HAVANA: Cuba will lay off more than 500,000 state employees by March and expand private employment to give them work in the biggest shift to the private sector since the 1960s, the Cuban Workers Federation said on Monday.

Eventually more than a million jobs would be cut and, due to efforts to increase efficiency in the state sector, there would be few new state sector openings, the federation said in a statement.

More than 85 percent of the Cuban labor force, or over 5 million people, works for the Soviet-styled one-party state, many of them in unproductive work.

"Our state cannot and should not continue maintaining companies, productive entities, services and budgeted sectors with bloated payrolls (and) losses that hurt the economy," the statement said.

"Job options will be increased and broadened with new forms of non-state employment, among them leasing land, cooperatives and self-employment, absorbing hundreds of thousands of workers in the coming years," it said.

The plan is the most important reform undertaken by President Raul Castro since he succeeded his brother Fidel Castro in 2008 and the biggest shift to private enterprise since all small businesses were nationalized in 1968.

The younger Castro indicated last month that reform was coming to reduce the inefficiency of the Cuban economy.

"We have to erase forever the notion that Cuba is the only country in the world in which people can live without working," Castro said, upon announcing in general terms his plans to cut state payrolls and increase self employment in an August speech to the National Assembly.

According to Communist party sources who have seen the detailed plan to "reorganize the labor force," Cuba expects to issue 250,000 new licenses for self-employment by the close of 2011, almost twice the current number, and create 200,000 other non-state jobs.

The government`s definition of self-employment includes many entities that are essentially small businesses, including such things as family-run restaurants and cafeterias, auto repair shops and jobs in the building trades.

The non-state jobs will include, among other things, workers hired by the small businesses, taxi drivers who will now lease their cabs from the state and employees of small state businesses to be converted to cooperatives.

PINK SLIPS

Cuba watchers said the statement marked the speeding up of reforms under Raul Castro, which have been gradual so far.

"Today`s announcement opens a new chapter, one that has a deadline, that will be felt and seen in every town, and that promises to create a much more substantial private sector inside the socialist economy," said Philip Peters, a Cuba expert at the Lexington Institute think tank in Washington.

Peters said the half million workers will not find themselves suddenly on the streets of Cuba because their workplaces will likely be converted gradually into cooperatives driven by private initiative.

"The 500,000 figure is alarming -- it conjures up an image of 500,000 Cuban workers going home with a pink slip, not knowing where they will go the next morning, and of the economy suddenly needing to create 500,000 new jobs," Peters wrote on his blog The Cuban Triangle.

"In fact, many workers will go to the same workplace as ever, but the business arrangements will be different."

Cuba currently has only 591,000 people working in the private sector, a number that includes mostly family farmers as well as 143,000 self-employed, according to the National Statistics Office.

All state businesses and agencies were ordered in January to review payrolls with an eye to trimming unneeded positions.

Laid-off state workers will be offered alternative jobs, and if they do not accept one, will have unemployment benefits equal to 70 percent of their wages for no more than three months, depending on their seniority, sources said.

They will not be totally out in the cold because all Cubans receive free health care and education, subsidized utilities, a subsidized food ration and automatic adjustment of mortgages to 10 percent of the top breadwinner`s income.

Many Cubans also receive remittances from family abroad worth far more than the average monthly wage, equivalent to around twenty U.S. dollars.

Castro has fostered discussion in the media and grass-roots meetings on what ails the socialist economy, and made mostly minor changes aimed at boosting productivity by putting more incentives in the system.

The most important reforms up to now were in agriculture, where state lands have been leased to 100,000 new farmers and the state`s monopoly on the sale of farm supplies including fuel and fertilizer and produce have been loosened.

BDST: 1105 HRS, September 14, 2010