The Labour Divide | Page 8

Additionally, entrepreneurship skills should be developed in small business skill training programs and in programs designed to enhance the management skills of existing entrepreneurs.
All retraining and re-qualification programs should double as advisory services. . The instructors / guides / lecturers should be obliged to provide legal, marketing, financial, sales-related or other consulting. Student who will volunteer to teach basic skills will be eligible to receive university credits and scholarships.
Entrepreneurship and Small Businesses
Small businesses are the engine of growth and job creation in all modern economies. In the long run, the formation of small businesses is Macedonia’s only hope. The government should encourage the provision of micro-credits and facilities to set up small and home-based businesses by the banking system. In the absence of reaction from or collaboration with the banking system, the state itself should step in to provide these funds and facilities (physical facilities and services – such as business incubators).
Thus, the state should encourage small businesses through microcredits, incubators, tax credits, and preference to small businesses in government procurement.
II. The Facts
Labour Mobility, Unemployment Benefits and Minimum Wages
We are all under the spell of magic words such as “mobility”, “globalization” and “flextime”. It seems as though we move around more frequently, that we change jobs more often and that our jobs are less secure. The facts, though, are different. The world is less globalized today than it was at the beginning of the century. Job tenure has not declined (in the first 8 years of every job) and labour mobility did not increase despite foreign competition, technological change and labour market deregulation. The latter led to an enhanced flexibility of firms and of hiring and firing practices (temporary or part time workers) but this is because many workers actually prefer casual work with temporary contracts to a permanent position. Granted, people have been and are moving from failing firms and declining industries to successful ones and booming sectors. But they are still reluctant to change residence, let alone emigrate. Thus, jobs remain equally stable in deregulated as in regulated labour markets. Yet, this phobia of losing one’s job (arising from the aforementioned erroneous beliefs) serves to increase both the efficiency and productivity of workers and to moderate their wage claims. It is safe to assume that collective bargaining led to increased wages and, thus, to less hiring and less flexible labour markets. It is therefore surprising to note that despite the declining share of unionized labour in two thirds of the OECD countries – unemployment remained stubbornly high. But a closer look reveals why. Both France and the Netherlands (where unionized labour declined from 35% of the actually employed to 26%), for instance, extended the coverage of collective agreements to non- unionized labour. It is only where both union membership and coverage by collective agreements were both reduced (USA, UK, New Zealand, Australia) that employment reacted favourably. Thus, at the one extreme we find the USA and Canada where agreements are signed at the firm or even individual plant level. At the other pole we have Scandinavia where a single national agreement prevails. All the rest are hybrid cases. Britain, New Zealand and Sweden decentralized their collective bargaining processes while Norway and Portugal centralized it. The evidence produced by hybrid cases is not conclusive. Decentralized bargaining clearly reduced wage pressures but centralized bargaining also moderated wage demands (union leaders tended to consider the welfare of the whole workforce. Still, it seems that it is much preferable to choose one extreme or the other rather than opt for hybrid bargaining. The worst results, for instance, were obtained with national bargaining for specific industries. Hybrid Europe saw its unemployment soar from 3 to 11% in the last 25 years. Pure system USA maintained its low rate of 4-5% during the same quarter century. These opposing moves cannot be attributed to monetary or fiscal policies. This is because all economic policies are geared towards increasing employment. Budget cuts, for instance, depress demand and job formation in the short term but, by lowering real interest rates, they encourage investment and job formation in the longer term. The cycle is: Employment protection laws make it hard to fire workers and hard for fired workers to find new jobs. The longer one is unemployed, the lesser the chances of employment. Skills rust and the long term unemployed become the unemployable. Gradually, desperation sets in and the unemployed stop looking for a job. Their absence is conspicuous in that they do not restrain the wages paid to the employed. They have become part of the structural unemployment. Blanchard and Wolfers studied 20 countries between the years 1960-96. They applied 8 market rigidities to their subjects. The average unemployment increased by 7.2% in this period. But in countries with strict employment protection unemployment rose by double the