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Articles | 750 | 14.07.2015

Unemployment: one step from the abyss

If the current situation does not change by the end of the year, the army of the unemployed will include 2.3 million people

Recently it has become obvious: there is no people among Ukrainian authorities, who is able to estimate the whole range of problems and find comprehensive solutions. We are not talking about some intellectuals. Their opinion is rarely taken into account in the formulation of the state policy. This is in vain.

Exactly the narrow-mindedness enforces to make a lot of efforts in order to overcome the consequences, not the reasons. It does not inure to the benefit of Ukraine. Nowadays more than ever, we have to see the interrelation. And it is not just about today, but also about tomorrow. Otherwise, a new threat will be a surprise, as all the previous ones.

A new threat called “unemployment.” By the end of the first quarter of 2015, according to official data, the unemployment rate in Ukraine amounted to 2%.  However, in fact, after the calculations of International Labor Organization, the unemployment rate is five times more (nearly 10%).

10-12% – is a critical limit. Exceeding this limit leads to the social upheavals even in peaceful and prosperous countries. There are some instances, namely: the large-scaled actions of unemployed against the economic policy of the government in the relatively prosperous Italy at the end of last year and “tariff Maidans” in Armenia.

10-12% – is a critical limit. Exceeding this limit leads to the social upheavals even in peaceful and prosperous countries

From the beginning of 2013, the number of unemployed Ukrainians increased by 250-270 thousand. If the current situation does not change by the end of the year, the army of the unemployed will include 2.3 million people. Plus, there is 1.6 million members of these families (almost 4 million Ukrainians).

Concerning the rate of unemployment allowance, it does not solve the problem of social protection. Firs of all, by the end of March, 402,500 out of 2 million unemployed have received it. Secondly, the minimum unemployment allowance is only UAH 544 per month. This year it will not increase. The average rate of allowance was UAH 1288 per month in March.

What kind of threats does it create?

Millions of people, who have not found their vocation in peaceful labor, are personnel reserve for the illegal armed groups

The first one is – a threat to national security. Millions of people, who have not found their vocation in peaceful labor, are personnel reserve for the illegal armed groups. We have to put aside the political preferences and accept the fact:  a person, which was driven to extreme despair, is ready to «work» as a part of the combat units of the DNR/LNR, or paramilitary units (from the Ukrainian side) that do not have official status (OUN “Praviy Sector”, a number of volunteer battalions, etc.). In both cases, peaceful citizen falls out of the legal economic field and flows into the cruel world of the military “business.”

 The second one is – threat of conservation of dysfunctional political system. The unemployed, as well as other socially vulnerable citizens, are traditionally electoral base of populist politicians. Populists always lobby decisions in the interests of the electorate. It means that they address the resources on «eating», rather than on the development. In case of populist’s strengthening, there is questionable prospect of struggling with vicious circle and carrying out necessary reforms, including the most unpopular. The instance is – Greece, where populists have won in several elections in sequence. This fact led the country to default.

The third threat is evident in such cases. It is about the threat of economic and social intensity and, consequently, deterioration of criminogenic situation, the growth of street crime. In addition, there is a weak law enforcement system and a lot of opportunities to obtain the weapons («kerstone market» is full of it due to the military conflict).

Besides, let’s not forget that:

–        a significant portion of the unemployed are IDPs from Donbas and Crimea. If they are discriminated in economic field (they have already been limited with their political rights, namely, IDPs have not been able to vote in parliamentary and would not vote in local elections), Ukraine will obtain half a million people, who have negative attitude to the authorities;

–        in our society there is a hidden unemployment. It means that plethora of workers were transferred to reduced hours’ schedule, “bare” rate without extra charges, a three-day working week, etc.

Only after understanding of the whole complex of problems, you can try to find ways of resolving it. The recipes «how to overcome the unemployment» have been already formulated, and even tried out.

One of it – is to make development of small and medium-sized business a priority in the state economic policy

Traditionally, it has not been given too much attention due to the fact the SMB segment provides only 7% of GDP in Ukraine.

However, in our case there is another important thing: small and medium business employs 60% of the working population. The key question here should be not the financial return for the budget (although it will also rise if this segment grows), but the opportunity to avoid social upheaval, providing jobs to people.

There are plethora instances in the history, when the developed countries overcame the deep crisis or prevented it.

Ukraine is free to choose either way. It can either invite the relevant international institutions, or develop a key segment of the national economy via own resources of the state (American model)

For instance, the small and medium business in USA became the driver, which helped to overcome the Great Depression. During that time, the first programs of business support, facilitating access to cheap credit resources, simplification of registration and reducing of bureaucratic procedures began to operate. A well-known massive construction of the roads by unemployed was just a temporary stabilization measure.

Since 1953, USA established an Agency for Development of Small and Medium Business. The main function of the Agency is consulting and support of the beginning businessmen. In some segments, such practice persists to this day. Thus, American business (via the state grants) took part in restoring economy of some countries in the Middle East in the fields of energy and the export of energy-saving technologies.

In Great Britain, private foundations (which are owned by the Royal family) deal with it. For instance, the Foundation of Prince Charles. Such funds are doing exactly the same that US government agency does, namely: opens access to advisory support for young businessmen – from the business plan to the recommendations on investing profit – and access to cheap financial resources (in the form of grants or low-interest loans).

Ukraine is free to choose either way. It can either invite the relevant international institutions, or develop a key segment of the national economy via own resources of the state (American model).

There are plethora paths. However, the decision must be taken quickly.

Link to source: Forbes

Photo: Shutterstock

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