During the first 12 years of the XXI century demographic and labor statistics in Cuba could be comfortably summarized as follows: the population is stagnant; there is a fairly constant flow of outward migration; the population of working age is rising very slowly and is beginning to fall. But this scenario of basic stagnation appeared to break down in 2013-14 when both the resident population and the population of working age (PWA) increased sharply; and net emigration turned into net immigration. At the same time, adding to the apparent mystery, there was a slowdown in the growth of the labor force.
The difference between PWA and labor force has two components: the first is demographic and is influenced primarily by the gender composition of the labor force; This note tries to answer the following questions.
Why did the population of working age surge in 2013-14 after 12 years of extremely slow growth?
Two factors appear to have been at work, as indicated in the Table below.
First the resident population rose by 33 thousand a year after experiencing virtually no growth in 2000-12. This upturn, reflects faster natural growth (which exclude migration flows) and a turnaround from net emigration (at an annual rate of 30-40 thousand people in 2006-2012) to net immigration (averaging 2.5 thousand people per annum in 2013-14)—an unprecedented development since the revolution.
Second, the ratio of PWA to population, which appeared to have stabilized in recent years rose sharply in 2013-14 and the PWA increased by a stunning 126 thousand. Part of that might be explained if those who returned to the Island were predominantly of working age. But there would still be a decline in the dependent population which is very puzzling. It is hard to understand why, all of a sudden, the dependent population would fall so sharply, particularly since is not possible to determine whether the fall reflected a decline in the young or in the elderly population.
In sum, the two components behind the recent increase in the PWA appear to have a common cause: (i) For the first since 1960 Cubans apparently returned to the Island at a faster rate than other Cubans left the country; and (ii) apparently most of the new emigrants were of working age. But a mystery remains.
Why did the population of working age increase so much faster than the labor force in 2013-14?
In 2012-13 the annual growth of the labor force (14 thousand a year) was smaller than it had been since the beginning of the century (37 thousand a year). Moreover, the recent increase in the labor force was only about 10% of the increase in the PWA. In other words, the gap between the PWA and the labor force increase on average by 112 thousand a year in 2013-14, compared with a negative average of 19 in the previous 12 years. Thus, te was a large decline in labor participation, following a steady rise in the previous period.
the second is cyclical and represents the number of discouraged workers, which has been found be highly correlated with the real wage rate. Because the demographic component changes slowly over time, it is likely that the large increase in the gap reflected a surge in the number of discouraged workers, a number that had been declining continuously since 1994. This is a puzzling development because real wages increased sharply in 2014, but it is possible that this action will be reflected in the participation data only in 2016. There is another possible explanation. Most of the 282 thousand employees that left the state labor force in 2011-13 as part of the government program to cut redundant employees were re-employed in the private sector. But some became unemployed or left the labor force, because they did not immediately find a job in the private sector, or because they failed to find an attractive job. For some the decision may have been permanent (those who retired); for others it was probably temporary and potentially reversible if labor market conditions improve. The large increase in public sector wages in 2014 suggest that the latter may occur in the near future.