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.

Table of Contents Introduction. 1 Overview of Unemployment Guyana. 2 General Causes and Unemployment... 4 Types in of

Unemployment Policy Measures Current policy measures to reduce unemployment in Guyana ..9 Other potential policy measures to reduce unemployment ..................................12 Conclusion. 14 Bibliography 15

INTRODUCTION
Unemployment is loosely defined as those who are temporary laying in wait to be recalled by their previous employer or those without a job who have actively searched for work in the previous month. There is also the natural rate of unemployment to consider which has several definitions. In this paper, the definition used will be the rate of unemployment at which job vacancies equal the number of unemployed workers. Of all the issues of great concern in Guyana, a naturally rich yet highly underdeveloped nation, unemployment is one of the major ones. Irrespective of its small population, Guyanas unemployment rate is considerably high at 11.7 percent relative to the more developed economies in CARICOM. This rate which was computed based upon the population census conducted in 2004 is ranked second ranking behind Suriname (with an unemployment rate of 13.7 per cent) in the same year (CARICOM Selected Economic Indicators1997, 2002 -2006). This rate also disguises the additional problem of underemployment in Guyana where by persons are working but not their desired capacity in terms of compensation, hours or level of skill and experience (InvestorWords.com). The twin problems of unemployment and underemployment are among the many reasons that Guyana also suffers from a brain drain whereby many of its highly qualified and highly skilled labour are leaving the shores of Guyana in order to search for jobs that are better suited to their skills. It is important therefore to identify the major underlying reasons for unemployment in Guyana and instituted policies that can be effective in eliminating or alleviating these reasons. In looking at the phenomenon of unemployment in Guyana, the main objectives 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.

OVERVIEW OF UNEMPLOYMENT IN GUYANA: 2002 CENSUS

Diagram showing Key Labour force Indicators from the Guyana 2002 Population Census

Employed 235,095

Not in Labour force 209,052

Unemployed 31,072

Some facts about unemployment in Guyana (Bureau of

Statistics, 2007) 1. According the census, approximately, eighty-eight (88.3) percent of persons within the labour force accounted for the employed while approximately 12 % (11.7) were unemployed. 2. A comparison of the unemployment rate across the years of data showed that the unemployment rate dropped significantly in 1992 from its 1980 counterpart and then remain constant into 2002. It was 16.8 % in the census year of 1980 and moved to 11.7% in 1992 when the Household Income and Expenditure Survey (HIES) was conducted and remain at this rate for the census year of 2002. 3. Employment levels are higher for males than for females (89.9 percent for males compared with 84.9 percent for females). Alternatively, it can be said that unemployment rates are higher for females (10.1 percent for males and 15.1 for females. 4. In terms of Guyanas regions, the highest unemployment rates by order of significance are shown among workers in Regions 8, 3

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 worst unemployment rates even above the national level with most figures showing approximately 25% unemployment for women in these regions. 5. School leavers (15-19 age group for Guyana) had the highest unemployment rate in terms of age ( 36.3 percent). This rate for group was almost five times as high as the 35 -39 and 40-44 age groups. The next most significant rate occurs in the 20-24 age grouping (16.9 percent) but this rate was only twice as high as the previous older age groups. It is at the beginning of this age group that the unemployment begins to have the greatest adverse effects since most likely the main breadwinners in the family will not come from the 15-19 age group. 6. The gender differential in unemployment among the different age groups showed that the female unemployment rate remained lower (and significantly so in some cases) than the male unemployment rate for all the age-groups below and inclusive of the 30-34 group. A possible explanation for this occurrence was that males at all ages are more likely to accept odd jobs as a means of ending their unemployment. 7. A striking fact was that 7 percent of persons in the age group 75 and over reported themselves as unemployed. This rate was also higher for women than for men (11.3% for women vs 6% for men)- suggesting perhaps the loss of a male main incomeprovider. In terms of policy, the significant number of persons still seeking jobs well into their retirement ages indicates that pensions and other welfare mechanisms may be insufficient to financially support them.

