Psychology, Philosophy, Economics and Foreign Affairs Web SitesI.
Recommendations Get the Real Picture
No one in
Macedonia knows the real picture. How many are employed and not
reported or registered? How many are registered as unemployed but
really have a job? How many are part time workers ? as opposed to
full time workers? How many are officially employed (de jure) ? but
de facto unemployed or severely underemployed? How many are on
?indefinite? vacations, on leave without pay, etc.?
Bureau must be instructed to make the gathering and analysis of data
regarding the unemployed (through household surveys and census, if
necessary) ? a TOP PRIORITY.
amnesty should be declared by the state on violations of worker
registration by employers. All employers should be given 30 days to
register all their unregistered and unreported workers ? without any
penalty, retroactive or prospective (amnesty). Afterwards, labour
inspectors should embark on sampling raids. Employers caught
violating the labour laws should be heavily penalized. In severe
cases, closures should be enforced against the workplace.
unemployed must register with the Employment Bureau once a month,
whether they are receiving benefits, or not. Non-compliance will
automatically trigger the loss of the status of ?unemployed?. If a
person did not register without good cause, he would have the right
to re-register, but his ?unemployment tenure? will re-commence from
month 1 with the new registration.
instituting a households? survey in addition to a claimant count.
Labour force surveys should be conducted at regular intervals ?
regarding the structure of the workforce, its geographical
distribution, the pay structure, employment time probabilities.
Bureau should propose and the government should adopt a Standard
National Job Classification.
Benefits Unemployment benefits ? if excessive and wrongly applied ?
are self -perpetuating because they provide a strong disincentive to
benefits should be means tested. There is no reason to pay
unemployment benefits to the children of a multi-millionaire.
Unemployed with assets (especially liquid assets) should not receive
benefits, even if they are otherwise eligible. The benefits should
scale down in accordance with wealth and income.
benefits should always be limited in time, should decrease gradually
and should be withheld from certain segments of the population, such
as school dropouts, those who never held a job, (in some countries)
women after childrearing.
unemployment benefits should be confined to those released from work
immediately prior to the receipt of the benefits, who are available
to work by registering in an employment bureau, who are actively
seeking employment and who pass a means test. Benefits should be
withheld from people who resigned voluntarily or discharged due to
misconduct or criminal behaviour. In the USA, unemployment
compensation is not available to farm workers, domestic servants, the
briefly employed, government workers and the self- employed.
benefits should not exceed short-term sickness benefits (as is the
case in Canada, Denmark and the Netherlands). Optimally, they should
be lower (as is the case in Greece, Germany and Hungary).
Alternatively, even if sickness benefits are earnings-related,
unemployment benefits can be flat (as is the case in Bulgaria and
Italy). In Australia and New Zealand, both sickness benefits and
unemployment benefits are means tested. It is recommended to reduce
the replacement rate of unemployment benefits to 40% of net average
monthly wages in the first 6 months of benefits and to 30% of net
average monthly wages thereafter in the next 6 months.
benefits should be limited in time. In Bulgaria, they are limited to
13 weeks, in Israel, Hungary, Italy and the Netherlands to 6 months
and in France, Germany, Luxemburg and the United Kingdom ? 12 months.
Only in Belgium are unemployment benefits not limited in their
duration. In most of these, countries, though, social welfare
payments replace unemployment benefits following the prescribed
period of time ? but they are usually lower than the unemployment
benefits and serve as a disincentive to remain unemployed rather than
employed. It is recommended to limit the duration of unemployment
benefits to 12 months.
insurance should be paid for those unemployed for more than 6 months.
benefits should be paid to a person who refuses work offered to him
or her on any grounds, except on medical grounds.
I recommend a
few pilot projects with the aim of implementing them nation-wide,
should they prove successful:
A pilot project
should be attempted to provide lump sum block grants to
municipalities and to allow them to determine eligibility, to run
their own employment-enhancement programs and to establish job
training and child care assistance. An assessment of the success or
failure of this approach in a limited number of municipalities can be
done after one year of operation.
worker, who participates in the second pilot project, should be
provided with a choice. He could either receive a lump sum or be
eligible for a longer period of unemployment benefits. Alternatively,
he can be provided with a choice to either receive a larger lump sum
or to receive regular unemployment benefits. In other words: he will
be allowed to convert all or part of his unemployment benefits to a
lump sum. The lump sum should represent no more than 9 months of
unemployment benefits reduced to their net present value (NPV).
The third pilot
project involves the formation of private unemployment insurance
plans to supplement or even replace the insurance (compensation,
benefits) offered by the Employment Fund. In many countries, private
unemployment insurance is lumped together with disability and life
insurance ? all offered by the private sector within one insurance
The fourth and
last pilot project involves the formation of ?Voucher Communities?.
These are communities of unemployed workers organized in each
municipality. The unemployed exchange goods and services among
themselves. They use a form of ?internal money? ? a voucher bearing a
money value. Thus, an unemployed electrician can offer his services
to an unemployed teacher who, in return will give the electrician?s
children private lessons. They will pay each other with voucher
money. The unemployed will be allowed to use voucher money to pay for
certain public goods and services (such as health and education).
