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UNIVERSITY OF GUYANA

FACULTY OF SOCIAL SCIENCES

B SC IN ECONOMICS

ECN 429 - LABOUR ECONOMICS II

Causes of Unemployment, & Policies that may be

implemented to reduce same.

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Table of Contents

Introduction. 1

Overview of Unemployment in

Guyana. 2

General Causes and Types of Unemployment... 4

Unemployment Policy MeasuresCurrent policy measures to reduce unemployment in Guyana

..9Other potential policy measures to reduce

unemployment ..................................12

Conclusion.14

Bibliography15

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INTRODUCTION

Unemployment is loosely defined as those who are temporary laying inwait to be recalled by their previous employer or those without a job

who have actively searched for work in the previous month. There isalso the natural rate of unemployment to consider which has severaldefinitions. In this paper, the definition used will be the rate ofunemployment at which job vacancies equal the number ofunemployed workers.

Of all the issues of great concern in Guyana, a naturally rich yet highlyunderdeveloped nation, unemployment is one of the major ones.Irrespective of its small population, Guyanas unemployment rate isconsiderably high at 11.7 percent relative to the more developedeconomies in CARICOM. This rate which was computed based upon the

population census conducted in 2004 is ranked second ranking behindSuriname (with an unemployment rate of 13.7 per cent) in the sameyear (CARICOM Selected Economic Indicators1997, 2002 -2006). Thisrate also disguises the additional problem of underemployment inGuyana where by persons are working but not their desired capacity interms of compensation, hours or level of skill and experience(InvestorWords.com). The twin problems of unemployment andunderemployment are among the many reasons that Guyana alsosuffers from a brain drain whereby many of its highly qualified andhighly skilled labour are leaving the shores of Guyana in order tosearch for jobs that are better suited to their skills. It is important

therefore to identify the major underlying reasons for unemployment inGuyana and instituted policies that can be effective in eliminating oralleviating these reasons.In looking at the phenomenon of unemployment in Guyana, the mainobjectives of this paper will be to:

Provide a general overview of the unemployment situation

existing in Guyana

Identify the main causes of unemployment in general and those

that are specific to Guyana

Examine current and potential policy measures to combat

unemployment in Guyana.

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OVERVIEW OF UNEMPLOYMENT IN GUYANA: 2002 CENSUS

Diagram showing Key Labour force Indicators from the Guyana2002 Population Census

Some facts about unemployment in Guyana (Bureau ofStatistics, 2007)

1. According the census, approximately, eighty-eight (88.3) percentof persons within the labour force accounted for the employedwhile approximately 12 % (11.7) were unemployed.

2. A comparison of the unemployment rate across the years of datashowed that the unemployment rate dropped significantly in1992 from its 1980 counterpart and then remain constant into2002. It was 16.8 % in the census year of 1980 and moved to11.7% in 1992 when the Household Income and ExpenditureSurvey (HIES) was conducted and remain at this rate for thecensus year of 2002.

3. Employment levels are higher for males than for females (89.9percent for males compared with 84.9 percent for females).Alternatively, it can be said that unemployment rates are higherfor females (10.1 percent for males and 15.1 for females.

4. In terms of Guyanas regions, the highest unemployment ratesby order of significance are shown among workers in Regions 8,

Employed

235,095

Not in Labourforce

209,052

Unemployed

31,072

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1, 2, 10 and 5 (19.4%, 16.7%, 15.5%, 15.2%, and 14.6 %respectively). Women in Region 1, 2, 5, 8, and 10 have the worstunemployment rates even above the national level with mostfigures showing approximately 25% unemployment for women inthese regions.

5. School leavers (15-19 age group for Guyana) had the highestunemployment rate in terms of age ( 36.3 percent). This rate forgroup was almost five times as high as the 35 -39 and 40-44 agegroups. The next most significant rate occurs in the 20-24 agegrouping (16.9 percent) but this rate was only twice as high asthe previous older age groups. It is at the beginning of this agegroup that the unemployment begins to have the greatestadverse effects since most likely the main breadwinners in thefamily will not come from the 15-19 age group.

