2009 Gloom & Doom Update: Protests in Germany and Bosnia

As the situation gets worse in Europe, with unemployment rates reaching new highs, the social unrest (see previous posts) is spreading. Germany is the latest in the string of countries that is seeing protests show up. This is important to note as Germany was one of the first countries that had been working on a stimulus plan and has tried hard to off-set the anticipated problems.

Problems in Bosnia are less surprising as this was not a strong economy to start off with. Given their political precariousness (two regional, uncoordinated governments), this is a country that is possibly in line for a change in administration in the style of Iceland or Latvia.

What to watch out for in the upcoming weeks: collapse of airlines. Several airlines are already facing problems as fewer people are flying (Singapore Air, Lufthansa, Swiss Airlines etc)- let us see when some of the weaker players are pushed out of the market or will need to be bailed out.

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2009 Gloom & Doom Update: Social Unrest in China


Double, double toil and trouble;
Fire burn, and caldron bubble.

– Macbeth, Shakespeare

Chinese factories are laying off people as their exports have slowed down. The numbers reported today are 20 million unemployed or about 15% of their workforce. With fewer orders being placed by other countries not as many workers are needed. Chinese cities are seeing reverse migration patterns as unemployed people are returning to villages. Unofficial reports suggest that there are daily demonstrations taking place in the country against the police and government officials as more and more people have fewer and fewer options available.

The government has been offering new graduates civil service jobs in remote areas to reduce unemployment however it is for college graduates and does not address the rural migrant workers.

How long can this continue before the situation will fester into something large and ugly? Without any intervention by the Chinese government the cauldron will bubble over before the second quarter of this year is out

Dignity in work

One of the lessons that is learned very quickly in the US is the dignity of any kind of honest work. There are few other places in the world (not even Europe) where what you do does not impact your social standing.

In real terms it means that a person who works at a gas station or a gardener or a secretary or a nurse or a nanny or a cashier or a bagger at the grocery store are all acceptable jobs. Kids start earning at a young age by babysitting and mowing the lawn for neighbors. They get older and work as cashiers or baggers at grocery stores. They flip burgers at fast-food joints, wash dishes at eateries and work through college (if they go). As they get older they get permanent jobs. At the end of the day, almost EVERYONE works at some point in time in their life.

Contrast that with KSA where the afore-mentioned jobs are mostly filled by foreign labor. It is below the dignity of many locals to be working in non-white-collar jobs. Thus, the workers are mostly imported from Asia and are considered second-class citizens and barely human (sometimes treated worse than animals).

In the RARE cases that you actually have a local fulfill these roles the quality of service is horrendous. They make it clear they do not want to be doing the work, and their level of effort (or lack thereof) is clear. This ranges from grocery baggers (your eggs will end up under the watermelon) to receptionists at hospitals (your medical card will have errors and if you ask them to correct the mistake the response is always: it doesn’t matter).

This country would be VERY different if locals accepted that all honest work has dignity. Corruption, laziness and non-performance is what robs a job of honor. Blue collar workers are just as human as local citizens.

Unemployment

There were two news reports yesterday regarding setting a minimum wage in KSA. Saudi Gazette reported that there were plans for a minimum wage for Saudis whereas Arab News reported that no minimum was being set (for expats).

One quoted that minimum wages causes unemployment, the other stated that it would create more jobs for citizens.

Regardless of which news agency was correct in this case, the common aspects that were striking were the complaint against companies for not abiding by Saudization laws as well as the unemployment figures.

The Labor Minister Ghazi Al-Gosaibi was quoted as saying “I feel ashamed that there are 270,000 unemployed Saudi young men and a similar number of unemployed Saudi young women in a country that employs more than seven million foreigners.” The total population of KSA is 26 million as per Saudi Gazette.

This would suggest that ~25% of the KSA population are expat workers (no surprise there). Also, apparently there are barely 0.54 million unemployed citizens in the country (less than 3% of the actual citizen population and 2% of the total population).

In September the Minister also explained that unemployment is 6% for Saudi men (~240k men) and ~25% for Saudi women (~164k women). The numbers employed are 3.42 million men and ~660k women. If you put all these figures together the numbers that emerge are a little odd.

Extrapolating the official numbers, are about 4 million men and barely 1 million women in the potential workforce out of the whole 19 million population! That represents (at max) 25% of the whole population with women barely 20% of the whole workforce.

Now let’s add another number to the mix. The CIA fact-book states that  ~60% of the population is between15-64 years old (9.5 million men and 7.2 million women).  The most recent numbers from UNICEF state that ~50% of the population is less than 18 years old.

This raises the following questions:

  • Why is 25% of the population part of the workforce when ~50% are of employment age?
  • Is a quarter of the population bearing the burden of the three-quarters?
  • Why is there such a large gap between the stated unemployment rate of 6% and the actual people who are not working?