self-employed, unemployed, entrepreneur, shadow economy, labour, labor, unemployment,contracts,business, enterprise

Self-employed or Unemployed?

For the 5th consecutive year, Panama’s unemployment numbers are increasing – up to 7% – even in an economy which is touted as the highest growing in Latin America & the Caribbean.  Almost 50% of the unemployed are under 24 years of age, with more women unemployed than men.  School leavers typically only have a 50% employment rate.

However, these figures cited seem to hide a situation within Panama’s economy – the “self-employed” or casual labour that are not even counted in this 7%.  40% of Panama’s labour force – some 606,000 workers, are not counted as “unemployed” because they have casual labour or are “self-employed”.

So, for example, if someone loses their job and then goes back to subsistence farming – they are no longer counted among the “unemployed” – because “look – they have a job“.   If they are lucky enough to have a family with a little plot of land still in the interior of the country where they can live off the land – at least to somewhat make ends meet. Their alternatives are finding another job – perhaps with a lower salary or becoming “self-employed” or simply taking odd jobs as they arise.

Self-employed versus entrepreneurs

Don’t make the mistake of thinking that the self-employed in Panama are all entrepreneurs, either.  Only about 1% of the self-employed move from being self-employed to entrepreneurs – the rest are simply making the best of a bad situation. This is created by necessity, not by design.

For some, they actually manage to create a business and an income that was better than their employment.  But this is not the case for all of the self-employed.  For others, this means going back to work for the company where they were employed part time, as a contractor rather than an employee, and then taking whatever odd jobs they can get in their field to make ends meet the rest of the time.  And for many, this is simply a temporary solution until they are able to get a job again.

In total, only 4% of the self-employed in Panama consider themselves to be entrepreneurs.  Few of the self-employed are hiring others to work for them and creating and innovating.  Panama’s culture is typically risk-adverse – taught to seek job security.  Only 3% of the entrepreneurs make it past 3 years, with little support offered for entrepreneurship and small business.

Typically, AMPYME is supporting small businesses, such as hair-dressers, IT support companies, printers, etc.  These are backbone small businesses, but not entrepreneurs.

Economic Growth

According to published figures, Panama is still seeing economic growth.  The challenge is that this growth is in the ports, Panama Canal, public infrastructure projects (such as the building of the Metro 2 line),, & government spending.  None of these areas are high-employment.  Agriculture, industry, commerce, tourism, real estate, banking & casinos – all of these are showing “modest figures” – i.e. they are not in the red (yet).  Fishing & local services, however, are in the red.  This means that the industries which typically provide the most areas of employment in Panama are actually just getting by – and they are getting  by through “restructuring” – cutting labour costs.

This year, Panama has seen El Rey supermarkets cut back on their 24-hour service – closing at night and getting rid of an entire shift of workers.  The overnight sales represented only 2% of their gross income, and so in restructuring their hours, eliminating the shift, they are able to increase their returns substantially.

Add to this the increases in salaries that have been implemented over the past 8 years – which automatic increases happening every 2-3 years.  With these wage increases, Panamanian firms have restructured their labour forces, down-sizing and reorganising.  So, it’s no wonder that 40% of the work force is now “casual labour” or “self-employed” rather than employed with all the rights and regulations that this entails.

However, it also means that 40% of the workforce + 7% that is unemployed (47%) – are outside of the social security system – minimum health care and no pension plan!

This 47% has no coverage in the case of accidents on the job, no health care plan, no pension plan, and no holiday pay.

This 47% includes the accountant that is selling hotdogs on the street at midday, the lady that is baking empanadas daily to sell to her neighbours and goes out daily at 5am to sell at breakfast time, and the young banking employee that is now driving a taxi.  It’s the hairdresser that comes to your home to do your hair, because she doesn’t actually have a salon that she works in. It’s the lady that comes to your house once a week to clean & iron, because that’s what she does to make ends meet.

But, luckily for Panama – we only have 7% unemployment!

A global issue

Of course, the numbers are just representative of Panama. Colombia has 50% casual labour as do many countries in Central America.  Even in Argentina, the figures are higher than expected.  Within the US, some 25% of those who lose their jobs consider starting their own business, rather than continuing to look for a job. In the 35-44 year range, there is the highest number of start up businesses.  26 million people in the US are unemployed and these levels are expected to stay up at least another 5 years.

Solutions

Unfortunately, solutions need to be considered long-term!  1 in 3 companies in Panama has problems getting skilled labour for well-paying positions.  There is a disconnect between the current needs of companies – especially in technology & customer service – and the education and preparation that school leavers are given.

The typical skills that employers are looking for at any time are:

  • Communication.
  • Teamwork.
  • Problem solving.
  • Initiative and enterprise.
  • Planning and organising.
  • Self-management.
  • Learning.
  • Technology.

This, unfortunately, is not what is taught in Panamanian schools. While they do ask for “group work”, there is no actual teaching done of what team-work is and why doing the homework or assignment as a group will actually enable you to learn essential life skills.  Similarly, while baseball and football are very popular in Panama, there does not seem to be a lot of attention placed on how these sports can improve life-skills and ensuring that students understand the importance of working together.

Communication is not a skill that is taught in school – especially nothing like crucial conversations or difficult conversation, empathy or social skills that will allow a school-leaver to adapt to a work environment.

Self-management, planning and organising, initiative & enterprise are also not taught in schools – leaving school-leavers ill-prepared for joining teams where they are not constantly supervised and having to be self-starters!  Homework is still micro-managed in schools and students are simply expected to “do as I say”, rather than to think outside the box and come up with their own ideas.  Critical thinking and challenging the system is certainly not welcomed.

Panama needs, however, over 150,000 technically qualified staff for commerce, construction, logistics, tourism, industry & agriculture.  It needs a further 25,000 professionals in these areas!  Some of these are as basic a plumbers, electricians, carpenters, metal workers, and painters. But even these skilled labourers are not available.

Immigration

Like it or not – Panama needs more foreign immigrants.  But not just any immigrants!  If we look internationally – 14% of the US population is foreign-born, but 30% of US entrepreneurs are foreigners. For example, Elon Musk. In fact – Silicon Valley would not exist if the US only depended on locally-born talent! In New Zealand or Australia, 25% of the population is actually foreign-born.

For innovation & entrepreneurship to grow – Panama needs immigrants.  People that are willing to come & invest in the country – entrepreneurs with business ideas.  But in order to attract that kind of investment – Panama needs an education system that will provide the thought processes & creativity that are required for entrepreneurs to succeed.  Not employees that need to be micro-managed – but ones that will think independently and creatively -that know how to work in teams and brainstorm new ideas.

There’s still a long road ahead for Panama in moving from unemployment to entrepreneurship!

 

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