6. The gender differential in unemployment among the differentage groups showed that the female unemployment rateremained lower (and significantly so in some cases) than themale unemployment rate for all the age-groups below andinclusive of the 30-34 group. A possible explanation for thisoccurrence was that males at all ages are more likely to acceptodd jobs as a means of ending their unemployment.

7. A striking fact was that 7 percent of persons in the age group 75and over reported themselves as unemployed. This rate was alsohigher for women than for men (11.3% for women vs 6% for

men)- suggesting perhaps the loss of a male main income-provider. In terms of policy, the significant number of personsstill seeking jobs well into their retirement ages indicates thatpensions and other welfare mechanisms may be insufficient tofinancially support them.

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GENERAL TYPES AND CAUSES OF UNEMPLOYMENT

Unemployment can be view rather differently depending on the schoolof economic thought being followed. The Keynesian and classical

economists each possess different views about the nature ofunemployment in terms of whether it is voluntary or involuntary. Theclassical theorist believed that short-run unemployment is temporaryand will eventually be eliminated when the reduced demand for labourleads to a fall in wages and a subsequent return to a new equilibriumposition. Long run unemployment under the classical model isconsidered voluntary as the unemployed worker is making a personaldecision to refuse the equilibrium price being offered for his/her labourservices. Under the Keynesian model, involuntary unemploymentarises out of insufficient demand for goods and services duringdownturns in the economy. Hence, the situation arises whereby the

number of persons out of work is more than the number of jobvacancies.

The causes of unemployment cover a wide range of, not only economicdimensions, but also social and political being categorized as four maintypes of unemployment. These types are as follows:

Frictional Unemployment

Structural Unemployment

Demand-deficient (Cyclical) Unemployment

Seasonal Unemployment

FRICTIONAL UNEMPLOYMENT

Frictional unemployment is unemployment that comes from peoplemoving between jobs, careers, and locations.

Causes of Frictional Unemployment

Dynamism of the labour market

Asymmetry of information

Time it takes to match unemployed workers with employers with

job vacancies

Dynamism of the Labour Market

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Irrespective of whether the size of the labour force is constant or not,in each period there will be new entrants seeking employment of theemployed or unemployed sometimes leaving the labour force. At othertimes, or simultaneously, some persons may be changing jobs,

fluctuating demand for products inducing the firing and hiring ofworkers at varying periods and/or expanding or opening businesses aswell.

Asymmetry of Information and Duration of Job Matching

These two causes are highly interrelated. Information about thecharacteristics of those in search of work and the nature of jobs

opening cannot be known instantaneously and evaluated; job matchestake time.

Frictional Unemployment in Guyana

All causes of frictional unemployment are applicable to approximately

every nation, with varying degrees of concentration. All businesses and

organizations contribute to this type of unemployment; each firm has

employee-turnover, whether it is downsizing, reforming, laying off and

an increased demand for workers in periods of expansion and boom.

Even in such a small economy as Guyanas, frictional unemployment

cannot be ignored, especially when noting that the larger percentage

of the labour force comprise of unskilled and/or semi-skilled workers

who complete generally homogeneous tasks.

In terms of information, the Labour Market Information System (LMIS)

is key in connecting potential employees with employers. Hopefully

with development, a more sophisticated approach to connecting

employees and employers, like a website with vacancy information, job

descriptions, and potential employees resumes, locally will be taken.

STRUCTURAL UNEMPLOYMENT

Structural unemployment arises when there is a mismatch betweenthe skills demanded and supplied in a given area or imbalancebetween the supplies and demands for workers across areas.

