Panama Investor Blog

Panama's unemployment rate

Panama has come a long way since my arrival to its shores in 1997. As I recall, employment was officially in the teens and things were looking worse with the upcoming American pullout with the canal treaty. Wow, have things changed. Official unemployment is around 6.7% and the reality is that there is a great challenge in finding qualified personnel. I don't see this being alleviated any time soon as more business is on the way, the canal construction is well underway and more hotels will be opening requiring hoards of service people. The real challenge for Panama is skilled labor and the only way I see this will change is to open up immigration to skilled labor for other Latin American countries. This will help to bring the level of service up dramatically as these new imports will train Panamanain's. If nothing is done the labor problem will become acute and businesses will look elsewhere for a larger skilled labor pool.

Machine translated from La Prensa;

Roberto González Jiménez
[email protected]

To analyze unemployment in Panama is to pass on a road full of paradoxes.  The economy has begun to grow at rates as in Asia, but the official unemployment rate is just barely reduced. Meanwhile, companies talk of the lack of skilled labor and cannot even find drivers to work in the new urban buses.

 Although the country exceeded the international economic crisis without major problems, growing by 3.2% in 2009 and in 2010 regained the momentum after the crisis with a growth rate around 7%, unemployment declined only slightly in the last year .

According to the latest data from the Comptroller General of the Republic, the unemployment rate was 6.5% in August 2010, a level similar to a year earlier (6.6%).

The Household Survey also shows that the participation of the population in the labor market recorded a decline compared to August 2009, from the rate of 64.1% to 63.5%.

According to statistics from the Ministry of Labor and Workforce Development (Mitradel), in 2010 there were 334,766 labor contracts, only 1269 more than last year.

Apart from having a larger population of slightly more than 15 years (46,723 persons), how can we understand this apparent contradiction?

 "This explains how we are growing," says Rolando Gordon, professor of the Faculty of Economics, University of Panama, who argues that the fastest growing segment in the country is transportation, storage and communications, "activities to compete using technology, but not many jobs. "

Sectors such as manufacturing or agriculture, which create jobs, have grown only marginally.  "We should encourage the growth of other sectors that create jobs," he advised.

 Yet workers missing

While unemployment figures do not reflect a sharp decline, there are sectors of the economy that can not fill their job demands.

 In the hotel, for example, is quite difficult to find qualified bilingual people ", argues Sara Pardo, president of the Panamanian Association of Hotels. The gap between the worker and the job is in education and training.  "In the end it all comes back to the same," he laments.

However, not only are there unfilled needs for highly qualified personnel.

Recently, the Minister of Presidency, Demetrio Papadimitriu, acknowledged they were having trouble recruiting all the staff needed to work on the Metro Bus, which offers a fixed wage and social security registration, two conditions that should be attractive an economy where informality rate is 42%, according to 2009 data.

 Is there no work or no desire to work and follow in the formal economy?

 Gordon argues that not everyone who is in the informal sector wants to be like that.  "Many can not find work.  Many would switch to the formal sector. "

 It also stresses that "perhaps the rate of 6.5% unemployment is disguised as busy as we are expecting of those that sells a rose in the Central."

 The context

 Although unemployment fell  between 2009 and 2010, expands the perspective for the last decade, it is observed a drastic drop.

 According to data from the Economic Commission for Latin America and Caribbean (ECLAC), urban unemployment rose from 15.3% in Panama in 2000 to 7.9% in 2009.

 In the region as a whole, there was also a downward trend, but not as pronounced.

 The urban unemployment rate rose from 10.3% in 2000 to 8.1% in 2009.  And by 2010 estimated to be completed in 7.5%, a reflection of economic recovery.

 However, the ECLAC warns that "indicators of recovery does not ensure a decent job growth" and that the region, like the rest of the world, faces the challenge of transforming the way they produce to develop sustainable economies in the long term .

Skilled manpower a big challenge for Panama

With over $13 billion in government infrastructure programs in the works, it is becoming more obvious to everyone that Panama does not have the necessary work force to accomplish its goals. And of course if government is having problems, so is the private sector. As this article points out, there is a real shortage of skilled workers and it will become more acute each year as these projects gain momentum. Fortunately the president sees the problem and says we must open up the country to foreign workers. The unions won't like it and neither will many entrenched Panamanians, but it is the only solution and one that will benefit the country in many more ways than just filling a job position. Panamanians need to work with skilled workers from other countries in order to learn new skills. They also need to see how performance is rewarded with higher salaries and benefits. This is the only way I see Panama able to build the bright future that lies ahead.

MINERVA BETHANCOURTH
[email protected]

The pace has been injected into state infrastructure investments could be damaged by the lack of skilled labor to build, management and manage the ten projects that are underway or about to start simultaneously.

According to the ambitious government estimates, contained in a report that contains 34 projects, some on wheels and other procurement-undated 34 000 direct jobs generated in the coming years.

The project will require more workers is the construction of the first Metro line, which should employ some 3 000 people from 2011 to 2013.

The scenario is complex, considering that 2011 is the year "spike" in regard to employment generation product of the construction of the third set of locks of the Panama Canal. For this work, it required 6 000 748 people.

According to analysts and experts in the labor market, the number of people trained not grow on par with the works, and it is likely that by 2013 demand will exceed supply.

The director of consultancy Insight Economy, Jovany Morales, estimated that from next year there will be a "bottleneck" and that 2014 will be a critical year.

