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Affordable Unemployment

February 17, 2017


Affordable Unemployment is a state of unemployment when person is unemployed but does not live in poverty, and is not looking for the employment actively.


In many post soviet countries unemployment remains endemic, it is, or for sure it was popular to put the blame on so called structural unemployment, or when there is a mismatch in between the jobs market needs and available educated workforce.


However the unemployment among younger generation is on the rise. This generation has very limited connection to the socialist past if any and still they are unemployed.


On the macro side, over the past years the former socialist emerging republics where among the highest investment receivers, at least there was no investment scarcity, did it help? It seems, it did not, or at least it had no substantial impact. It did not produce inclusive growth. Then, is that right to think the foreign investments can effectively decrease the unemployment? Not always.


Situation is even more striking; unemployed does not actively engage into the job seeking; even one is offered the workplace, still they do not rush for it; neither unemployed is looking for the necessary skills and education and still they stay above the poverty line, somewhat vulnerable but not poor yet for sure.


What could be the drivers of such behavior? What may sustain their behavior? How come they can afford the unemployment? Let’s use some logic to answer these questions.


Obviously anyone needs some money to live. However, the living expenses vary. In some countries less is needed for daily expenses. Which basically means the country where you can live spending less may not be the best motivator place for hard work. What might be your daily or monthly expense? This includes at gross the utilities, food and entertainment. Countries blessed with mild climate where folks do not consume much energy and food is not a national security issue may not create enough incentives for a hard work either.


Once utilities are paid and food is eaten, everyone thinks about entertainment. And it is a tricky issue. In developed countries there are lots of different entertainment easily available, including the sport, cinema, different attractions, while in developing countries usually the entertainment related bigger infrastructure is in a bad shape and what remains? Mainly slot machines or internet and internet related different gambling platforms coupled with easily accessible alcohol or even worse the easily accessible drugs.


When all daily living expenses are met, everyone thinks about bigger investments which are all about the cars and homes. If a man can easily impress the world with a cheap second hand but still impressive car, why on the earth he would bother himself with anything else?! Which means countries with affordable second hand cars; especially status related cars might not be the best job search motivators.


Even all those expenses are not that much high, how come totally jobless may carry on with them. It should be the family behind or some other social ties. In post soviet countries informal social net is very strong, which should not be surprised since whole society was engaged into informal activities based on the strong social network. Still it is miraculous because even the parents are mostly jobless due to some other reasons. Remittances - lots of large families are living at the expense of someone abroad in Berlin, London, Moscow, or elsewhere; remittances is some source which covers the daily expenses of jobless offsprings without showing them the associated hard work.


What about the houses? Well fed generation needs a roof over itself. Theoretically and largely in practice there was no person in the socialist block without a home, now the new generation still enjoys the family assets, unless they want to improve their living conditions, roof is still there. Poor but still asset reach (satisfied) families might not be the great work motivators either.


But, if after all the youth wants to live better, have better house, better car, higher income, one must think about education, is quality education affordable? Absolutely no, in many socialist countries vocational education collapsed together with the socialist system and has been never recovered since. Higher education is just picking up, staying way far from the western standards. And honestly quality education process might be more expensive than doing nothing, especially when there is no guarantee for job placement which is the next big problem.


The problem of job placement is not always associated with the scarcity of the job places; however there might be other barriers, namely nepotism. For some reasons the post socialist countries are highly nepotism driven, that has something to do with its socialist past and strong social network based informal activities. How come the individual might be motivated to obtain the necessary skills if from the beginning it is clear that the skills are not game changer at all?


And after all who has ever got reach with a hard work in the Soviet Union? Or right after the Soviet Union? Who is the reach in post socialist countries? At large, they are the former government employees or people having access to the government assets and administrative tools, basically the corrupt part of society. Does not seem it may fuel job or proper education desire in any youngster.


I am far from challenging the conventional theories about unemployment but I must say there is a perfect formula if one wants the sustained unemployment in the society despite the foreign investment flows:


Kleptocrat elite, nepotism, broken educational system, asset reach, effortless income, cheap cars, affordable alcohol/drugs, easy access to gambling, expensive outdoor activities, affordable nutrition, low utility bills =  Unemployment 
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