Source: Al-Qabas Newspaper
*Offer valid ONLY in Kuwait
In Kuwait, just like the other 200 countries of the world, we are facing the imminent issue of layoffs associated with the financial crisis. The number of Kuwaitis laid-off from the private sector is estimated to be around 4500 individuals. The government, parliament, and public are ironically deeply concerned for the fate of 0.45% of the population which will be decided in 3 weeks when the government unveils its rescue plan!
The current unemployment level in the US stands at 9.5% as of June, Eurozone at 9.5% as of May, and UK at 7.6% as of June. The unemployment figure in the US is up ≈70% yoy (from 5.6%), in the Eurozone ≈30% yoy (from 7.4%), and in the UK ≈45% yoy (from 5.2%). Comparing those numbers to the minuscule 0.45% jump in the Kuwaiti unemployment numbers, one realizes the political aspect of this issue.
The recommended solutions to this problem presented by Kuwaiti parliament members are outright outrageous! These members seem to have fallen for the cries of the coalition for the “Kuwaitis laid-off from the private sector” which melodramatically stated that divorce cases increased and laid-off Kuwaitis are being dragged to jail ALL because of the layoffs.
This has caused our virtuous parliament members to propose the following solutions to the recently laid-off employees:
- Mohammed Barrak Al-Mutair (Member of the Parliament “MP” & Head of the Financial & Economic Committee): The government should pay the monthly basic salary and the national labor support until they find a new job.
- Dr. Rola Dashti (MP and Chairman of the Kuwaiti Economic Society (KES): The government should create a fund which pays the monthly basic salary and the national labor support for a maximum duration of 1-year. A laid-off employee can utilize this financial support until he/she finds a job or reaches the maximum duration of 1-year. Further, the remaining balance from the individual 1-year support fund can be used at later times if an employee is laid-off again.
- Mubarak Al-Walan: (MP) The government must provide adequate salaries and benefits to the recently laid-off individuals for at least 1-year.
I’m personally against all of the above proposals simply because they enhance moral hazard in an already over-dependent society, discourage hardworking employees, doesn’t solve the problem (only addresses the symptoms could potentially INCREASE unemployment) and . Don’t get me wrong, I think unemployed individuals should be supported especially since Kuwait is a welfare-state. However, there is a significant distinction between support and reward. The parliamentary suggestions reward the unemployed and disincentivize hardworking individuals who were able to maintain their jobs.
Whatever law is passed, the parliament/government must assure that the recently laid-off don’t get the same salaries as currently working individuals. It is unfair and creates serious moral hazard issues! A support law should grant the unemployed a reasonable diminishing salary to motivate him/her to actively seek a job. For example, if the salary for the first 3 months is 60% of the official salary, the following 3 months should pay 50% of the official salary (note the 10% decrease). Another important aspect of any potentially successful law is setting-up training programs to enhance the productivity of the unemployed.
If one would maintain the same salary for up to a year while at home, why would one bother go to work or (worse) even search for a job?! I bet employees will open their boss’s office door wide open and curse until they’re fired. After getting fired, an employee will be extremely grateful to his/her boss for granting him/her a government sponsored one-year paid vacation!
P.S. I’m very disappointed by Dr. Rola Dashti’s (KES chairman) proposal.
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Loading ...Tags: GCC layoffs, Kuwait, Kuwait layoffs, Kuwait unemployment, Kuwaiti proposals for the recently laid off, Rola Dashti
Interesting !! only happens in Kuwait !!
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I totally agree with your statements above. The parliament is rewarding bad behavior.
It is noteworthy to add that Dr. Aseel is suggesting that the Parliament and the Government work on a permenant solution that involves the Private sector rather than the easy solution of just splashing money on laid off workers. I think a well-thoughtout plan is much better, and it will give the Private Sector a say.
BTW the article’s title is great. It summarizes the whole issue.
[Reply]
Nice article! Glad the article in Alqabas inspired you to write this. Specially since it was inspired from data provided by Kuwait Financial Centre “Markaz”
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Q8iya:
Its sad.
Naser:
Thanks for the compliments. I was very impressed by Dr. Aseel’s point of view which I read only today in several newspapers.I applaud her braveness!
Farah:
I’m gald you visited our blog and enjoyed the article! The issue at hand inspired me, not the Al-Qabas article. I only used the photo from Al-Qabas. I did read the article and was impressed by Markaz’s stance on the issue.
I am a follower of Markaz blog which I believe contains a wealth of information and interesting analysis. Yet, I’m disappointed in the fact that I wrote a comment on an article by Mr. Amrith Mukkamala more than a week ago and no replied.
[Reply]
I was discussing the article with a couple of friends when I had an interesting thought:
4500 recently laidoff (TIMES) 12 months (TIMES) KD700* ≈ KD38 Million .
Isn’t it IRONIC that while everyone is grilling the Minister of Interior for wasting KD 5 Million, most people are applauding the efforts of parliament members to waste KD 38 Million!
*KD 700: Calculation based on a very conservative estimate of the average salary of the 4500 unemployed plus their national labor support.
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What about professional bankruptcy? … Do I get a higher compensation for that?
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Ofcourse you do! Its a corporate account!
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Great article Keynes! I liked your suggestion of the diminishing salary. Not only are people abusing the national labor support monetary incentive for years, but now are trying to discourage hardworking employees and “Reward” the laid off. .
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