Unemployment on the rise under Juan Carlos Varela

While unemployment had fallen to its natural rate under the administration of Ricardo Martinelli, the government of Juan Carlos Varela has seen it turn, once again, into one of the major concerns of Panamanians. A recent poll published by Dichter & Neira showed how 17% of respondents rated unemployment as their primary concerned, behind only public safety concerns. There are multiple reasons behind increase in unemployment in Panama: amongst them is the government’s arbitrary suspension of multiple public works projects; the deficient budgetary execution capacity at many state institutions; as well as a sharp increase in their perception of the weak rule of law. Faced with the current situation, the government appears less and less likely to be able to fulfill its electoral promise of full employment. In the first half of 2012, unemployment stood at 4.6% out of an active working population of 1.6m Panamanians. At the end of Ricardo Martinelli’s administration in 2014, unemployment stood at just 4%, which represents for all intents and purposes full employment. Move forward two years, and things have changed quite dramatically. Unemployment has gone from being a minor concern among some population, to one of its main worries. Polls indicate how unemployment has steadily crept up amongst the various concerns population holds: from 11% in mid-2015, to 17% this month. It seems safe to assume that it will keep rising, given the negative impact that international scandals affecting the country, coupled with the government ineffective administration are likely to have on economic activity. According to economist Juan Jovane, to understand unemployment in Panama it is also important to consider the issue of job security. Mr. Jovane argues that the 5.1% unemployment rate recorded in mid-2015 is deceptive. This is due to high number of workers who are effectively under-employed: if those are added to the officially unemployed, the unemployment rate reaches 15.3%. “You have to consider job insecurity when analyzing unemployment: 15.3% is actually a worryingly high number” he explained. According to Mr. Jovane, the percentage of active population in their faces a high level of job insecurity in Panama is as high as 39.7%. In Panama it is often the case that labor laws meant to protect the rights to workers are grossly overlooked. According to national statistics by INEC, in August 2015, over 109,000 workers were qualified as informal. “This means they had no written contract, no social security protection and no labor rights”, he denounced. Additionally, statistics show that workers in Panama are not getting their fair share of the value they create. Between 2004 and 2014, salaries showed an annual increase of only 1.7%, against a healthy 8% growth in productivity. As a result of lower salary growth and high food inflation caused by import monopolies, Panamanians have seen their standards of living fall. According to union leader Fernando Cebamanos, the recent scandals that hit Panama have generated even greater concern amongst the population. The effects of the Panama papers debacle, as well as the ruin of the Waked business empire, are both likely “to weigh heavily both on employment and on salaries”. To make matters worse, the sharp increase in foreign laborers over the past few years has translated into more informality and more downward pressure on salaries. “We can go on like this”, says Mr. Cebamanos: “it is the law of the jungle out there”.