To Lay Off 500,000 In Iraq
By Warren Vieth
Los Angeles Times
05 June, 2003
U.S. reconstruction officials will soon hand out pink slips to nearly
half a million Iraqi military and civilian personnel, exacerbating an
unemployment crisis that experts say could slow the pace of postwar
The layoffs will mean the
loss of a government paycheck for roughly 1 in 10 Iraqi workers. The
Bush administration hopes to soften the blow by making cash "termination
payments" to members of Saddam Hussein's armed forces, Information
Ministry employees and other government workers whose services are no
longer wanted. The amount of the payments had not been announced.
Officials of the U.S.-led
reconstruction effort acknowledged that the dismissal of so many people
will magnify the economic misfortune of a country where a majority of
the population depends on food rations; an estimated 30% of the labor
force works for the government; and unemployment, as best anyone can
tell, already exceeds 20%. The layoffs will be the latest blow to the
once-thriving trading nation, already reduced to Third World subsistence
levels by nearly three decades of authoritarian rule, international
sanctions and intermittent war.
"We are fully aware
of the difficulties that have been created," Iraq civilian administrator
L. Paul Bremer III said Monday. "The purpose of our policy is not
to punish people. We are looking for ways that those who did not have
a prominent role or an active role in [Hussein's now-outlawed] Baath
Party can find employment."
Several economists, investors
and business owners familiar with conditions in Iraq said the effect
of the mass firings could be more severe than Bremer and other officials
of the Pentagon-run Office of Reconstruction and Humanitarian Assistance
"It will be catastrophic
for the Iraqi economy," said Humam Shamaa, senior professor of
finance and economics at Baghdad University. "There will be a depression.
It is a contraction to the reconstruction."
"You cannot bar salaries
from some sectors of the economy and expect it to function," said
London economic consultant Salah Shaikhly, who used to run Iraq's central
bank, Bureau of Statistics and Overseas Development Ministry. "Lay
them off and you have half a million people on your back."
One of those permanently
losing her job is Nidaa Abaas, who was supervising 12 people in the
Information Ministry's satellite broadcasting department before the
war. Abaas, 45, said her husband is also out of work. A son is attending
college, and three girls live at home. The family depended on her monthly
salary of 30,000 dinars about $23 at Saturday's exchange rate
as well as United Nations food supplements and the extra money
she made baking flat bread at home.
Abaas wants coalition authorities
to reconsider their layoff decision. If they don't? "I will cry,
and pray that God hurts the Americans."
Saad Hamdani, who headed
the foreign affairs branch of the ministry's international department,
said he learned only 10 days ago that 5,200 jobs in the agency, including
his, would be permanently eliminated.
"Where will those people
be working? Where will they go? To the grave? To the street to live?"
asked Hamdani, 52.
Bremer said Monday that the
coalition was attempting to provide new jobs as best it could. He said
thousands of former enlisted men would be hired to serve in the Iraqi
Corps, which will replace Hussein's army. He cited a $70-million community
action program administered by his office that is hiring Iraqis to clean
up their neighborhoods and build public facilities.
The goal, Bremer said, is
to create "an economy that has real jobs with real wages for millions
of citizens who need and deserve them. This will take time."
For now, even trying to calculate
the effect of the layoffs is a challenge. Iraq's economy became highly
distorted under Hussein.
The best available estimates
suggest that Iraq, a nation of 24 million people, has a public and private
work force of about 5 million. Of those, an estimated 1.5 million were
receiving a paycheck from the government before the war. About 1 million
were civil servants, from technocrats to teachers. The remaining 500,000
were officers and soldiers in the armed forces.
Coalition officials said
the number of military personnel affected by the layoffs is believed
to be about 400,000, but they acknowledged that some advisors have told
them the figure could be as high as 680,000.
Perhaps 100,000 soldiers
will be absorbed into the new army, officials said. The rest will have
to fend for themselves.
Iraq's defense and information
ministries are being dissolved. In other agencies, varying numbers of
senior Baath Party loyalists are being shown the door.
Most government employees
have families. The average family size is five, so more than 2 million
Iraqis are expected to suffer a direct income loss as a result of the
layoffs, coalition officials acknowledged.
"You're talking about
hundreds of thousands of people without pay," said Bathsheba Crocker,
co-director of the Post-Conflict Reconstruction Project at the Center
for Strategic and International Studies, a Washington think tank. "It's
just going to add to the already heavy burden of all the people who
are dependent on the government for their basic resources."
The amount of the severance
payments is still under discussion, officials said. But the word on
the street is that they will be about the same size as the $20 and $30
cash handouts dispensed to government employees in lieu of salaries
in April and May.
Although the affected workers
represent roughly 10% of Iraq's work force, the effect of the layoffs
will not be as severe as if 1 in 10 Americans lost their jobs, experts
said. That's because government workers in Iraq were grossly underpaid.
Most took second jobs or found other ways to supplement their incomes,
and they relied on U.N. aid to help feed their families.
Still, the economic fallout
will be extensive, and the political recoil could be substantial, experts
Shamaa, the Baghdad University
economist, said the situation calls for the kind of fiscal pump-priming
endorsed by early-20th century economist John Maynard Keynes, who argued
that governments should spend public funds aggressively to ward off
Instead of distributing baskets
of food and $20 bills, Shamaa said, the coalition should forget about
commodity handouts and boost the monthly cash payments to $50, $100
or whatever the bank account will bear, to stimulate demand for goods
and services and get the economy growing again.
The money should come from
the confiscated assets of Hussein and his cronies and future Iraqi oil
revenue, Shamaa said, not from taxpayers of the United States or other
"We have our dignity
as Iraqis," he said. "We can use our resources. This is not
for other countries to do."