GENERAL TYPES AND CAUSES OF UNEMPLOYMENT

Unemployment can be view rather differently depending on the school of economic thought being followed. The Keynesian and classical economists each possess different views about the nature of unemployment in terms of whether it is voluntary or involuntary. The classical theorist believed that short-run unemployment is temporary and will eventually be eliminated when the reduced demand for labour leads to a fall in wages and a subsequent return to a new equilibrium position. Long run unemployment under the classical model is considered voluntary as the unemployed worker is making a personal decision to refuse the equilibrium price being offered for his/her labour services. Under the Keynesian model, involuntary unemployment arises out of insufficient demand for goods and services during downturns in the economy. Hence, the situation arises whereby the number of persons out of work is more than the number of job vacancies. The causes of unemployment cover a wide range of, not only economic dimensions, but also social and political being categorized as four main types 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 people moving 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 5

Irrespective of whether the size of the labour force is constant or not, in each period there will be new entrants seeking employment of the employed or unemployed sometimes leaving the labour force. At other times, or simultaneously, some persons may be changing jobs, fluctuating demand for products inducing the firing and hiring of workers at varying periods and/or expanding or opening businesses as well.

Asymmetry of Information and Duration of Job Matching These two causes are highly interrelated. Information about the characteristics of those in search of work and the nature of jobs opening cannot be known instantaneously and evaluated; job matches take 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 between the skills demanded and supplied in a given area or imbalance between the supplies and demands for workers across areas.

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 technologically advanced world, more skilled labour is required in varying areas and sectors. When the demand for a product, product A, in one sector increases simultaneously with lowering demand for another product, product B, if wages were flexible downwards and the unemployed, as a result of reduced demand for product A, could costlessly become competitive 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 inflexible downwards. The cost of adjustment is also high enough to prevent such movements, whether it entails becoming trained, more education and/or geographical relocation. It can also be a time consuming venture that may or may not be profitable in the long run. In terms of required skills and training, over the past decades, Guyana has been experiencing brain-drain, retarding the availability of human capital locally to meet job requirements. Structural Unemployment in Guyana LINMINE has seen severe employment reductions over the decades. In its heyday, bauxite employed over 6,000 persons. By the end of 1991, employment was 3,100; at the end of 1994, following the 1993/1994 MINPROC-led restructuring, it was down to less than 2000. Since that time, levels have fallen with the gradual transfer of social services and privatization of the power plant. In October of last year, the figure was down to 1250 persons (Guyana: Land of Six Peoples, 2009). Trade liberalization and globalization has added a new dynamic, so to speak, to structural unemployment in Guyana. Local markets are flooded with cheap foreign goods, stifling both infant and old industries. Many investors as well are averse from such risky investments, since the risk of default is high; sunk costs may accumulate to seven digit figures. In addition, free movement of capital and labour has made local economic development even more difficult: local investors can easily invest monies in the most profitable ventures external to Guyana; semi-skilled and skilled labourers can freely seek occupation in more developed countries where their

compensation would be greatest and utility maximized, compounding an already prevalent brain-drain predicament in Guyana. DEMAND-DEFICIENT (CYCLICAL) UNEMPLYOMENT Demand-deficient unemployment, also known as cyclical unemployment, is associated with fluctuations in the business activity/cycle and it occurs when a decline in aggregate demand in the output market causes the aggregate demand for labour to decline in the 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 since economic 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 human capital, asymmetric information, risk aversion and worker status & social norms Unions: Nominal wages often cannot be cut freely due to the presence 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

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 is significant; 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 9

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 for restricted 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 varying forms 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 link between 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 11

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 12

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 discussion that 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 GUYANA POLICY MEASURES TO REDUCE UNEMPLOYMENT IN

