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The authors would like to thank Louis Erasmus and participants at an informal seminar in the African Department for their valuable comments on this paper. Any remaining errors are the sole responsibility of the authors.
The majority of enterprises in the EPZ are textile firms.
In its 2002 report, the Bank of Mauritius states that “while vacancies advertised have been principally for skilled and management jobs, the vast majority of persons seeking jobs do not have the necessary training, reflecting the mismatch between available labor and skills required.”
Mauritian unemployment figures are derived from incomplete data, reflecting in the main, conditions in “large establishments.” The Mauritian Central Statistics Office is of the view that there is a tendency for people to falsely declare themselves as unemployed. The false responses to questions regarding employment and income might be explained by the respondents’ hopes of receiving some current or potential unemployment benefit. In the case of people engaged in the informal sector, they may not wish to acknowledge their employment and income, because of fear that the questionnaire may be used for tax collection purposes. This view is shared by some policymakers (see Coe and others, 2002).
Under skill-neutral technical changes, higher unemployment may be primarily a short-term phenomenon because the main issue is the reallocation of labor from contracting to expanding sectors rather than skill mismatch.
The foreign workers are predominantly contract workers from China. Mostly women, these workers typically come to Mauritius on three-year contracts, with backgrounds that include three years of vocational training and a few years of work experience in the textile industry.
The Survey on the “Attitudes of the Unemployed Towards Accepting Employment in the Export Processing Zone of Mauritius” (Center for Applied Social Research, 2001) finds that wages and working conditions are unanimously agreed to be “bad” in EPZ enterprises. Long working hours, poor remuneration, limited career prospects, job insecurity, and the risk of not receiving severance pay in the event of job loss are listed as the most unattractive features of these jobs.
In their cross-country study, Dowrick and Gemmell (1991) find that the speed of labor transfer from traditional to modern sectors has been slow in less-developed countries.
The injection of the technology capital can be done by government capital expenditure or foreign direct investment. Two new pillars (the financial services and high-end tourism sectors) were developed during the 1990s in Mauritius, reflecting to a large extent deliberate government industrial policy. These new pillars were largely financed through a redirection of domestic savings that were accumulated in the traditional sectors. The government supported the new pillars by providing their basic infrastructure and incentives to investors.
It is possible that unemployment in the traditional sectors in Mauritius could have also increased as firms took steps to economize on the use of labor in the face of rising wages. This can take the form of the substitution of capital for labor or increases in labor productivity. However, the evidence of this is not very compelling. For example, over the period 1982-2002, the capital/labor ratio in the EPZ increased by only 3 percent. In recent times, however, there has been increased mechanization in the sugar industry, although data on the capital/labor ratio is not readily available.