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Cuba To Cut 500,000 Government Workers, Reduce Restrictions On Private Enterprise

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HAVANA — Cuba announced Monday it will cast off at least half a million state workers by early next year and reduce restrictions on private enterprise to help them find new jobs – the most dramatic step yet in President Raul Castro's push to radically remake employment on the communist-run island.

Castro suggested during a nationally televised address on Easter Sunday that as many as 1 million Cuban workers – about one in five – may be redundant. But the government had not previously laid out specific plans to slash its work force, and the speed and scope of the coming cutbacks were astounding.

Cuba's official work force is 5.1 million – meaning nearly 10 percent of all employees could soon be out of a government job.

Workers caught off guard by the announcement said they worried whether the tiny private sector could support so many new jobs, a sentiment echoed by some analysts.

"For me the problem is the salaries, that's the root of it," said Alberto Fuentes, a 47-year-old government worker. "If they fire all of these people, how can they all become self-employed?"

The layoffs will start immediately and continue through April 2011, according to a statement from the nearly 3 million-strong Cuban Workers Confederation, which is affiliated with the Communist Party and the only labor union allowed by the government. Eventually the state 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, but its intent appeared to deal a body-blow to the decades-old social safety net upon which the island's egalitarian society is built.

Castro has long complained that Cubans expect too much from the government, which pays average monthly salaries of just $20 but also provides free education and health care and heavily subsidizes housing, transportation and basic food. Because unemployment is anathema in a communist society, state businesses have been forced to carry many people who do almost nothing.

"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.

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 allowing the unrestricted sale of cell phones, privatizing some state-run barbershops, licensing more private taxis and distributing fallow land to private farmers – have moved Cuba toward economic reform since July 2006, when serious intestinal illness nearly killed Fidel Castro and forced him to cede power to Raul.

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."

Some Cubans also said they supported the changes, hoping that even a small dose of private enterprise would go a long way in a country where state mismanagement has led to frequent shortages of everything from potatoes to toothpaste.

"There are many things that are deficient now including services, which, of course, the private sector will improve on," said Moraima Santos, a 65-year-old employee in the Office of the City of Havana Historian. "I completely support the government giving private employment licenses. That's going to benefit a lot of people."

Others were skeptical.

Arch Ritter, an expert on the Cuban economy at Carleton University in Ottawa, Canada, said the cutbacks rely too heavily on a work force unaccustomed to going into business for itself.

"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."

Castro has said repeatedly he is seeking to reform the pay system to hold workers accountable for production, but change has been slow in coming.

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 are so low.

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 before. 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.

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Associated Press writer Andrea Rodriguez contributed to this report.

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