The National Development Strategy 2001 -2010 included various policies initiatives to be implemented in response to the phenomenon of unemployment and underemployment in Guyana. The strategy stated that such a goal required accelerating the pace of economic growth and thus creating greater avenues for employment, infusing greater labour flexibility and mobility to Guyanas labour market, ensuring indirect labour costs to employers are not excessively high and directing a labour intensive path to economic growth as much as possible. The specific policy actions recommended in the NDS are mainly 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 these policies, structural, frictional and real wage unemployment can be greatly reduced which in turn can lead to a reduction in the natural rate of unemployment. Supply side policies may take the form of manipulating and reforming passive income supportive payment or implementing more active labour market policies and other policies aim at improving the productivity of businesses. The National Development Strategy 2001-2010 included the following active labour market policies: Increasing the skills, education and productivity of the labour force by expanding and improving the quality of technical and vocational education and instituting an ongoing and relevant onthe-job training programme. In this regard, the Guyana Budget for 2009 has allocated $ 400 million for the construction of two new 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 paid employees or self employed in the setting up of a small business. Implementing a full functioning labour market information system so that job-seekers and policy makers can have access to timely information on employment opportunities and other labour market data. Improving the mobility of labour so that workers may more easily move from within industries or geographic locations. The NDS document posited that such mobility require the implementation of a combination of policies that included a decompression of wage scales, improved labour market information and improved technical and vocational training and education. Training and education is crucial to improving occupational mobility of labour while availability of timely and reliable information can assist in improving geographical mobility. Geographical mobility can also be improved by regional initiatives such as the CARICOM Single and Economy which involves the coordination of economic and social policies to allow for the free movement of labour among other factors of production.

An additional active labour market policy being currently being employed by the government but not specially stated in the NDS chapter on labour and employment policies included policies to ensure low-skilled individuals can earn more by working than by not working. Such policies were described by Lawrence Katz (1994, pg 53) in the report titled, Reducing Unemployment: Current Issues and Policy Options. In Guyanas case, these include: The increase in the minimum wage from GY$25,000 to GY$35,000 per month in 2006. The effect of such a policy action should be to increase earnings of low-skilled workers without being so high so that they are priced out of the market. In this way, it is hoped that those unemployed persons who previously did not accept certain jobs because the wages were too low and did not met their reservation wages would not be induced to accept these jobs. However, there is great deal of skepticism with respect to this particular policy action as a rise in the minimum wage theoretically leads to a reduction in the number of employment opportunities. Direct government subsidies are also given out to what might be termed the working poor single parent, that is, low income

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single parents are being given vouchers to offset day care expenses for their children. Expansionary Fiscal policies and Monetary policies These are also used by government to stimulate aggregate demand during periods where this demand in falling resulting in cyclical fluctuation in unemployment. There have been debates concerning which of these two policies should be used. Expansionary fiscal policies have been criticized due to its effect of increasing government budget deficits while monetary policies can become ineffective due to the liquidity trap. The National Development Strategy 2001-2010 for Guyana has many fiscal policy options as a means of reducing unemployment. These include: Restructuring the Companies Act to eliminate overlaps between the personal income tax and corporate taxes so as to negate double taxation for registered micro, small and medium-scale enterprises. Implementing a lower corporate tax rate for registered small companies.

Instituting legislation that will facilitate charging registered micro and small scale businesses household instead of commercial rates for public utilities Additionally, the Guyana Budget for 2009 has allocated sum of monies toward physical infrastructure development which can be very crucial in attracting private investment in the form of new businesses and the expansion of old businesses. One example of this infrastructure development includes the public-private partnership initiative to fund the building of the Berbice River Bridge. With respect to the monetary policy, the 2009 budget reported that the focus of this policy is maintaining price and exchange rate stability and promoting private sector credit. It has been posited that price stability can be especially important deterrent to increasing unemployment and can also assist in creating employment. In report titled, Reducing Unemployment: Current Issues and Policy Options, Donald Brash (1994, pg 51) sited New Zealands experience with the resolute pursuit of price stability beginning from 1989. At that time, the country began to pursue a policy to move its consumer price inflation in the range of 0 to 2%. He stated that although this country experience a period of prolonged recession, the economy eventually 16

