Unemployment
I. 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.?
The Statistics 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.
A limited 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.
All the 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.
I recommend 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.
The statistics Bureau should propose and the government should adopt a Standard National
Job Classification.
The Unemployment Benefits Unemployment benefits if excessive and wrongly applied are
self -perpetuating because they provide a strong disincentive to work.
Unemployment 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.
Unemployment 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.
Eligibility to 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.
Unemployment 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.
Unemployment 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.
No health insurance should be paid for those unemployed for more than 6 months.
No unemployment 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.
The unemployed 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
policy.
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 electricians 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.
Encouraging 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.
Additionally, 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 new worker.
Employers will receive benefits for a new worker only if he was registered with an
unemployment office for 6 consecutive months preceding his new employment.
I recommend linking the size of investment incentives (including tax holidays) to the
potential increase in employment deriving from the investment project.
Encouraging 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
workers family should also be considered and catered to (kindergarten or school for his
children, work for his wife and so on).
Fixed term labour contracts with a lower cost of dismissal and a simplified procedure for
firing workers must be allowed (see details below).
I recommend 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 reformed.
I propose a scaled minimum wage, age-related and means tested and also connected to
skills.
In other words, the minimum wage should vary according to age, other (non-wage) income
and skills.
Administrative 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