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Causes of Structural Unemployment

Technological Advancement

Inflexibility of wages

Low occupational & geographical mobility

Lack of required skills & training

None of these causes are mutually exclusive. In a technologicallyadvanced world, more skilled labour is required in varying areas andsectors. When the demand for a product, product A, in one sectorincreases simultaneously with lowering demand for another product,product B, if wages were flexible downwards and the unemployed, as aresult of reduced demand for product A, could costlessly becomecompetitive potential employees in the sector with increased demand,labourers could always be employed. However, due to unions, social

norms, government legislation and the like, wages are inflexibledownwards. The cost of adjustment is also high enough to preventsuch movements, whether it entails becoming trained, more educationand/or geographical relocation. It can also be a time consumingventure that may or may not be profitable in the long run. In terms ofrequired skills and training, over the past decades, Guyana has beenexperiencing brain-drain, retarding the availability of human capitallocally to meet job requirements.

Structural Unemployment in Guyana

LINMINE has seen severe employment reductions over the decades. Inits heyday, bauxite employed over 6,000 persons. By the end of 1991,employment was 3,100; at the end of 1994, following the 1993/1994MINPROC-led restructuring, it was down to less than 2000. Since thattime, levels have fallen with the gradual transfer of social services andprivatization of the power plant. In October of last year, the figure wasdown to 1250 persons (Guyana: Land of Six Peoples, 2009).

Trade liberalization and globalization has added a new dynamic, so tospeak, to structural unemployment in Guyana. Local markets areflooded with cheap foreign goods, stifling both infant and old

industries. Many investors as well are averse from such riskyinvestments, since the risk of default is high; sunk costs mayaccumulate to seven digit figures. In addition, free movement ofcapital and labour has made local economic development even moredifficult: local investors can easily invest monies in the most profitableventures external to Guyana; semi-skilled and skilled labourers canfreely seek occupation in more developed countries where their

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compensation would be greatest and utility maximized, compoundingan already prevalent brain-drain predicament in Guyana.

DEMAND-DEFICIENT (CYCLICAL) UNEMPLYOMENT

Demand-deficient unemployment, also known as cyclicalunemployment, is associated with fluctuations in the businessactivity/cycle and it occurs when a decline in aggregate demand in theoutput market causes the aggregate demand for labour to decline inthe face of downward inflexibility in real wages.

Causes of cyclical unemployment

Lack of demand for labour- Running of the economy below capacity

Wage Rigidity

Unemployment Benefits

Lack of demand for labour

Duly noting that this point is in itself a dimension of defining cyclical

unemployment, it is important to identify it also as a cause of such

unemployment since it may be as a result of the economy running

below capacity. When the business cycle is in a downturn, to which the

lack of spending and consumption contributes, the demand for goods

and services fall; as a result, workers are laid off. However, when

business cycles peak, cyclical unemployment will be low sinceeconomic output is being maximized; as the economy recuperates, the

problem of cyclical unemployment declines.

Wage Rigidity

There are five primary sources of wage rigidity: unions, specific humancapital, asymmetric information, risk aversion and worker status &social norms

Unions: Nominal wages often cannot be cut freely due to thepresence of unions. Contractual agreements made between

employers and unions, on behalf of their members, make wages

inflexible downwards.

Specific human capital: This refers to employer investments in

workers, especially in firm-specific investments. Employers would

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prefer not to lower wages, especially for employees they have

invested heavily in via training, education, etc., to prevent a

turnover of such workers. This would ultimately be costly and

unbeneficial to the firm.

Asymmetric information: Employer-employee communication issignificant; however there is almost always some degree of

asymmetry of information. The employers generally have more

accurate information on the performance of the business and the

demand for the product or service provided than the employee.

Wage cuts are less preferable than lay-offs in times of low

demand since, due to asymmetric information, employees

usually dont believe their employers on issues of firm

performance; employees tend to believe that the employers are

only attempting to generate more profit at their expense. Therefore, the lay-offs instead of wage cuts prevail; workers

would take their employers claims more seriously.

Risk aversion: This aspect of wage rigidity is especially

associated with firms which have internal labour markets of long

forged employer-employee relationships. Seniority-based layoffs

- last hired, first laid off - are practiced in such instances, instead

of wage cuts to all workers, in an attempt to achieve a constant

wage/income stream, instead of a fluctuating one.