rebounded and the unemployment rate was significantly reduced from its pre-recession peak. Given this evidence, he argued that focusing on price stability is a necessary prerequisite for reducing unemployment in lasting way. Additionally, according a report by Robert Keleher (1997, pg 5), price stability can result in important employment expansion effects. Price stability basically results in lower inflation. With lower inflation, there is lower variability between individual prices which enables the price system to better serve its information and allocative functions. Hence the economy operates more efficiently and grows faster. Employment grows as well. Lower inflation can also mean lower interest rates. According to Keleher, the sustained reduction in inflation gradually lowered expectations of future inflation in the United States of America which caused the inflationary expectations component of both short term and long term interest rate to melt away resulting in lower overall interest rates. Lower interest rates are one way to stimulate investment and thus increase employment. Linden Economic Advancement Programme (LEAP) is collaboration between Government of Guyana and European Union programme with the aim of fostering entrepreneurship and enterprise for economic development of the town of Linden. The town of Linden has suffered severe structural unemployment due to the decline of the bauxite industry which was this towns main economic activity and source of employment. LEAP is designed to achieve economic diversification away from this traditional industry through increased investment, and emergence of a viable entrepreneurial sector. This programme was launched in 2002 and has sum of 12 million allocated towards the execution of the project over a seven year period (Linden Economic Advancement Programme 2009). A public-private partnership is expected to replace LEAP which comes to an end in June 2009. Linden Economic Advancement Fund (LEAF) is credit fund and a complementary programme to LEAP that is intended to provide accessible micro small and medium credit facilities in support entrepreneurial activities. The total amount allocated to this fund is 1.9 million (Linden Economic Advancement Programme 2009). This fund has so far enabled new an expanded investment in the areas other than the mining industry such as agriculture, forestry, manufacturing and services. It is thus the intention of this fund to reduce structural unemployment by allowing persons in the community of linden to become involved in job creation by setting up their own businesses to replace the jobs lost with the decline of the bauxite industry.

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The overall LEAP project has also been seeking to reduce another element responsibility for structural unemployment, that is, occupational immobility. Thus, in 2004, this project in collaboration with the Guyana Training Agency organized Prior Learning Assessment and Certification Training Programmes in the areas of Electrical techniques, Welding, Carpentry, Administration and Information Technology. The project also supports micro and small enterprises by providing relevant training programmes to equip these businesses with the knowledge to succeed. On the other hand, the reduction of geographical immobility is not targeted as the main aim of the project is to create employment within the community of Linden for the people already resident in this area.

OTHER POTENTIAL POLICY UNEMPLOYMENT

OPTIONS

TO

REDUCING

Potential Supply side policy options Reducing the power of unions can increase employment in a competitive labour market as unions tend to raise the price of labour above the equilibrium level resulting in disequilibrium unemployment. The reduction in strike activity may also reduce down time for the firm and increase efficiency and output as the firm utilizes all of its labour resources. Reducing barrier to entry results in a more competitive market as more firms are able to enter into a particular industry. Currently, Guyanas fixed or landline telecommunication sector is owned and controlled by one firm but the breaking of this monopoly power will enable more firms to enter the market and potentially increase employment. Currently, the mobile cellular service sector is liberalized and in additional to GT&T, an additional company, Digicel, is providing Guyanese with cellular phone service. In a Stabroek News article dated February, 15, 2007, Chief Executive Officer of the company at that time, 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 of unemployment benefit insurance can also encourage the unemployed to become employed. In report titled, Reducing Unemployment: Current Issues and Policy Options, Feldstein (1994, pg 52) in looking at the situation existing in the United States recommended a reformed unemployment insurance system so that this benefit is reduced to a level where those who previously had a high paying job will have the 18