Voucher money will not be redeemed or converted to real money ? so it
has no inflationary or fiscal effects, though it does increase the
purchasing power of the unemployed.
Employers to Hire the Unemployed The principle governing any
incentive scheme intended to encourage employers to hire hitherto
unemployed workers must be that the employer will get increasing
participation in the wage costs of the newly hired formerly
unemployed workers ? more with every year the person remains
employed. Thus, a graduated incentive scale has to be part of any law
and incentive plan. Example: employers will get increasing
participation in wage costs ? more with every 6 months the person has
been unemployed by them.
employers must undertake to employ the worker a number of months
equal to the number of months they received benefits for the worker
and with the same salary. It would be even better if the incentives
to the employer were to be paid for every SECOND month of employment.
Thus, the employer would have an incentive to continue to employ the
receive benefits for a new worker only if he was registered with an
unemployment office for 6 consecutive months preceding his new
linking the size of investment incentives (including tax holidays) to
the potential increase in employment deriving from the investment
Labour Mobility Workers must be encouraged to respond promptly and
positively to employment signals, even if it means relocating. We
recommend obliging a worker to accept any job offered to him in a
geographical radius of 100 km from his place of residence. Rejection
of such work offered (?it is too far?) should result in a loss of the
?unemployed? status and any benefits attaching thereof. On the other
hand, the Employment Bureau should offer financial and logistical
assistance in relocation and incentives to relocate to areas of high
labour demand. The needs of the unemployed worker?s family should
also be considered and catered to (kindergarten or school for his
children, work for his wife and so on).
labour contracts with a lower cost of dismissal and a simplified
procedure for firing workers must be allowed (see details below).
altering the Labour Relations Law to allow more flexible hiring and
firing procedures. Currently, to dismiss a worker, the employee has
to show that it has restricted hiring, applied workforce attrition
and reduced overall overtime prior to dismissing the worker. The
latter has recourse to the courts against the former. This recourse
should be eliminated and replaced with conciliation, mediation, or
arbitration (see below for details).
Reforms in the
Minimum Wage The minimum wage is an obstacle to the formation of new
workplaces (see analysis in the next chapter). It needs to be
I propose a
scaled minimum wage, age-related and means tested and also connected
In other words,
the minimum wage should vary according to age, other (non-wage)
income and skills.
Measures: Early Retirement Macedonia must allow the employer to
encourage the early retirement of workers which otherwise might be
rendered technologically redundant. Early retirement is an efficient
mechanism to deal with under-employment and hidden unemployment.
ameliorated its unemployment problem largely through early
severance package, which includes a handsome up-front payment
combined with benefits from the Employment Fund, can encourage early
retirement. A special Early Retirement Fund can be created by setting
aside receipts from the privatization of state assets and from
dividends received by the state from its various shareholdings, to
provide excess severance fees in case of early retirement.
Measures: Reduction of Working Hours Another classic administrative
measure (lately implemented in France) is a reduction in the standard
working week (in the number of working hours). For reasons analyzed
in the next chapter, we recommend NOT to implement such a move,
despite its obvious (though false) allure.
Measures: Public Works All the medically capable unemployed should be
compulsorily engaged in public works for a salary equal to their
unemployment benefits (Workfare). A refusal by the unemployed person
to be engaged in public works should result in the revocation of his
?unemployed? status and of all the benefits attaching thereto.
would not have recommended public works.
?The weakness in
the proposal to use disguised unemployment for the construction of
social overhead capital projects arises from inadequate consideration
of the problem of providing necessary subsistence funds to maintain
the workers during the long waiting period before the projects yield
consumable output. This can be managed somehow for small-scale local
community projects when workers are maintained in situ by their
relatives ? but not when workers move away. The only way to raise
subsistence funds is to encourage voluntary savings and expansion of
marketable surplus of food purchased with these savings.?
But public works
financed by grants or soft loans can serve as an interim
?unemployment sink? ? a buffer against wild upswings in unemployment.
The situation in
Macedonia is so extreme, that it is comparable only to the Great
Depression in the USA.
In the USA, in
1932, the Civilian Conservation Corps (CCC) was established to tackle
nature conservation work for the young and unmarried men. They
planted trees, erected flood barriers, put out forest fires and
constructed forest roads and trails. They lived in work camps under a
semi-military regime. They were provided with food rations and a
modest monthly cash allowance, medical care and other necessities.
The CCC employed 500,000 people at its peak ? and 3 million people
throughout its existence.
In any case,
there is always the danger that public works will simply displace
existing employment. Labour union and local municipality endorsements
should, therefore, be strictly observed.
Measures: Public Education and Dissemination of Information ? The
Functioning of the Employment Bureau
dissemination of information regarding employment practices,
opportunities, market requirements, etc. should be a prime component
of the activity of the Employment Bureau. It must transform itself
from a mere registry of humans to an active exchange of labour. This
can be done through computerized employment exchanges and
To change the
image of the Employment Bureaus from places where the unemployed
merely registers and receive benefits to a labour exchange can be
done by publishing examples of successful job placements.