Worker status & social norms: Many unemployed workers prefer

not to work with relatively small firms because of the sense of

status they may have. In addition, the wages offered in lower

paying jobs may be below their reservation wages. Taking such

jobs, even for a short period, may determine the range of

compensation they can obtain from such a firm since the

employer may be convinced that their reservation wage was

lower than previously thought to be. Prevailing market wages

may also be seen as social norms, inhibiting the unemployed

from undercutting the wages of employed workers.

Unemployment Benefits

This may also be a cause of cyclical unemployment; if such benefits

are overvalued, they be a hindrance instead of an aid in reducing

unemployment rates. If unemployment benefits are greater than a

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workers reservation wage, the said worker would not be encouraged to

seek employment, since humans generally place a greater value on

leisure rather than labour.

Cyclical Unemployment in Guyana

The presence of all causes of cyclical unemployment is felt locally.

Trade unions by their very nature create distortionary effects in the

labour market. Trade unions in Guyana presently have far less

influence than they had years ago; it is also expected that as the

economy develops, via increased privatization and enhanced

competition, provisions made for trade unions will be less and less,

since they would be no longer seen as effective in their operations and

goals. Until Guyana has reached that time however, trade unions will

continue to distort market operations locally by petitioning forrestricted wage fluctuations and legislation that is anti-efficient for

producers and company owners.

Due to the high cost of living and the low real value of the Guyanese

dollar, the government may restrict wage fluctuations, without the

coercion of trade union bodies, in an attempt to provide a minimum

wage upon which its citizens can exist at a certain socially acceptable

level.

Aside from the distortions created in the labour market by varyingforms of wage rigidity, Guyana has been operating below capacity for a

large number of years. This is identifiable by the gross underutilization

of potential economic goldmines warranted this nation in natural

deposits. Without the economic motion, the corresponding labour will

not be required, hence unemployment. Taking into consideration the

movement of the business cycle, that itself creates employment and

unemployment, the levels of unemployment prevalent in Guyana are

unnecessarily high because the economy is operating below capacity.

SEASONAL UNEMPLOYMENT

Seasonal unemployment is unemployment induced by fluctuations in

the demand for labour that are regularly anticipated and follow a

systematic pattern over the course of a year.

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Causes of Seasonal Unemployment

Climatic Conditions

Leakages between jobs

Specialization

Crop Cycles

Production Cycles

Climatic Conditions

Distinctly separate from the effects of weather conditions on crop

cycles is the effect of climatic conditions on other dimensions of

economic activity that foster growth, for example construction

processes. Aside from the fact that unfavourable weather patterns may

generally reduce the efficiency of workers, it may also extend periods

of unemployment resulting from delayed shipments, increased cost of

economic activities in bad weather, increased risk in such conditions

and the like.

Leakages between jobs

A large amount of unemployment is brought about by frequent

changes in employers; if a worker performs only a small fraction of a

trade he is more subject to unemployment than one who has a more

inclusive craft (Haber). The majority of workers hired by contracting

firms, for example, are not kept full time because the need for their

services do not continually exist; only skilled and semi-skilled workers

are kept full time. Therefore, unskilled labourers, or even labourers

specific in a trade, like contractors, are left with no alternative but to

change employers frequently as their tasks are completed. Seasonal

unemployment is borne out of this process of changing employers.

Specialization

According to Haber, it is difficult to measure the influence of

specialization on seasonal unemployment; however a strong linkbetween the two aspects can be established. Labourers specific in one

trade, for example specializing in making concrete forms, will be out of

work after the period of mixing and/or the desired quantity of concrete

blocks is over and/or is met. These labourers must then go in search of

other job opportunities specific to their trade. Workers in such a

position can attempt to qualify themselves in more than one trade. The

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problem however associated with this attempt at reducing such

frequent unemployment is that employers generally prefer each

worker specific only to a specific trade; a worker specific to one trade

is generally more efficient in that regard since he/she is more

productive and faster when engaging in the activity. Therefore, even if

a worker is qualified in more than one trade, he/she may loss practice

of one, while actively engaging in the others. Modern construction

demands speed, not knowledge; and speed requires maximum

specialization (Haber).