incentive to find a new job. At the same time, the truly disadvantaged low skilled employee that may find it harder to get a new job will continue 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 fewer but more skilled workers. These firms are usually reluctant to lay off these skilled employees as they risk losing their skills to other firms. Thus, as a result of new and improved technologies, employment in seasonal industries has become more stable over the years. Hiring subsidies In the report titled, Reducing Unemployment: Current Issues and Policy Options, Mortensen (1994, pg 52) present numerical estimates of alternative policies that can be used to reduce unemployment in the United States economy. From these estimates, he surmised that a firing tax would raise rather than lower unemployment because such a tax would impede workers mobility. Reducing unemployment benefits would be effective but would have the tragic side effect of forcing many persons who could not find jobs into poverty. Cutting payroll taxes such as the social security tax could also reduce unemployment but not enough to justify the accompanying adverse effect of reducing pension and health care for retirees. Thus, based on his estimates, he concluded that a hiring subsidy to employers would significantly reduce unemployment but would not adversely affect the poor or the elderly. The best way to finance this subsidy would be through a payroll tax which according to Mortensen model has minimal disincentive effects on hiring in the context of the US economy. Other active labour market policies In the report titled, Reducing Unemployment: Current Issues and Policy Options, James Heckman (1994, pg 53) suggested that the returns to government training programs for displaced workers are generally very low. Hence, he recommended using early childhood intervention to increase the chances that youths from disadvantaged backgrounds stay in school. He determined that a super-Headstart program for pre-school children has proven effective in raising their educational attainment and reducing criminal activity in subsequent years. Of course, these programs would also yield benefits in the long run but in the short run, he also suggested that government subsidies to the employers of less-skilled adult workers would be more effective in reducing unemployment among this group. According Heckman, such subsidies would be better than government training programs partly due to the fact that such workers are less malleable than youth. 19

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

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Conclusion
Unemployment in Guyana is difficult to effectively assess due to the lack of fully functionally labour market information systems and the absence of an on-going labour force survey. However, the data that is available reveals some to the areas where the government policies needs to be strengthened. The higher unemployment rate in women can be addressed perhaps by gearing policies to eliminate or reduce any labour market or pre-labour market discrimination that may be contributing to this phenomenon in Guyana. According the National Development strategy 2001, women are not only paid significantly less than men for similar work, but they are far less represented in higher-paying occupations and higher positions in occupational hierarchies. Additionally, the report stated that womens participation in the labour force continue to predominate as low-paid domestic workers, and in many jobs which are nonunionised, unregulated and not subject to a minimum wage. In terms of statistics, in July 2005, a United Nations report stated that while 30.7 per cent of parliamentarians in Guyana were women and womens representation on the Regional Democratic Councils had grown to 30 per cent, challenges still persisted in improving the nature of employment for women due to patriarchal norms and stereotypical and discriminatory cultural practices towards women (Committee on the Elimination of Discrimination against Women, 2005). Additionally, without effective policies to reduce this rate in youths, serious social and economic problems can result. Social problems include youths who may turn to criminal activities in the absence of legal employment. Young people who are unable to find unemployment in Guyana are migrating to other countries assisting in the development of these countries perpetuating a growing brain drain problem that has even dire consequences for Guyanas economy. The migration of Guyanas skilled workforce means that investors will be have an incentive to established businesses in a country that does not have the skills required for these businesses further reducing the employment opportunities for the rest of Guyanas working age population. According the Employment Report 2006 produced by the Ministry of Labour, the government of Guyana has committed to improving employment opportunities in the long run in the specific areas of ecotourism, information and communication technology. Appropriate policies should also be instituted to target the short run as well since unemployment cannot be reduced in the long run if this rate remains high in the current period.

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