Figures show that over the period 2008 to 2011 income levels have fallen, both in real terms and surprisingly at current prices, growth in the gainfully employed population has been zero, as has productivity, and unemployment has doubled. Furthermore 2012 is heading for minus 2 per cent plus in GDP change, worse than the recession year of 2009.
This generation of young people entering the labour market will be lost because they cannot find work. Unemployment has increased from 14,500 in 2008 to 31,500 in 2011, and 33,900 in September this year. This constitutes over 11 per cent of the labour force, as compared to only 3.5 per cent in 2008. From having one of the lowest rates of unemployment in Europe three years ago, Cyprus is now at the EU average, and with all the indications being that it will surpass that benchmark also.
The young are being disproportionately affected, before many of them even get the taste of working and earning money. The labour force survey of the second quarter in 2012 shows that 21 per cent of the 14 to 24 age group is unemployed. With declining or zero growth the school leavers and university graduates entering the labour market cannot find jobs and will join the lists of unemployed. This could affect their lifetime prospects because if one does not work productively in the early years, it becomes more difficult to develop the skills one needs to move up the job hierarchy. The dreams of youth are being smashed.
Another worrying statistic is that incomes are falling, as GDP per capita shows a declining trend, while at the same time the population has been growing rapidly, as witnessed by the 2011 census. Contrary to popular belief, demographic data shows a steady increase in net migration from almost 16,600 in 2008 to over 18,000 in 2011. Yet it is known that many Pontian Greeks have left (especially these in Paphos) and many illegal immigrants (from Bangladesh, Pakistan etc) have also left the island as they cannot find jobs.
School leavers stand at about 10,000 a year. The men delay work for at least two years owing to military service, but eventually about 80 per cent go on to university, college or tertiary level studies in Cyprus and abroad. Those who entered UK universities at the start of the recession in 2009 have just returned home as graduates this summer. Their job prospects are not good.
Many will opt to delay the return home, take post graduate courses, or try to find jobs overseas. Those prospects are not good either. This 2012 recession is expected to continue into 2013 and 2014, and the prospects for improvement are believed unlikely before 2016, when the infrastructure for natural gas revenues will generate jobs and income, and the economy should get a boost from there on from natural gas revenues.
On a world scale this could be the longest recession since World War II, and in length and with respect to unemployment socially as disruptive as the Great Depression of the 1930s as witnessed by the Arab spring and the rise of fascism.
This state of affairs is unacceptable, and it is time that the emphasis on balancing budgets and saving the banks, was changed to one of stimulating growth thereby raising incomes, improving state revenue and saving the lost generation. There is much noise about growth but few concrete suggestions. The EU is basically saying the proposals of 2020 are the way forward in the long run, forgetting that people need to eat today and every day.
In view of the debt situation and fiscal deficits, everyone throws up their hands and asks how can growth be achieved?
The answer to this pessimism is to concentrate on growth, lowering interest rates and introducing growth policies in all the economic sectors. That requires a reassessment of priorities, cutting the fat, increasing the savings, and reducing taxes in some activities and increasing them in others, and boosting infrastructure development from the cost gains. It can be done but it needs good planning, some imagination and the targeting of social and other provisions.