Ricardo Martinelli administration is no stranger to this reality and, quietly, begin to say in forums and meetings with entrepreneurs that if the country lacks the necessary personnel should import people from abroad.

The amount of labor may increase as new projects up for tender, as the Financial Tower or the amphitheater in the area of Amador.

However, it would be wrong train workers only in the area of construction, because this business is cyclical and volatile.

Last October, Manpower Panama presented the results of the Talent Shortage Survey 2010, which found difficulty in finding workers.

38% of employees in Panama has difficulty filling key positions within their organizations.

In Panama, the most difficult to fill jobs are: technicians, sales managers, secretaries, personal assistants, administrative assistants and administrative support personnel, and accounting and finance staff.

Luis Fernando González, regional manager of Manpower and the Dominican Republic, said she is seeing a recovery in employment in many parts of the world, but where space is available, employers have difficulty filling.

The problem is not the number of potential candidates, but the lack of talent because not enough people with the skills required in the right place.

The matter is compounded, since employers are looking for a specific skill set and are less willing to preventive contracts. In the case of Panama that could see it coming, to set a target investment of $ 13 billion 600 million in five years.

Panamanian paychecks are on the rise

General wages in Panama have increased significantly and this time it is not due to government minimum wage increases. This is market driven wage increase as demand for labor outstrips supply and those with skills are rewarded with higher pay. Everyone wants higher pay, but it is always the demand that sets the wage in a free market.  In a recent study conducted by Price/Waterhouse/Cooper they show a 14.3% increase over 2008 wage rate. According to the study transnational companies are responsible for the highest increase with nearly 10% over 2009. Increase wages mean increase spending and everyone wins especially when the increase is from an outside source.

Low unemployment and higher wages go hand in hand and there is no doubt that Panama is doing well in these areas. As more international companies come into the country demand will continue to increase and so will wages. Now what is needed is an educational system to help Panamanians acquire better skills and a more open immigration policy that will bring additional know-how and competition into the labor market.

The Job-Killing Impact of Minimum Wage Laws

This year Panama increased their minimum wage and I railed against it to no avail. Minimum wage laws are always popular with politicians and unions  as they  believe it is helping labor by forcing businesses to pay a "fair rate" for their efforts. In the end it causes unemployment, higher prices for goods and services and poor quality service from businesses who are forced to cut somewhere or raise prices to cover these additional costs. Our friends at the Center for Freedom and Prosperity have brought us another good video to help us understand this.

Could a much needed change in Panama's labor laws be in the makings?

As I have lamented on a number of times in the past, Panama's labor laws are challenging for business, especially if you are in the hospitality industry. Imagine trying to run a hotel where staff gets paid 50% more if they work on a Sunday even if you could give them another day off during the week. If that were not bad enough, the law demands a 150% payment if they work on holidays. Yet it is holidays when hotels are the busiest. Again, you cannot just give them an alternate day of the week off in exchange. These and many other in-flexibilities make Panama's labor code a detriment to both the workers as well as investors. 

In a meeting I had last year with the minister of commerce he was clear that the labor code was an issue they would not tackle anytime soon, but today, La Estralla carried a story where a number of business organizations have gotten together and made an issue regarding labor laws and it seems to be getting some attention, at least for the Ministry and Economy and Finance. 

Here is a machine translation of the story.

PANAMA.  The proposal to relax the labor code in Panama is championed by the business associations that for years have requested a change to make the country more competitive.

The changes outlined by the Minister of Economy and Finance, Alberto Vallarino, include among other things, the revaluation of Sunday as the only day off, cost overruns generated by days 24 hours 7 days a week and overtime pay .

Under the current legal text, workers who work a Sunday or any day of weekly rest, the employer is obligated to pay an additional 50% of that day.

In the case of national holidays or mourning, the mark of the day will be 150%.

Processing Zones

Both Alfredo Burgos, executive director of the National Council of Private Enterprise (CONEP) as the president of the Union of Industrialists (SIP), Juan Francisco Kiener support the motion that the Sabbath is not only on Sunday and set the same to special laws processing zones.

  Burgos believes the country is not competitive by not allowing the transfer of employees from one position to another.  Also considers unfair to dismiss a worker needs a proven causal aspects that have changed in the special areas.

  The executive estimated that the income of employers and employees should be linked to productivity, an aspect that is not taken into account in the current code "now if a salary increase, then it can not be lowered."

Next Monday will meet CONEP Working Committee to begin addressing the issue in order to sort the priority issues and critical, and then communicate to the government.

THE INDUSTRIAL

  IAPA president, Juan Francisco Kiener, adding that among the issues that are less competitive high minimum wage per capita for the region.

  The operator called to copy the model used processing zones in Costa Rica and Colombia, where a company, even its location is considered a special area.

He clarified that although the unions do not have an official document known to apply the mechanism of processing zones, where the Sabbath is not just on Sunday.

  Kiener pointed out that there is an international court ruling that allows workers who do not wish to participate in a strike, to continue working.  Discard the reform point to stop paying overtime and holidays.

The ruling referred to by Kiener refers to one given in 1999 by the International Labour Organization (ILO) in favor of CONEP, a document that would base the government to propose changes to the code.

"Reforms must address the measurement of worker productivity as a key element to grant wage increases," said Fernando Arango, president of the Chamber of Commerce.