Seasonal Unemployment in Guyana

From the research conducted on the practical dimensions of the first

three causes of seasonal unemployment, climatic conditions, leakages

between jobs and specialization, literature has not been located in

terms of Guyana on these aspects. From the information garnered

however, climatic conditions, in terms of construction, may not have a

major impact on the processes of work; snow is not synonymous with

Guyana, which is the major hindrance pinpointed under the cause.

During the rainy seasons though, the speed of construction may be

slowed down and the productivity of workers in inclement weather may

also be affected, unless the construction is indoor.

In terms of leakages between jobs and specialization, the researchers

believe that this phenomenon would prevail regardless of the country,assuming that there are not specific legislative arrangements formed

to evade unemployment as a result of such and/or that a natural flow

of the business cycle exists. During booms in economic activity,

construction of new firms and/or repairing/maintenance of older ones

are likely to occur; employment of workers involved in trades will be

generally continuous over the period of the boom(s). However, after

said period passes, the natural effect will take place and seasonal

unemployment for such labourers will prevail.

In terms of seasonal unemployment, crop and production cycles are

generally self-explanatory. In terms of crops, many have on and off

seasons, periods of the year where they flourish and other times when

they cannot be found, other crops have long gestation periods so to

speak and times of abundant harvest. More labour is required during

harvest time relative to periods of planting and growth. This is

especially related to the sugar and rice industries in Guyana. Skilled

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labour is generally required all year round, but unskilled labour is laid

off at certain periods, left to look for alternative employment during

such periods. Production cycles are a less applicable cause of seasonal

unemployment in Guyanas circumstances since our manufacturing

sector is small and underdeveloped. However, in more developed

nations, more labour is required during high demand for certain

products at specific times, like Christmas, Easter and the like.

Summary of Major causes of unemployment in Guyana

The following are some of the major causes of unemployment in

Guyana, some previously mentioned. This list however is not

exhaustive and the causes are not mutually exclusive.

Dynamism of the labour market Limited education

Lack of required skill levels

Lack of structured work ethic

Decreasing demand for primary products

Attitude towards employers

Low occupational & geographic mobility

Trade liberalization & globalization

Free movement of capital & labour

Wage rigidity

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UNEMPLOYMENT POLICY MEASURES

The policy measures to combat unemployment can be specific to one particular type of

unemployment but it is usually the case that several types of unemployment can be

reduced with the implementation of one specific policy initiative. Thus, in the discussionthat follows these policies will be described in general with references being made to the

types of unemployment that can be addressed through individual measures.

CURRENT POLICY MEASURES TO REDUCE UNEMPLOYMENT IN

GUYANA

The National Development Strategy 2001 -2010 included variouspolicies initiatives to be implemented in response to the phenomenonof unemployment and underemployment in Guyana. The strategy

stated that such a goal required accelerating the pace of economicgrowth and thus creating greater avenues for employment, infusinggreater labour flexibility and mobility to Guyanas labour market,ensuring indirect labour costs to employers are not excessively highand directing a labour intensive path to economic growth as much aspossible. The specific policy actions recommended in the NDS aremainly supply side policies and to a lesser extent fiscal policies.

Supply side policies

Supply side policies are designed to increase productivity and cause an

outward shift in the aggregate supply curve of an economy. With thesepolicies, structural, frictional and real wage unemployment can begreatly reduced which in turn can lead to a reduction in the naturalrate of unemployment. Supply side policies may take the form ofmanipulating and reforming passive income supportive payment orimplementing more active labour market policies and other policiesaim at improving the productivity of businesses.

