Yet Another Paid Holiday

This time it is Independence from Spain.  We’ve already celebrated Independence from Columbia earlier this month.

I know on the surface it looks like labor is cheap in Panama . . .yes and no.  Compared to Australia, YES!  Compared to the US, yes.  But it is more expensive than it looks at first glance.  If you have someone working for your they’d better be “on the books.”  If they are not, and there is an accident, they are your responsibility . . . FOR LIFE!  If they are not “on the books” and you are not paying Panama wages and Social Security and they get ticked off at you for any reason, they can take you to the Labor Board and . . . guess what! . . . the employer is ALWAYS wrong and the worker is always right.  That is the basic premise of Panamanian labor law, leading to a work force which at times can be downright lazy and often has a poor work ethic.  It is this fact of life that is going to limit the productivity and success of the rapidly growing Panamanian economy.  As one Panamanian told me, who had owned several stores in Panama City’s huge shopping malls, “I just gave up and closed up!”  Now that’s a Panamanian: what message does this send to potential foreign investors?

OK, so the guy who works on my farm, really a “peon” although because we wanted him to occasionally look in on my brother who at the time was living in a casita on our farm, the Labor Board decided that his job had to have the title of “capitan” and be paid accordingly a higher wage.  And we, being essentially dumb Gringos and feeling guilty, have given him raises, undeserved I might add by the quality of his work or his work ethic.  Like many people you hire, he started off great guns, and through the years has gotten more and more lazy.  So he gets $64 a week for a 44 hour week, or about $1.39 an hour, and out of that he pays 8% Social Security and we pay 12% social security and 1.5% Educational benefit – I guess just in case he wants to work on an MBA nights.  So OUR cost is $72.65 per week or $1.65 an hour.

$1.65 an hour, so you ask, “So what do you expect, Richard?”

Well hold on Pilgrim!  In addition he receives:

16 paid sick days – our cost $213

12 paid holidays – our cost $159

30 days paid vacation per year!!! – $315 – Plus we have to hire someone on a temporary basis to do his work while he is gone!

So, 365 days in a year (in Panama as elsewhere) less 16 sick days, less 12 paid holidays, and 30 vacation days – leaves possible work days – ooops, forgot 52 Sundays unless you want to pay the required overtime for working on Sunday – we end up with 255 possible work days.

And when our guy is off on vacation, we still have to hire someone on a temporary basis to get the work done that my regular guy is not doing.

And not just that but . . . hold on, because this gets more and more unbelievable!

The famous “13th month” – gratuitous payment for a non-existent “13th month” – a full month’s salary paid in three equal installments.  This is not a “bonus” for meeting goals or doing a good job.  Doesn’t make any difference what the quality of work is, the Labor Law regulres that you pay.  Bingo!  Another $315!

Even better – severance pay!  When the guy quits, or gets fired (which is a major challenge), or the job runs out – doesn’t make any difference – ANOTHER MONTH of pay!  Well it takes half a dozen trips to the Labor Board in David to figure this out exactly, but it is more or less – usually more! – $315 to 400!   We use a  yearly contract which makes it easier to not rehire someone who is under-performing and avoids a outrageous severance pay at the end of several years, which is tough for us and generally gets used in a spendthrift way by the employee.  It also avoids us being wed to any employee for life.

So yes, my Aussie friends, labor is much cheaper here than Down Under.  And it is cheaper than in the US, but don’t be misled . . . things are not always what they seem at first glance.

Zero Unemployment

Finding an exact unemployment rate for Panama is tough.  You’ll see numbers from 1.5 to 4%, depending.  One thing is certain, the unemployment rate is the lowest it has been in 45 years.  There are those who make the argument that if you take the number of jobs waiting to be filled (but without qualified people available) and the number of unemployed (who unfortunately don’t have the needed qualifications) that they cancel out one another and you end up with a zero unemployment rate.  This is the reason that the Government of Panama has begun recruiting qualified people from abroad. More “friendly” nations enjoying quick path to permanent residence, college grads too!

So you may be thinking, “It’s a wonder anything gets done in Panama, given the work ethic.”

Well, thankfully, most Panamanians actually work very hard, accomplish a great deal, and have an innate ability to in a pinch make almost anything work.