The unemployment rate fell from 6.8% in 2022 to 6.1% in 2023. For this year, the Ministry of Finance is counting on a rate below 6%. What do you think the unemployment rate should be?
Generally, the level at which unemployment equates to a level of positive economic output (gross domestic product – GDP growth) is considered optimal. That is, the unemployment rate should be as close as the GDP growth rate. As the unemployment rate falls below 5%, the economy should theoretically move closer to full capacity.
However, it is important to extrapolate an average over a period of three to five years, or even over a period of 10 years, for certain analyzes to smooth out the annual (short-term) cyclicality. An economy is not a static beast and one needs to understand whether certain cycles of unemployment are cyclical, seasonal, structural or frictional in nature. In conclusion, we believe that an average unemployment rate in Mauritius of 4% over a 10-year period should be a theoretically ideal range.
Full employment is defined as a situation where the unemployment rate is around 3%. Can we hope to achieve such a situation? If yes, how ?
Full employment and/or optimal unemployment rates, let us reiterate again, must be compared to the underlying country's rate of economic production. For purposes of illustration, consider an economy that is growing steadily, say at an average of 10%. Its optimal unemployment rate over the corresponding period would be reasonable, on average around 10% and not 3% (very improbable) and vice versa. As long as the unemployment rate is closer to a country's rate of economic production, socio-economic optimization should prevail.
At ANNEAU, we have the firm conviction that with an intelligent and relevant socio-economic structure, Mauritius can achieve full employment. For this to happen, our economy must transition to a 24/7 economic model as its underlying foundation.
This will likely increase our workforce and population by around +75% and its multiplier effect on socio-economic prosperity could be very significant in an inclusive manner (essential). But it is not an easy exercise. This requires a very long-term approach, as a basis for planning and developing public/private policies.
There is a paradox in the job market. On the one hand, companies are ready to recruit. On the other hand, there is not enough labor to fill these positions. Likewise, the country is facing a certain exodus of talent. Your comments ?
We believe these are natural changes and cycles as our small economy matures and stagnates (full capacity, ceteris paribus). They create, as in any other cycle, their own genetic challenges and opportunities. Honestly, we would rather have a situation where an economy is growing and facing employment deficit problems than the other way around; excess supply of labor, obviously without alleviating the problem of brain drain (which tends to be psycho-socio-economic and cyclical).
As the economy experiences sustainable growth, we will likely increase the need for foreign labor. We reaffirm that this country has historically almost always been “built on foreign labor” and that we should not be too wary of this phenomenon. This situation remains a “good problem to have.”
What do you recommend to reverse the paradox?
Well, it’s not the whole trend that needs to be reversed! If we are truly committed to structural socio-economic changes, we will need more foreign works (around 500,000 more). What must be reversed is the brain drain, because the psycho-sociological impact, in its essence and over time, will ultimately be felt on Mauritian patriotism! This is the evil!
For this to happen, we must create more innovation and opportunities, but also improve the quality and standards of living, truly bringing the country into the 21st century through progressive socio-economic reforms, including secularism (and therefore, among other things, the separation of the State and religious dogmas); is a fundamental element. For any country, brain drain is a natural phenomenon because humanity has always been rooted in the inherent need to explore; greener pastures.
That's not the problem. Their quantum, in specific cycles, is. In conclusion, “the greener and sunnier the pastures of our Mauritian Garden of Eden become, the more likely it is that our people will want to stay, flourish and prosper, vice versa.”