The National Development Strategy 2001-2010 included the followingactive labour market policies:

- Increasing the skills, education and productivity of the labourforce by expanding and improving the quality of technical andvocational education and instituting an ongoing and relevant on-the-job training programme. In this regard, the Guyana Budgetfor 2009 has allocated $ 400 million for the construction of twonew technical and vocational training centres in Regions 3 and 5.The budget also allocated funds towards the training of single

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parents to increase their chances of being employed as paidemployees or self employed in the setting up of a small business.

- Implementing a full functioning labour market informationsystem so that job-seekers and policy makers can have access to

timely information on employment opportunities and otherlabour market data.

- Improving the mobility of labour so that workers may more easilymove from within industries or geographic locations. The NDSdocument posited that such mobility require the implementationof a combination of policies that included a decompression ofwage scales, improved labour market information and improvedtechnical and vocational training and education. Training andeducation is crucial to improving occupational mobility of labourwhile availability of timely and reliable information can assist in

improving geographical mobility. Geographical mobility can alsobe improved by regional initiatives such as the CARICOM Singleand Economy which involves the coordination of economic andsocial policies to allow for the free movement of labour amongother factors of production.

An additional active labour market policy being currently beingemployed by the government but not specially stated in the NDSchapter on labour and employment policies included policies to ensurelow-skilled individuals can earn more by working than by not working.

Such policies were described by Lawrence Katz (1994, pg 53) in thereport titled, Reducing Unemployment: Current Issues and PolicyOptions. In Guyanas case, these include:

- The increase in the minimum wage from GY$25,000 toGY$35,000 per month in 2006. The effect of such a policy actionshould be to increase earnings of low-skilled workers withoutbeing so high so that they are priced out of the market. In thisway, it is hoped that those unemployed persons who previouslydid not accept certain jobs because the wages were too low anddid not met their reservation wages would not be induced to

accept these jobs. However, there is great deal of skepticismwith respect to this particular policy action as a rise in theminimum wage theoretically leads to a reduction in the numberof employment opportunities.

- Direct government subsidies are also given out to what might betermed the working poor single parent, that is, low income

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single parents are being given vouchers to offset day careexpenses for their children.

Expansionary Fiscal policies and Monetary policies

These are also used by government to stimulate aggregate demandduring periods where this demand in falling resulting in cyclicalfluctuation in unemployment. There have been debates concerningwhich of these two policies should be used. Expansionary fiscalpolicies have been criticized due to its effect of increasing governmentbudget deficits while monetary policies can become ineffective due tothe liquidity trap.

The National Development Strategy 2001-2010 for Guyana has manyfiscal policy options as a means of reducing unemployment. Theseinclude:

- Restructuring the Companies Act to eliminate overlaps betweenthe personal income tax and corporate taxes so as to negatedouble taxation for registered micro, small and medium-scaleenterprises.

- Implementing a lower corporate tax rate for registered smallcompanies.

- Instituting legislation that will facilitate charging registered microand small scale businesses household instead of commercial

rates for public utilitiesAdditionally, the Guyana Budget for 2009 has allocated sum of moniestoward physical infrastructure development which can be very crucialin attracting private investment in the form of new businesses and theexpansion of old businesses. One example of this infrastructuredevelopment includes the public-private partnership initiative to fundthe building of the Berbice River Bridge.

With respect to the monetary policy, the 2009 budget reported thatthe focus of this policy is maintaining price and exchange rate stabilityand promoting private sector credit. It has been posited that price

stability can be especially important deterrent to increasingunemployment and can also assist in creating employment. In reporttitled, Reducing Unemployment: Current Issues and Policy Options,Donald Brash (1994, pg 51) sited New Zealands experience with theresolute pursuit of price stability beginning from 1989. At that time,the country began to pursue a policy to move its consumer priceinflation in the range of 0 to 2%. He stated that although this countryexperience a period of prolonged recession, the economy eventually

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rebounded and the unemployment rate was significantly reduced fromits pre-recession peak. Given this evidence, he argued that focusing onprice stability is a necessary prerequisite for reducing unemploymentin lasting way.

