income1

The Fundamental Question

text from the magazine Bohemia April 20, 2001

Photos & Translation by Cindy O'Hara

The economy is getting better but the problem of incomes has created complexities, and generalizations appear less and less able to explain how incomes are distributed among the Cuban population.

The man, who appears healthy and athletic, might only have had a few months left to live. Cardiological science had discovered a severe arterial obstruction that needed to be taken care of immediately. The surgical rites lasted for about three hours, after which time began to run forward again in his life. In gratitude, a few weeks after his operation, he wanted to give his surgeon a gift: a 19 inch Phillips television. "Not even with this can I repay him," he said upon reaffirming his return to life.

We won't use any names, but this is a true story. Since 1996, "Javier" -- as we'll call the reborn patient -- has rented two comfortable rooms in his large house in Vedado to tourists and today, on the average, he has a net monthly income of US $800.00. The salary of the cardiologist, even though it is among the highest, does not exceed 800 pesos. Javier, by renting rooms, earned almost 21 times more than the cardiovascular surgeon. Both, nevertheless, enjoy the same social benefits and assistance from the state.

The dilemma of incomes, which can frequently be illustrated with examples like this one, results in one of the most complex problems of Cuba's current socio-economic framework. And everyone, with great and legitimate emotion, analyzes it from his or her own experience, and from the quantity of needs that were either postponed or satisfied during recent years.

After the subject of housing, the other three points that most absorbed the energy of the debates concerning the Thesis of the XXXVIII Congress of the Central de Trabajadores de Cuba (CTC) were all connected with this fundamental question, even though from different approaches. As in Rome, all roads seem to lead to the issue of incomes.

Here are some examples of the dual money system: the ten peso bill above is worth about $.45 US (45 cents USD). The convertible peso that appears below it is the equivalent of $1.00 USD. Everyone can possess both pesos and dollars, but some goods and services can only be purchased with dollars.

The discussions about stimulating production and attention to people's needs, about wages and prices, and about the dual money systems and the value of Cuban national money, can be summed up in a common yearning: to raise the economic capacity of the majority of the population who still live supported solely by wages and pensions.

Instead of becoming simpler as the economy improves, the problem of incomes has brought on complexities that, if not understood, can result in error. More and more, generalizations appear less and less useful in interpreting how income is in fact distributed among the Cuban population.

The unavoidable history

Before the critical decade of the 90s, the income of the Cuban population was basically provided by wages. According to calculations from those years, 95 percent of working people were wage earners, and wages represented 85 percent of the cumulative income of the Cuban population.

The purchasing power of wages in those years was relatively high. People's wages were first spent in the markets of rationed products (those with controlled prices) -- which were much more plentiful than currently. After that, a considerable portion of people's wages was used to purchase of a wide array of products in the markets without price controls. The form of access to goods was the same for everyone, and the system of income had adjusted to that reality.

Nevertheless, the system of homogeneity in incomes originating from wages still had its flaws. The effective wage scale in those years started from a standard of uniformity that did not adequately stimulate productivity. Qualification was the defining criteria, and the standard of "equal pay -- equal work" did not take into account important differences.

For example, a mechanic "A" in the City of Havana, perhaps with a greater intensity of work, earned the same as a mechanic "A" in Guantánamo where, moreover, cumulative living expenses were less. And, the opposite could occur: an accountant of the highest qualification in one of the nickel factories in Moa, would earn the same as an accountant in a modest shop in Havana, only because they were in the same job category.

With the sudden economic contraction of the early 90s, incomes and jobs remained protected and intact, but the supply of products and services fell precipitously. The excess money in circulation gave rise to an inflationary spiral that provoked extreme growth in prices in the "informal sphere," or "black market." From that moment on, a good part of wages went to satisfy basic necessities in the black market. Those were the times when a dollar came to cost 150 pesos and one small box of cigarettes cost 30.

The stars on the collar of this worker's shirt signify that he has attained the status of "vanguard worker" for the quality and efficiency of his work. For this, he receives estimulación (incentives) in the form of convertible pesos or prepaid magnetic debit cards that can be used to purchase in dollars.

In 1993 the economy bottomed out, and the strategy of planned subsistence was augmented with decisions that attempted to move toward economic recovery. After extensive debates in the workers' parliaments of 1994, a national consensus was achieved in favor of a policy of financial cleansing: the possession of dollars was legalized and family remittances from abroad were authorized; the doors to the farmer's markets were opened with a majority of the sellers being private; self employment was broadened; a system of taxes was created; and the renting of rooms and houses to foreigners and to Cuban citizens was authorized.

Activities that previously functioned informally were regulated, and prices, disconnected little by little from abusive speculation, began coming down, among other reasons, because of the notable reduction of excess money in circulation, and because of the appearance of currency exchange houses that took control of the exchange of Cuban currency for U.S. dollars.

Everything had changed. A market of high prices in Cuban pesos began to expand, and a commercial network in dollars arose, with the purpose of collecting all that vital dollar currency for the empresarial functioning of the Island. Nevertheless, wages were not ascending in equal proportions. It was crazy to believe that wages alone could overcome the elevated level of prices.

Already, income could not be explained from a point of view that included just wages as the principal element. Private work (legal or not), family remittances, the sale of products or services to tourists, and the payments in dollars to Cubans who worked in foreign enterprises, all resulted in a growing volume of money which entered into circulation and was distributed without regard to the principles of equity that were aspired to.

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