By Theodore Panayotou
It is sad to see 75,000 unemployed and their families placing their hopes of getting a job one day upon the economic recovery which sooner or later will have to come. It is doubly sad when policy makers are similarly optimistic and focus their effort on short-term palliatives. It is wishful thinking by virtually everybody that high rates of unemployment are a storm that will pass and the good old days of 2-3 per cent unemployment will return. Unlikely, if not impossible! Globalisation and technology has changed everything.
Certainly, unemployment will fall from its present 17 per cent and the likely 20 per cent of the coming months once the recovery arrives. Unfortunately, high rates of unemployment, in the range of 6-8 per cent will persist even when growth begins. Why? Unemployment rates that high are common in the US and in many growing EU economies. A small part of this rate, 2-3 per cent, is expected and is due to people changing jobs, but the rest is structural unemployment and is the result of a mismatch between skills and jobs available.
As globalisation advances and technology and markets become more dynamic and faster changing, uncertainty increases. Existing products, industries and jobs become obsolete and new products and jobs are created. In the process, the mismatch between existing skills and jobs increases and so does the rate of structural unemployment.
In Cyprus, this mismatch is likely to become ever wider. The very policies and practices that led to Cyprus having one of the lowest unemployment rates in the world for the past several decades have today led to this monumental mismatch. Traditionally, to get a good job it mattered more on whom you knew than what you knew, and much less on what you could do with what you knew. As long as you had the minimum of formal academic qualifications and the right connections, a job was waiting for you, or created, in the public or semi-public sector, the banks or the educational service. The political parties were employment agencies in exchange for allegiance and votes.
The private sector was only marginally better. Family business and connections with business owners and executives were surer avenues for employment than knowledge and skills. As long as the economy was growing, even by creating one bubble after another, new jobs were created to accommodate new entrants into the labour force, even where overstaffing was egregious.
In that climate merit and skill became of secondary importance. Choosing what to study or what profession to pursue was a matter of what you liked, or thought you were good at in school. Other considerations were life-time job security, short working hours, a generous pay and multiple benefits. There was little attempt to either anticipate the jobs of the future or to acquire unique or diverse skills to ensure employability and competitive advantage in a dynamically changing labour market.
The desire to get a job that paid well and required the least effort is exemplified by the list of 40,000 teachers on the waiting list for a job in public education even if, for most aspiring teachers on the list, the waiting time is over ten years and for some “specialisations”, such as Greek and maths teachers, over 20 years.
Even today, little has changed in youngsters’ study preferences and they opt for what they “like” and worry about a job later, or rather let their parents and the government worry. They are certain that by the time they graduate the good old times will have returned and it will again take just a call from a powerful connection, a Member of Parliament, a party official or a government minister for a good job to be arranged.
Similarly, the educational institutions, mainly universities (as most others were extinguished by deficient demand or act of the state) cater to the demand of youngsters and their parents for academic education that will enable them to continue business as usual: meet the minimum qualifications for the traditional privileged jobs that will surely be in abundance once the crisis is over, optimistically expected by 2015 or 2016.
To their credit both public and private universities were quick to offer new programmes in oil and gas engineering and management in response to the discovery and upcoming development of hydrocarbon resources in Cyprus EEZ. However, even this is highly opportunistic and likely to lead to another bubble in academic degrees rather than in the applied technical skills that will be required. At any rate, in a classic case of Cypriot exuberance, too much is expected in job creation from this sector.
With or without oil and gas jobs, a rate of unemployment of 6-8 per cent is the new norm for Cyprus as it is for the rest of the world because of the aforementioned disconnect between skills and jobs.
Cyprus does need jobs but not the jobs of the past that were created and allocated as favours or the jobs that are artificially created today through government subsidies to occupy a small fraction of the unemployed. It is helpful to encourage businesses to hire young people and help them get some work experience, with the taxpayer footing part of the wage bill, but it is unlikely to create many new jobs in the long run, nor is the acquired experience what is needed for the future.
What Cyprus needs is a different type of jobs, the type of jobs that the late Steve Jobs, the cofounder and former CEO of Apple, created globally, the creative entrepreneurship types of jobs. Steve Jobs was an out of wedlock child of a Syrian-born university lecturer and a student adopted and raised by working parents who could ill afford to send him to college from which he soon dropped out. He is widely recognised as the pioneer of the personal computer revolution and for his influence on the computer and consumer electronics fields. He transformed one industry after another, from computers and smartphones to music and movies, creating millions of jobs and billions of dollars in value. While there will be few Steve Jobs, even in America, the path he traced points the direction of the future.
Globalisation and technology has changed everything. Without creativity, innovation and entrepreneurship combined, multiplied and targeting the global market there is little chance that the levels of incomes and living standards attained under the previous regime of insulated local markets can survive. All markets of products, labour, capital and technology are now open, global and free. Living a life of comfort from monopolies and oligopolies, from privileges and hand-outs, from bubbles and borrowed money or from leeching the taxpayer is no longer on the cards.
The continuous creation of real value through innovation and the production of differentiated and internationally competitive products and services (low cost and high quality) is the only sustainable source of wealth and rising standards of living. Steve Jobs showed the way. Unless thousands of small Steve Jobs rise among the new generation, there is little hope that Cyprus will see again the kind of prosperity that we experienced the past two decades, the oil and gas deposits in the our EEZ notwithstanding. The latter might end up being a curse for Cyprus while the economic crisis and unemployment might turn out to be a blessing.
Our tens of thousands of unemployed should react to their having lost their job in the way Steve Jobs did when he was fired from the very company he founded. In a speech Jobs gave to students at Stanford University in 2005, he said being fired from Apple was the best thing that could have happened to him: “The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life… I’m pretty sure none of this would have happened if I hadn’t been fired from Apple. It was awful-tasting medicine, but I guess the patient needed it.”
Dr Theodore Panayotou is Professor of Economics, Ethics and Entrepreneurship and Dean and Director of the Cyprus International Institute of Management (CIIM). He is a member of the President’s Council of the National Economy and an independent expert on the steering committee of the Commissioner for the reform of the Public Service. For 25 years he taught Economics and Environmental Management at Harvard University. Dr Panayotou also served as consultant to the World Bank and several UN agencies. He was recognised for his contribution to the work of the Intergovernmental Committee on Climate Change which won the Nobel Peace Prize in 2007