I recommend to
prominently display and disseminate information regarding the rights
of the unemployed, their obligations and services available to them
and to publish weekly or daily employment bulletins.
seminars to the unemployed and to employers in which the rights of
the unemployed, their obligations and the services offered to them
and to their potential employers will be described. This can be
combined with employment fairs. Separately, the unemployed should be
taught in these seminars how to find a job, prepare a curriculum vita
(biography), entrepreneurial skills, preparation of business plans,
marketing plans, feasibility studies, credit applications and
Bureaus in collaboration with the local authorities should organize
job clubs, labour exchanges and employment fairs ? places where
employers can meet potential employees, currently unemployed.
I recommend to
oblige the mass media by law to dedicate at least an hour weekly
(could be broken to as many as 4 segments of 15 minutes each) to
unemployment: disseminate information, organize a televised labour
exchange, a televised entertainment show (where employers will offer
a job to a winner) and so on.
I recommend to
link by a Wide Area Network (WAN) or Intranet with firewalls the
National Employment Bureau, the Health Fund, the Pension and
Disability Insurance Fund and the Social Security Office. To cross
and compare information from all these bureaus on a real time basis
(to specifically cater to the needs of an unemployed person) and on a
periodical basis for supervision and control purposes.
Employment Bureau should maintain a regular presence in employment
fairs abroad. Many fairs are global and work can be obtained in them
for Macedonian workers (especially the more skilled).
employment Contract A ?National Employment Contract? should be signed
between the government, the trade unions, the employers (Chamber of
Commerce) and the Central Bank. All parties will have to concede some
will guarantee the formation of new work places against a freeze on
employee compensation, a separate treatment of part time labour
(exclusion from collective bargaining), flexibility on minimum wages
and with regards to job security, hiring and firing procedures,
social and unemployment benefits, indexation of wages and benefits,
the right to strike and the level of salaries.
will obligate themselves to fixed quantitative targets over a number
of years against the receipt of the unemployment benefits of the
newly hired (or another form of subsidy or tax incentive) and/or a
discount in social contributions.
Employment Contract should aim to constrain inflation by limiting
wage gains to productivity gains (for instance, through dividends on
the shareholdings of the workers or through stock options schemes to
In return, the
trade unions will be granted effective control of the shop floor.
This is the neo-corporatist approach.
It means that
the tripartite social contract will increase employment by moderating
wage demands but the unions will control policies regarding
unemployment insurance, employment protection, early retirement,
working hours, old age pensioners, health insurance, housing,
taxation, public sector employment, vocational training, regional aid
and subsidies to declining and infant industries.
In Sweden and
Germany there is co-determination. Workers have a
quasi-constitutional shop floor representation even in non-wage
related matters (such as the work organization).
instituted an ?Incomes Policy? intended to ensure that employers,
pressurized by unions, do not raise wages and prices. In Sweden, for
instance, both labour and management organizations are responsible to
maintain price stability. The government can intervene in the
negotiations and it can always wield the whip of a wage freeze, or
wage AND price controls. In Holland the courts can set wages. Wages
and unemployment benefits are perceived as complementary economic
stabilizers (contra the business cycle).
possibility is a Guaranteed Wage Plan ? Employers assure minimum
annual employment or minimum annual wages or both to those employees
who have been with the firm for a minimum of time.
Firms and trade
unions must forego the seniority treatment (firing only the newly
hired ? LIFO, last in first out). The firm should be given a free
hand in hiring and firing its employees regardless of tenure.
Settlement The future collective agreements should all be
subordinated to the National Employment Contract. All these
agreements should include a compulsory dispute settlement through
mediation and arbitration. All labour contracts must include clear,
compulsory and final grievance procedures. Possibilities include
conciliation (a third party bring management and labour together to
try and solve the problems on their own), mediation (a third party
makes nonbonding suggestions to the parties) and arbitration (a third
party makes final, binding decisions), or Peer Review Panels ? where
the management and the employees together rule on grievances.
allowing out of court settlement of disputes arising from the
dismissal of employees through arbitration, an employees’ council,
trustees or an employer-employee board.
Modes of Work Work used to be a simple affair of 7 to 3. It is no
longer the case.
In Denmark, the
worker can take a 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 or further
education, or a 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 2 months). It
makes economic sense, because their activities replace social
In Britain, part
time workers receive the same benefits in case of layoffs and
wrongful dismissals and in Holland, the pension funds grant pensions
to part time workers.
treatment should be granted by law and in the collective agreements
to night, shift and weekend work (for instance, no payment of social
All modes of
part-time, flextime, from home, seasonal, casual and job sharing work
should be encouraged. For example: two people sharing the same job
should be allowed to choose to be treated, for tax purposes and for
the purposes of unemployment benefits, either as one person or as two
persons and so should shift workers. In Bulgaria, a national part
time employment program encouraged employers to hire the unemployed
on a short term, part time basis (like our Mladinska Zadruga).
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.
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 (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 in
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