The Labour Divide | Page 5

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
electrician’s 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 worker’s 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
under-employment and hidden unemployment.
Romania ameliorated its unemployment problem largely through early
retirement.
Offering a severance package, which includes a handsome up- front
payment combined with benefits from the Employment Fund, can
encourage early retirement. A special Early Retirement Fund can be
created by setting aside receipts from the privatization of state assets
and from dividends received by the state from its various shareholdings,
to provide excess severance fees in case of early retirement.
Administrative Measures: Reduction of Working Hours
Another classic administrative measure (lately implemented in France)
is a reduction in the standard working week (in the number of working
hours). For reasons analyzed in the next chapter, we recommend NOT
to implement such a move, despite its obvious (though false) allure.
Administrative Measures: Public Works
All the medically capable unemployed should be compulsorily engaged
in public works for a salary equal to their unemployment benefits
(Workfare). A refusal by the unemployed person to be engaged in
public works should result in the revocation of his