Additionally, according a report by Robert Keleher (1997, pg 5), pricestability can result in important employment expansion effects. Pricestability basically results in lower inflation. With lower inflation, there islower variability between individual prices which enables the pricesystem to better serve its information and allocative functions. Hencethe economy operates more efficiently and grows faster. Employmentgrows as well. Lower inflation can also mean lower interest rates.According to Keleher, the sustained reduction in inflation graduallylowered expectations of future inflation in the United States of Americawhich caused the inflationary expectations component of both shortterm and long term interest rate to melt away resulting in lower overall

interest rates. Lower interest rates are one way to stimulateinvestment and thus increase employment.

Linden Economic Advancement Programme (LEAP) is collaborationbetween Government of Guyana and European Union programme withthe aim of fostering entrepreneurship and enterprise for economicdevelopment of the town of Linden. The town of Linden has sufferedsevere structural unemployment due to the decline of the bauxiteindustry which was this towns main economic activity and source ofemployment. LEAP is designed to achieve economic diversificationaway from this traditional industry through increased investment, and

emergence of a viable entrepreneurial sector. This programme waslaunched in 2002 and has sum of 12 million allocated towards theexecution of the project over a seven year period (Linden EconomicAdvancement Programme 2009). A public-private partnership isexpected to replace LEAP which comes to an end in June 2009.

Linden Economic Advancement Fund (LEAF) is credit fund and acomplementary programme to LEAP that is intended to provideaccessible micro small and medium credit facilities in supportentrepreneurial activities. The total amount allocated to this fund is1.9 million (Linden Economic Advancement Programme 2009). This

fund has so far enabled new an expanded investment in the areasother than the mining industry such as agriculture, forestry,manufacturing and services. It is thus the intention of this fund toreduce structural unemployment by allowing persons in the communityof linden to become involved in job creation by setting up their ownbusinesses to replace the jobs lost with the decline of the bauxiteindustry.

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The overall LEAP project has also been seeking to reduce anotherelement responsibility for structural unemployment, that is,occupational immobility. Thus, in 2004, this project in collaborationwith the Guyana Training Agency organized Prior LearningAssessment and Certification Training Programmes in the areas of

Electrical techniques, Welding, Carpentry, Administration andInformation Technology. The project also supports micro and smallenterprises by providing relevant training programmes to equip thesebusinesses with the knowledge to succeed. On the other hand, thereduction of geographical immobility is not targeted as the main aim ofthe project is to create employment within the community of Linden forthe people already resident in this area.

OTHER POTENTIAL POLICY OPTIONS TO REDUCINGUNEMPLOYMENT

Potential Supply side policy options

Reducing the power of unions can increase employment in acompetitive labour market as unions tend to raise the price of labourabove the equilibrium level resulting in disequilibrium unemployment.The reduction in strike activity may also reduce down time for the firmand increase efficiency and output as the firm utilizes all of its labourresources.

Reducing barrier to entry results in a more competitive market as more

firms are able to enter into a particular industry. Currently, Guyanasfixed or landline telecommunication sector is owned and controlled byone firm but the breaking of this monopoly power will enable morefirms to enter the market and potentially increase employment.Currently, the mobile cellular service sector is liberalized and inadditional to GT&T, an additional company, Digicel, is providingGuyanese with cellular phone service. In a Stabroek News article datedFebruary, 15, 2007, Chief Executive Officer of the company at thattime, Tim Bahrani, stated that Digicel has created 200 jobs in Guyana thus providing employment for about 2000 people. Hence, making the case of how

liberalization of a sector can expand employment in a country.

Reducing passive income support payment in the form ofunemployment benefit insurance can also encourage the unemployedto become employed. In report titled, Reducing Unemployment:Current Issues and Policy Options, Feldstein (1994, pg 52) in looking atthe situation existing in the United States recommended a reformedunemployment insurance system so that this benefit is reduced to alevel where those who previously had a high paying job will have the

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incentive to find a new job. At the same time, the truly disadvantagedlow skilled employee that may find it harder to get a new job willcontinue to benefit from an adequate level of income.

