Unemployment

On the surface, unemployment is simply a measure of the percent of the population looking for a job that cannot find one. In reality, however, it’s a crucial indicator of lost wages, goods and services, which in turn cause a variety of negative societal issues. In essence, unemployment is and should be a very big deal for any country. Guatemala is no exception.

At a very basic level, employment is crucial to society from an economic perspective because when people are working they have money to spend, thus increasing consumption, GDP and the overall financial health of a country.

Contrary to conventional wisdom, despite having a nearly 50% poverty rate, Guatemala boasts just a 2.9% unemployment rate according to the World Bank (steady, which is among the lowest in the world. There are a number of potential explanations for this. Perhaps the most obvious is that in a country with such a high rural population, there are many “employed” farmers who simply provide solely for themselves and their families, as opposed to truly contributing to the economy. Another is that Guatemala does not provide unemployment benefits, so the workforce can’t rely on steady money while they’re not working, meaning many Guatemalans will take any job they can, regardless of the salary, in the hope that it’s at least steady.

Unfortunately, though, Guatemala’s unemployment numbers, which are extremely low but present odd and sometimes wild fluctuations with no explanation, must be taken with a grain of salt.

While low unemployment is generally a positive reflection of a country’s economy, it’s not necessarily a reflection of a country that’s great to expand to. A company opening up stores in a country with scores of unemployed people, for instance, would have a wide pool of overqualified candidates to choose from, who likely would work for a favorable salary for the employer. Of course, it is a double-edged sword, as the most talented staff in the world won’t help a business if it’s target customers can’t afford the product. Again, however, the low-cost nature of Finagle a Bagel’s product and the ability to adapt prices for the Guatemalan economy (based on cost savings of employees, rent and nearly everything else in Guatemala), combined with the highly unlikely risk of arbitrage (no one is going to fly down to Guatemala from the US to buy thousands of bagels just to bring them back and sell them at a higher price) presents an interesting opportunity no matter the advantages of high unemployment.

Regardless, due to efficiency wages – Finagle’s ability to make more profit because we can afford to pay higher wages than most Guatemala restaurant workers – we should have an accomplished pool of candidates and be able to gain an advantage from our high level of employee competency regardless of national employment numbers.

Learn more about a related issue, social security, here.