the unemployed are victims of economic problems and need public assistance. The last thing the authorities can do is legally destroy the very notion “unemployment” and consider unemployed as spongers so as to place them under the control of law-enforcement authorities.