Improved technology can assist in reducing seasonal unemployment as

seasonal industries become less labour intensive and engaged fewerbut more skilled workers. These firms are usually reluctant to lay offthese skilled employees as they risk losing their skills to other firms.Thus, as a result of new and improved technologies, employment inseasonal industries has become more stable over the years.

Hiring subsidies

In the report titled, Reducing Unemployment: Current Issues and PolicyOptions, Mortensen (1994, pg 52) present numerical estimates ofalternative policies that can be used to reduce unemployment in the

United States economy. From these estimates, he surmised that afiring tax would raise rather than lower unemployment because such atax would impede workers mobility. Reducing unemployment benefitswould be effective but would have the tragic side effect of forcingmany persons who could not find jobs into poverty. Cutting payrolltaxes such as the social security tax could also reduce unemploymentbut not enough to justify the accompanying adverse effect of reducingpension and health care for retirees. Thus, based on his estimates, heconcluded that a hiring subsidy to employers would significantlyreduce unemployment but would not adversely affect the poor or theelderly. The best way to finance this subsidy would be through a

payroll tax which according to Mortensen model has minimaldisincentive effects on hiring in the context of the US economy.

Other active labour market policies

In the report titled, Reducing Unemployment: Current Issues and PolicyOptions, James Heckman (1994, pg 53) suggested that the returns togovernment training programs for displaced workers are generally verylow. Hence, he recommended using early childhood intervention toincrease the chances that youths from disadvantaged backgroundsstay in school. He determined that a super-Headstart program for

pre-school children has proven effective in raising their educationalattainment and reducing criminal activity in subsequent years. Ofcourse, these programs would also yield benefits in the long run but inthe short run, he also suggested that government subsidies to theemployers of less-skilled adult workers would be more effective inreducing unemployment among this group. According Heckman, suchsubsidies would be better than government training programs partlydue to the fact that such workers are less malleable than youth.

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Introducing profit sharing as part of the compensation given toseasonal workers will assist employers in reducing wage costs duringoff peak production periods. Hence, they are less likely to lay offworkers during this period.

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Conclusion

Unemployment in Guyana is difficult to effectively assess due to thelack of fully functionally labour market information systems and the

absence of an on-going labour force survey. However, the data that isavailable reveals some to the areas where the government policiesneeds to be strengthened.

The higher unemployment rate in women can be addressed perhaps bygearing policies to eliminate or reduce any labour market or pre-labourmarket discrimination that may be contributing to this phenomenon inGuyana. According the National Development strategy 2001, womenare not only paid significantly less than men for similar work, but theyare far less represented in higher-paying occupations and higherpositions in occupational hierarchies. Additionally, the report stated

that womens participation in the labour force continue to predominateas low-paid domestic workers, and in many jobs which are non-unionised, unregulated and not subject to a minimum wage. In termsof statistics, in July 2005, a United Nations report stated that while 30.7per cent of parliamentarians in Guyana were women and womensrepresentation on the Regional Democratic Councils had grown to 30per cent, challenges still persisted in improving the nature ofemployment for women due to patriarchal norms and stereotypical anddiscriminatory cultural practices towards women (Committee on theElimination of Discrimination against Women, 2005). Additionally,without effective policies to reduce this rate in youths, serious socialand economic problems can result. Social problems include youths whomay turn to criminal activities in the absence of legal employment.Young people who are unable to find unemployment in Guyana aremigrating to other countries assisting in the development of thesecountries perpetuating a growing brain drain problem that has evendire consequences for Guyanas economy. The migration of Guyanasskilled workforce means that investors will be have an incentive toestablished businesses in a country that does not have the skillsrequired for these businesses further reducing the employmentopportunities for the rest of Guyanas working age population.

According the Employment Report 2006 produced by the Ministry ofLabour, the government of Guyana has committed to improvingemployment opportunities in the long run in the specific areas of eco-tourism, information and communication technology. Appropriatepolicies should also be instituted to target the short run as well sinceunemployment cannot be reduced in the long run if this rate remainshigh in the current period.

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